The B2B Exodus to E-Commerce: How Procurement Can Prepare for a Strategic Shift

THE B2B EXODUSTO E-COMMERCEHOW PROCUREMENT CAN PREPARE FOR A STRATEGIC SHIFT PREPARING PROCUREMENT FOR THE E-COMMERCE REVOLUTIONIN ASSOCIATION WITHROADMAP 1ROADMAP PREPARING PROCUREMENT FOR THE E-COMMERCE REVOLUTIONprior. Similar meteoric increases were seen in the US, Canada, Germany and other developed economies.Amazon hired 175,000 new employees in the US, almost overnight. On-demand grocery shopping service Instacart hired 300,000 new staff. Tesco, the UK’s largest grocery retailer, had a capacity of 590,000 weekly home-shopping deliveries at the start of the UK’s lockdown in late-March 2020; by the end of May, this had steadily climbed to 1.3 million.B2B organisations, especially those serving sectors such as the hospitality industry, were forced to abruptly develop B2C business models to continue trading. Demand for delivery services and consumer-friendly packaging soared.Did consumers object to being so abruptly switched to e-commerce? Retail therapy, after all, has been elevated almost to a leisure activity in its own right in many of the world’s shopping malls and shopping districts. However, when forced – or electing – to work from home, many consumers found e-commerce to be a surprisingly acceptable alternative.“E-commerce is so easy and convenient, and the associated reverse logistics are so straightforward,” says Rob Handfield, professor of supply chain management at North Carolina State University’s Poole College of Management. “Many people switched to e-commerce because they didn’t want to leave their homes, but now they’ve seen its advantages.”Richard Wilding, professor of supply chain strategy at Cranfield University’s Cranfield School of Management says: “Consumers want shopping to be easy and pleasant and, if possible, fun. But visiting a physical store now calls for them to wear masks, queue to get in, follow one-way systems and socially distance while there: it doesn’t feel safe. Contrast that with the online experience, which is fun because they can watch Netflix or listen to music at the same time. In addition, it is easy and, of course, safe.”In short, then, a very different retailing paradigm beckons. But it’s not just different. Look closely, and it also heralds some challenging implications – for supply chains, procurement functions and businesses in general. nIn March 2020, the world changed – perhaps forever. For years, there had been airy talk of the rise of e-commerce, and the consequent withering of physical retailing. This talk suddenly became very real, however, as Covid-19 infection rates increased throughout Europe and North America.Although lockdown rules varied between countries, the broad thrust was similar: physical retail outlets selling essentials such as foodstuffs remained open; shops selling items deemed nonessential remained closed. E-commerce was the only option for consumers who wanted to buy such items. Even for essentials such as groceries, many consumers – especially the elderly or vulnerable – preferred home delivery. PIVOTING AT PACEIn 2008, notes the Financial Times, e-commerce comprised about 5% of UK retail sales. By May 2020, however, it accounted for 30% of retail sales having increased sharply during the three months EXECUTIVE SUMMARYn The Covid-19 pandemic has unleashed a consumer e-commerce revolution with far-reaching implications for both existing B2C retailers and B2B organisations entering the consumer space.n Consumers’ service expectations are high, and rising. Cost-to-serve will increase, perhaps significantly.n Many companies are drifting into the consumer e-commerce revolution without a considered strategy: omnichannel, for instance, is not something for companies to adopt lightly.n Procurement organisations have a definite role to play: supply chain resilience and value engineering are going to matter more than ever.E-commerce clicks with consumers and businessesIn 2008, e-commerce comprised about By May 2020, having increased sharply in the three month prior, it wasof UK retail sales5%30% 2ROADMAP PREPARING PROCUREMENT FOR THE E-COMMERCE REVOLUTIONAround the world, the story was the same: as countries contemplated lockdown, their stock markets tanked. Wall Street’s Dow Jones index plunged from 29,551 on 12 February 2020 to 18,592 on 23 March 2020 – a decline of 37%. In London, the FTSE 100 fell 35%. Germany’s Dax tumbled 39%.But grocery retailers’ shares fell