Litium just released their seventh and 2023 edition of their annual report on the state of digital commerce in B2B. As usual, it provides an excellent foundation for any B2B company's strategic and tactical planning. The following is a review of the report.
About the reviewer: Joakim Lööv is a highly experienced professional within the digital space of international business-to-business, with a long background in e-commerce, UX design and management. He provides C-level support on how to build, operate and continuously improve an online presence.
Nordic B2B companies continue to grow their digital commerce investment budget, solution and service capability, staff concentration, and most importantly their business results. There’s a fairly large variation between company size and type of industry but on average:
- 69% use digital channels to enable sales
- 38% offer e-commerce solutions
- 30% of the respondents’ sales is digital
- 58% use digital channels for business on secondary markets
- 87% actively drive traffic to their digital channels
Digital commerce challenges are mostly organizational and B2B companies are not data-driven nor customer-centric enough - this is where investments should be focused.
About the report
The report follows the same and familiar format as previous years and is as always based on a recent survey with some 900 respondents (mostly C-level), representing mainly manufacturing companies with a yearly revenue of >€50M. This year, respondents from Finland were added to the mix of those from Sweden, Norway and Denmark. This northern European focus has historically still allowed for the results to be applicable to many other, similar regions and markets and I'm sure they will be this year too.
The different sections of the report are slightly different compared to previous years. I take it as a natural adaptation to new business conditions, trends, and alike. Sustainability is largely and notably absent in this year’s report. The report still contains excellent graphs and tables, ready to be re-used not the least to make well-informed arguments and strategic decisions.
Overall, the report confirms what has been evident for quite some time – a large majority of B2B companies use digital channels to (1) enable sales, (2) process orders and/or (3) increase service levels and customer satisfaction. Large parts of the report cover the organizational and operational capabilities necessary to be successful, as well as why digital commerce and its variations are important, together how to best progress.
According to the report, the vast majority of B2B companies enable sales online (supporting the customer’s journey up till but not including order placement). Most companies thereby employ a hybrid sales model, where traditional/physical sales co-exist with digital sales, that in turn is found challenging. For those who don’t yet offer digital commerce services at all, not knowing how to successfully operate a hybrid sales model seems to be the main reason for why.
Digital commerce also enables much faster, less expensive and more effective expansion onto new markets, compared to the more traditional setup of physical and local branches. The results and the report mention this several times throughout, sometimes in conjunction with marketplaces.
One thing just briefly mentioned in the report, as a sales enabler, is the ability to start your digital commerce journey with just a part of the assortment. Addressing one’s full assortment, on all markets, towards all customer segments all in one go can be too difficult both practically and culturally, so do indeed start small and expand over time.
Digital order processing
On average, digital order processing is now up 30% - a respectful number. This provides an excellent target value for those who are still just getting started. The report doesn’t reveal the standard deviation around those 30% but I assume it’s large, with the best of even traditional B2B companies probably reaching as high as 90% of certain markets. In my experience, traditional B2B companies, that have been digitally mature for more than ten years, nowadays average a 50-70% e-order line share.
The report doesn’t say anything about the level of automation of the digital order processing. This is an important aspect to determine and reach the expected ROI and effect goals (see below). The full value, of those on average 30% of digitally placed orders, will be obtained first when they are fully automatically processed, but based on the report we can’t tell to what degree they are.
Post-order digital services
One area that the report is weak on, is uncovering what the respondents do to digitally support their customers post-purchase. The respondents do mention the importance of meeting customer expectations, increasing service levels (likely through self-service), and reducing internal administration. There are lots of digital services to offer customers post-purchase, with a clear impact on these goals. I often find B2B companies start offering post-purchase focused portals (for e.g. order status and tracking, invoicing and payments, etc.) before offering webshops. Next year, I’d like to see more results within this area.
As a side note, the report also doesn’t cover how digital commerce solutions can be valuable for the organization’s own sales and marketing staff, nor as collaboration surfaces between vendors and re-sellers. This too is an area in which you can easily find significant value, especially in the B2B domain.
When looking at the reasons for why B2B companies engage in digital commerce, it’s still a balance between increasing operational efficiency/productivity, increasing sales, and increasing service levels and customer loyalty. The survey also collects how the respondents plan to reach these improvements even if only half of the companies will actually measure the return-on-investment towards these goals (albeit a higher share than last year). I’d like to again highlight using digital commerce as a powerful tool to expand onto new markets and to gain market share.
As one’s digital investments materialize into new solutions and capabilities, the organization will naturally be affected, with changes to roles and responsibilities, which Litium’s report also shows. A positive side-effect to mentioned investments seems to be that the understanding of customer needs partly will increase at the same time. However, it’s still less than half of companies that explicitly work with customer journey mapping. It has gone up from last year but is still in my mind not yet good enough.
Likewise, only 16% of the respondents have a data-driven mindset and actively use data as a basis for making continuous improvements (basically unchanged from last year). Almost 50% don’t use data at all. This is mind-blowingly bad, considering how easy it is to both collect, analyze and act on digital commerce data nowadays.
This year’s report, like in 2022, sadly doesn’t contain a full maturity ladder like it did in 2021, but still presents a simplified maturity self-assessment, and re-visits throughout the correlation of maturity with other factors. The direct results are split in a within-group comparison based on company revenue. The revenue scale in turn caps out at >€50M annually, making the results potentially difficult to translate onto all those B2B companies with a significantly larger turnover.
Surprisingly, larger B2B companies are more digitally mature than smaller companies, in many ways. The larger companies’ bigger and more diverse investment budgets and larger workforce seem to trump the smaller companies’ more nimble processes. The long-lasting fear among large companies of being disrupted by smaller but more fast-moving companies is potentially exaggerated. At the same time, being fast-paced is not valued or acted on enough, regardless of company size.
For those who are just getting started, the report provides a 5-bullet list of what to do, based on input from the respondents. This very pragmatic list provides valuable guidance to any immature B2B company on how to get past focusing on obstacles, edge case scenarios and made-up business conditions.
This year’s report also brings up the economic and post-COVID-19 climate and concludes that a recession will only have a very small impact on how the respondents will act, and on the results obtained, in terms of digital commerce, which is re-assuring.
When it comes to ownership of B2B digital commerce, the move from IT to sales or marketing happened a long time ago and the digital commerce responsibility sits firmly in the hands of one of those functions. As expected, B2B companies have e-commerce managers and to an increasing extent digital commerce experienced staff.
Where the ownership of digital commerce resides is to me however not that important. Referring back to the challenges of hybrid selling, it’s more important to find ways of effectively and efficiently collaborate across functions and channels, or even better organize your company from an outside-in perspective. This type of change, arguable already happened to a high degree in the finance sector, I believe is yet to happen in the context of digital commerce in B2B and manufacturing – the re-organization from functions into value streams. Maybe next year’s Litium report can shine some light on this?
The Litium Nordic Digital Commerce in B2B 2023 report has been as previous years highly anticipated and provides excellent insights this year too! It feels well-founded with a large number of respondents apparently approached according to research best-practices, that brings a high level of trust to its conclusions. The report is also highly balanced in scope and level of detail, making it both accessible (easy to read) and practically applicable (specific and comprehensive). Noteworthy is also Litium’s ability to make the report entirely independent of their own platform and service offering – two thumbs up.