The Value of Convenience in B2B eCommerce
Why B2C’s struggling instant convenience model might work in B2B
If you ask anyone today, there’s an unspoken consensus that convenience has taken quite a different meaning in our everyday life. In this post pandemic world, consumers expect a great purchase experience, from placing an order to the physical arrival of a product, to occur in the span of 15 minutes and within a push of a finger. The result of such expectations is realized in the rise of B2C delivery platforms, third party marketplaces, and scores of startups promising instant delivery services to urban areas.
However, over the past two years, these start ups, largely funded by VC capital, struggle to sustain this new model of convenience. Just as quickly as they came into the market, they seem to disappear overnight as seen in the case of Fridge No More, Buyk, and 1520.
While critics and consumers alike are increasingly doubting the affordability of convenience in the B2C space, B2B eCommerce have been adopting this convenience model and experiencing quiet success, especially in areas outside of North America (eg. South America, Africa). B2B companies like TradeDepot, Wasoko (formerly Sokowatch), and Jabu, for example, are digitizing Africa’s informal and offline commerce with sustainable services as convenient as same-day delivery. When it comes to valuation, these B2B startups are 2x to 10x their B2C counterparts. This begs the question: Why does the instant convenience model work for B2B but not B2C?
Why does the instant convenience model seem to work for B2B but not B2C?
The answer can be drilled down to product market fit. B2B and B2C consumers differ in their willingness to pay for convenience. The motivation to order and receive a product within the next few hours is different for a small shop owner and someone who say wants a late night snack without leaving the house.
For the late night snacker, the goal is to complete a transaction that satisfy an instant gratification. Since the snacker is the end consumer, the value of the convenience ends with the transaction.
In comparison, for a shop owner in a rural town, the goal is to optimize a business. A convenience app can help expand access to extended product catalogs, personalized algorithms and logistic initiatives that will help fortify the shop’s brand image and strengthen its competitive advantage over other shops in the area. The value of convenience, in this case, is multi-dimensional. To the owner, investing in a better product selection and services capability can transform into higher market share and revenue. If the shop can provide the exact product a customer need today, it’s one more happy and returning customer.
The same set of motivations that applies to a small shop owner also applies to corporate buyers. In 2015, Amazon launched a B2B marketplace, Amazon Business, duplicating the company’s B2C platform and 2-day delivery service for corporate consumers. In 2021, Amazon reported a $25 billion in annual sales from its B2B marketplace, a 20x increase since its launch. In a press release, Amazon credited this growth to new changes in buyer preferences. Business buyers these days not only expect the same fast, convenient, and personalized digital buying capabilities they’ve grown accustomed to at home, but also seek product catalog selections that help reach both monetary and corporate environmental and social goals, such as improving sustainability in purchasing, supporting local businesses within the community, and increasing diversity among suppliers.
In the last couple years, suppliers across industries caught on to this trend and started developing B2B eCommerce platforms that offer product suites able to satisfy these complex market demands. According to a recent McKinsey report, nearly two-thirds (65%) of B2B companies across industry sectors have eCommerce channels on par with in-person sales and ahead of all other channels.
Today, B2B eCommerce channel resembles more like a one stop shop that optimizes product and service availability, pricing, performance guarantees, shipping and delivery, and personalized recommendations. With each additional flexibility and agility level the suppliers provide to their consumers, the bigger the incremental revenue and operation potential for both buyers and suppliers. Unlike in B2C case, the perceived value of B2B convenience is simply greater. And the performance bar is likely only going to get higher as leading B2B companies stretch their capabilities and services to adapt, laying the foundation for instant convenience models to thrive.
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