When a B2B company is looking to add electronic commerce to sell more to a wider net of customers and reduce the cost associated with each customer interaction, how does that company know what kind of electronic commerce technology to use?
We’ll help you answer this question, and more, as we discuss the different roles and strengths of electronic data interchange (EDI) and B2B eCommerce. The short answer is that these methods of doing business aren’t mutually exclusive. When is EDI the right choice and how does B2B eCommerce fit in? It’s all about the sales situation.
EDI and B2B eCommerce: A Complementary Relationship
One of the misunderstandings about EDI and B2B eCommerce is that B2B eCommerce will replace EDI or that EDI is an outdated version of B2B eCommerce. The reality is that both of these technologies remain important (and will continue to do so) because they fulfill different roles, which are often complementary. How do they do that? We should start by talking about what EDI and B2B eCommerce are.
What is EDI?
EDI is the computer-to-computer exchange (sending and receiving) of sales transactions and purchasing transactions in an agreed-upon data format so that buyers and sellers can place and receive orders, send and receive invoices, and keep each other informed about order status and other related details. EDI is an excellent communication tool that can be used by organizations that have agreed to implement EDI in order to do business together.
By automating sales and purchasing transactions, EDI increases accuracy and business cycle speed, and decreases errors and order processing costs. Integrating EDI with your ERP system greatly increases the benefits of using EDI by incorporating your EDI transactions right into your order management system.
What is B2B eCommerce?
B2B eCommerce goes beyond the exchanging of sales transactions and provides potential and existing business buyers with the ability to navigate through your full catalog of products to identify potential solutions for their needs. The promotional nature of B2B eCommerce and the potential it offers for creating new sales opportunities is what differentiates it from EDI.
Integrating a B2B eCommerce storefront with your ERP system gives you the ability to synchronize your customer-, product-, inventory-, and order-specific data between your storefront and your ERP system, enabling you to grow your eCommerce business while reducing fulfillment time and cost and improving customer experience.
For most businesses, a combo that includes EDI and B2B eCommerce may be the winning strategy that gives more customers more of what they need. Let’s take a look at why your different customers might need the ability to use EDI and B2B eCommerce at different times and for different reasons.
Excelling in different sales situations
When manufacturers and distributors pitch products with the hopes of landing on the shelves (and website pages) of a large retailer, they do so knowing that using EDI to receive purchase orders and send ship notices and invoices will be part of the deal. And with good reason: EDI is an excellent tool for large, recurring orders. For the same reason, EDI is also ideal for manufacturers and distributors on the other side of the transaction, ordering parts or raw materials from their own suppliers.
For example, if my company is a supplier of electronic components used in the production of hedge trimmers, and those hedge trimmers are sold in Lowe’s or Home Depot, there will be lots of large, recurring orders in play. This kind of selling situation is particularly well-suited for EDI. I might use EDI to receive purchase orders and send invoices to my buyer (the hedge trimmer manufacturer) and I might use EDI to send purchase orders and receive invoices for the parts I need to make my electronic components. Inventory stock levels will drive those orders, and since we are talking about known products being purchased over and over, there’s no need for providing detailed product specifications, product images, or pricing for each order. The automated ordering system (EDI), can be much more streamlined than that, just delivering the details that matter in order to procure and fulfill orders in the most efficient way possible.
Now, consider a different kind of sales opportunity: one that starts with investigation and evaluation and requires the ability to view and compare potential products. Whether a buyer is currently using EDI or not, their overall customer experience is enhanced by the ability to research products and place orders online. Perhaps my electronic component supply company is now looking to attract the attention of new buyers for a new-to-the-market electronic starter assembly. We might be targeting a new industry segment for this product and we may also be interested in promoting it to our existing customers. This is where B2B eCommerce fits in.
A B2B eCommerce website is the best method for helping new and existing customers discover new products and for providing all of the product details they need to make a purchase decision. Ordering can take place immediately and buyers can easily review order history and invoices. You might think of it in this way: EDI is more “reactive” in nature since it happens in response to a previously-made purchase decision, and B2B eCommerce is more “proactive” in nature, since the opportunity to influence a purchase decision – as well as upsell and cross-sell – is built right in.
B2B eCommerce opens the door; EDI might seal the deal
Before you discount the role of EDI based on the characterization in the paragraph above, consider this: EDI is big business. For companies using EDI to sell products, EDI sales almost always make up the majority of overall sales volume, and many buyers will only do business with you using EDI. This means EDI is a necessity for some industries where selling to the major players in that industry require it. It’s a sales enabler.
At the same time, most manufacturing and distribution businesses, including those who are harnessing the sales-making power of EDI, need an online sales strategy for attracting new customers (including those who don’t use EDI) and selling more to existing customers. This is the specialty of B2B eCommerce, and it does all of these things very well.
Put EDI and B2B eCommerce together to serve your customers well
The main takeaway from this article is that there are important benefits to be had from investing in EDI and B2B eCommerce, and neither of these technologies is a suitable replacement for the other because they do different things and are each designed for different selling situations. By understanding how to use each one you can better ensure you are providing every customer with the kind of buying experiences they need each time they do business with your company.
Need help evaluating your ecommerce opportunities?
Over the past three decades, we’ve helped many small and large manufacturers and distributors find the right electronic commerce solutions to enable new sales opportunities and increase efficiency and business cycle speed. We’d love to hear from you about your ecommerce business goals. Let’s get in touch.