Learning from 2022: A retrospective analysis of McKinsey’s 4 myths

Learning from 2022: A retrospective analysis of McKinsey’s 4 myths

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Digital Commerce recently reshared McKinsey’s 2022 B2B ecommerce myths. Now, exactly a year later from when this study came out, it's the perfect moment to examine the report's predictions in the light of changes that have occurred since then.

In this analysis, we'll revisit the myths identified in the original report and assess how relevant they still are while considering their implications for businesses in 2023 and beyond. 

By revisiting this study, we aim to provide valuable insights for businesses to stay ahead of the curve and make informed decisions that will help them improve their ecommerce capabilities and better compete in the market.

McKinsey Myth #1: Most B2B companies don’t offer ecommerce

This myth was debunked with data showing that nearly two-thirds (65%) of B2B companies in 2022 across industry sectors offer ecommerce capabilities. In addition, their research indicated that ecommerce drives more than 18% of all revenue for the average B2B company, putting it on par with in-person sales and ahead of all other channels. 

In 2023, an estimated 17% of B2B sales are expected to be generated digitally. This is a higher percentage than ever before. Plus, with an estimated compound annual growth rate of 10.7%, U.S. B2B ecommerce is expected to generate over three billion U.S. dollars sales by 2027.

Ecommerce share of total B2B sales in the US

With this kind of opportunity up for grabs, the companies that don’t offer ecommerce will only fall more and more behind, especially amid supply chain disruptions, rising fears of costs and inflation.  

According to a Shopify study, 66% of brands expect supply chain issues to get even worse in 2023. Another 71% say their company is preparing for a recession next year. All of this puts ecommerce in a critical position to be leveraged as a growth channel. With the momentum all but evaporated, B2B ecommerce growth in 2023 is expected to be higher than ever before and expected to drive company growth amid the economic situation. 

McKinsey Myth #2: B2B buyers prefer face-to-face interactions

According to McKinsey, two-thirds of corporate customers intentionally reach for digital or remote in-person engagement when given a choice. This preference isn’t going anywhere–According to estimates from the U.S. Census Bureau, as of 2019, Millennials have surpassed Baby Boomers as the nation’s largest living adult generation. That means that they are also the largest group of decision-makers when it comes to company purchases. Millennials are online natives and are twice as likely as older generations to discover a product by searching online. 

Another TrustRadius showed that 87% of buyers want to self-serve part or all of their buying journey and 57% of buyers already make purchase decisions without ever talking with a vendor representative.

Plus, as business buyers continue to optimize for efficiency, in-person channels are going to struggle to keep up with the increasingly sophisticated online purchasing journeys in B2B.

BigCommerce, Shopify and Adobe Commerce have all doubled down on B2B to improve the online experience. As these platforms improve their capabilities, the preference for digital will only become stronger. 

B2B buyers want a self-serve journey

McKinsey Myth #3: Just a basic ecommerce site can suffice

McKinsey’s research shows that the majority of B2B companies are treating ecommerce as a full-service channel and more than 80% say they hold their ecommerce channel to the same or higher standard as other channels. This makes sense—business buyers, even more than consumers, need the easiest and fastest way to get their job done. 

This means that everything from product, payments, shipping and delivery, matter in B2B. According to our own data, ecommerce payments are also just as expected–73% of buyers stated that they would abandon their cart if they experienced friction at checkout.

B2B buyers would abandon their cart if they experienced friction

When it comes to online payments, the expectation is even higher. 91% of buyers had specific payment requirements that if unmet, would make them switch ecommerce suppliers, and 53% of buyers stated that slow or cumbersome online net terms approval would be the top reason to change to another ecommerce supplier. Further, 50% of respondents said they would share their negative payment experience with colleagues and peers. 

McKinsey Myth #4: Ecommerce is only for repeat or low-ticket purchases.

McKinsey reported that an increasing number of corporate decision makers are willing to make large purchases online, with 35% stating they would spend $500,000 or more in a single digital transaction.

Our own data supports this: Balance processed millions of dollars worth of B2B ecommerce transactions online in 2022. For one customer, we financed an average of $400,000 in transactions directly from the checkout. This points to the fact that credit cards are not suitable for the high value of B2B transactions. By making net terms accessible and as easy as a card payment, there is incredible opportunity. 

In 2022, we financed 400% larger payment values than in 2021, a sign not just of our growing credit facility but of the increasing demand and need for buyers to use a financing partner for their purchases of high value products. 

Ecommerce cannot be thought of as only a channel for low-ticket purchases. More and more buyers are moving online and they want the best price and service possible to make their jobs and lives easier, no matter the product they need.

While the preference is still for buyers to stick with in-person selling for first-time, complex, or high-value, B2B commerce is still in its  early stages and will likely continue to shift as commerce channels become stronger, prices more competitive, etc. 

McKinsey Myth #5: Digital marketplaces are a next-level ‘nice-to-have.’

According to McKinsey, a significant proportion of B2B buyers, 60%, are willing to purchase on digital marketplaces, which is roughly the same percentage as those who buy from suppliers' websites. 

At Balance, we’ve seen our marketplace customers grow on our platform, with our customers doubling over the last year. Why are marketplaces so preferred? They connect supply and demand and remove traditional hurdles of procurement related to siloed and largely offline and slow processes. 

The impact is massive when you think about the power of quickly and seamlessly enabling vendors to sell across a greater, diversified network without the overhead. Buyers get to find any number of goods at various prices, with the marketplace enabling that in a matter of seconds.

In addition to the benefits already mentioned, digital marketplaces also offer a level of convenience and ease of use that traditional procurement methods cannot match. The ability to search for and compare products and prices from multiple vendors in one place, as well as streamline the buying process with features such as online ordering and electronic payment, greatly simplifies the purchasing experience for buyers. 

Digital marketplaces not only connect supply and demand, but also facilitate streamlined and efficient payments. One of the key benefits of digital marketplaces is the ability to easily onboard buyers and sellers, which is crucial for a seamless buying and selling experience.

Buyers want to be able to have the same net terms and payment options that they had with their previous suppliers, and the onboarding process is key in enabling this.

For example, if a buyer is accustomed to a net 15 payment schedule with a previous supplier, they want to be able to have that same option on the marketplace without going through a lengthy and time-consuming process.

On the other hand, sellers also want to be able to easily onboard onto the marketplace and have the option to set their preferred payment options. This allows them to receive payments in a timely manner and smoothly conduct business on the platform.

In summary, the ease of onboarding and the ability to facilitate payments are crucial elements of digital marketplaces that enable the true digital shift in procurement and streamline the buying and selling process.

From myth to practice

The B2B landscape is continually evolving. The trends we saw in 2022 will only become even more relevant in 2023, as businesses and their clients search out more dynamic, digitized and all-encompassing solutions to the unique challenges of B2B. 

Here at Balance, we will continue to keep our fingers on the pulse of B2B ecommerce to provide valuable insights for our businesses in 2023 and beyond.

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