$6 Trillion in B2B Trade by 2005

More than $6 trillion in online B2B trade is expected by 2005, representing 42 percent of total US B2B non-service spending, according to research by Jupiter Communications.

The research, which defines online B2B trade as any sale made by a business to a business where either the terms of the transaction are agreed upon online, or the majority of terms or item features are configured online, found that Internet B2B trade in the year 2000 will represent only 3 percent of the total US B2B non-service market, or $336 billion. But online volume will grow 20-fold over the next five years opening the doors for new business models such as Net markets and coalition markets, Jupiter found.

Currently, the direct channel, a model of one seller to many buyers, dominates 92 percent of the Internet B2B market. However, in 2005, 35 percent of the Internet B2B trade volume will be conducted via a Net market, a model of may buyers and many sellers, or through a coalition market, comprised of a consortium of buyers and sellers. Net markets can completely disrupt current channels and alter how companies and industries conduct business, according to Jupiter.

“The value proposition of the Internet is on a grander scale for the B2B space; the sheer size of B2B trade, coupled with inefficient processes, makes the Internet migration of business strategies very attractive,” said Melissa Shore, senior analyst for Jupiter Communications. “Early adopters have already made their investments, but it will be the mainstream companies that now embrace the Internet and will drive it to mass penetration. Over the next several years, businesses will face an array of new opportunities to improve and expand their sales and procurement processes. They must invest now even though the payoff will take some time; it will require several years to see a substantial migration from today’s manual, paper-based solutions to tomorrow’s Internet purchasing counter.”

In its “Real Numbers Behind ‘Net Profits” study, ActivMedia Research predicts 257 percent revenue growth for B2B Web sites from 1999 to 2000. That number drops to a 160 percent increase from 2000 to 2001.