Report: Online B2B Surge May Herald Overall Recovery

Use of the Internet to conduct business-to-business (B2B) transactions grew substantially in the second quarter, possibly signaling the early stages of economic recovery, according to a report from Forrester Research and the Institute for Supply Management (ISM).

Emphasizing that a single quarter does not constitute a long-term trend, ISM spokesperson Edith Kelly-Green told the E-Commerce Times that the numbers are encouraging.

“Organizations are buying significantly more direct and indirect materials online,” Kelly-Green said. “It indicates there may be a rise in demand, and that companies see the value of online purchasing.”

Bigger Gains Ahead?

The numbers may also suggest that suppliers are investing in better online sales channels to improve online offerings, which, in turn, should accelerate adoption of online purchasing over the long term, she added.

According to the report, 84 percent of large companies surveyed said they use the Web to purchase indirect materials, up from 78 percent in the first quarter. In addition, 65 percent said they buy materials directly from suppliers online.

The percentage of overall materials being purchased through the Web also increased, with surveyed companies buying 6.6 percent of their materials online, compared with 5.6 percent in the previous quarter.

Savings Seen

In addition, more companies saved money by buying online in the second quarter. Overall, 30 percent of companies participating in the survey reported savings when they bought through the Internet, compared with 29 percent earlier in the year. Firms in the manufacturing sector saw the biggest jump, with the percentage of those reporting significant savings rising from 27 percent to 33 percent.

“Despite the difficult economic environment, we are seeing growth in using the Internet to purchase — particularly among manufacturers — picking up where we left off at the end of 2001,” said Forrester senior analyst W. Daniel Garretson.

Adoption was particularly strong among smaller users in the quarter, Garretson noted, and more companies expressed satisfaction with their online supply buying experiences. In fact, 13 percent of surveyed companies reported that suppliers had either very good or excellent online capabilities, up from 11 percent in the first quarter.

Changes Needed

Garretson said that one factor slowing wider adoption may be the scope of institutional change necessary to reap all the benefits of buying online, including the need to forge true partnerships with suppliers rather than using the Web to bid down prices.

He added that over time such partnerships will create added benefits, such as the ability to improve inventory control.