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B2B.

B2B2B. B2B2B2B2B2B2B.

Sounds like Porky Pig, doesn’t it? And just as Porky’s stuttering means nothing until the actual words come along, it doesn’t matter how many B2Bs you have — none of them create any value at all until a B2C happens. B2Bs are all in the middle of a value chain; the end is always B2C — customers consume the goods and provide the money that powers all the rest of it.

The term B2C created a huge potential for “ignorant expertise.” The newness of the term gave some pundits the misguided impression that there’s something fundamentally new about B2C itself, which in turn meant their general-purpose new-economy theories gave them something useful to say about the subject.

The only thing new about B2C, though, is the term. There’s nothing at all new about business-to-consumer transactions. Until about two years ago it was called “retailing”. Those who are experts in the field still call it that.

No matter how hard your business is, retailing is harder. Bank on it.

For example:

If you think your manufacturing company has an elaborate bill of materials, go visit a big-box retailer, and think about its inventory management. For “soft lines” (apparel and such), every SKU (“Stock Keeping Unit”) comes in multiple sizes and colors. A knit shirt, for example, may come in 6 sizes and 8 colors. That one shirt represents 48 separate items to track. How many different shirts can you find in a Target Greatland store or WalMart?

And where B2B selling propositions are rooted in the value they create, what do you have in retail? Fashion. Status. Convenience. The customer’s mood. Not to mention the all-important factors of store design and merchandising. And, of course, price.

“e-Tailing” was going to transform the whole business of selling to consumers, through the magic of Internet B2C. Too bad so many e-tailing experts knew nothing about retailing, because if they did, they’d have known there’s no such thing as on-line retailing.

When you sell on-line, as a retailer friend of mine pointed out more than a year ago, the shopper’s psychology has nothing to do with entering a store and everything to do with buying from a catalog. Catalog shoppers care more about convenience, less about physically interacting with merchandise, and not at all about the immediate gratification of coming home with the goods — the exact opposite of in-store shoppers, who see, touch, and often try on merchandise, and can wear it, hang it on the walls, or fix a leaky sink with it as soon as they get home.

That’s why the market estimates for on-line retailing are completely wrong, and always have been. The e-tailing industry is pretty much bounded by the number of catalog shoppers — a far smaller segment than retailing. And while the boundary isn’t fixed, it isn’t all that elastic either.

An e-tailer’s business processes are those of a cataloger as well. Where a retailer’s warehouse is designed for logistics — as an intermediate distribution point, shipping crates and pallets to stores — a cataloger’s warehouse is designed for fulfillment, or what’s known as “pick, pack and ship”. It’s a very different discipline. Having a warehouse doesn’t make you ready to offer customers on-line shopping carts.

And then there’s the little matter of returns, or “reverse logistics” for the fully buzzword compliant. Awhile back I suggested that Amazon.com’s success would depend on its opening physical stores. Returns are just one reason, but it’s an important one. Why? Take book-buying. You mail books back to Amazon.com for a refund — a pain in the neck for both of you. If you bought it at barnesandnoble.com, you’d drive to their nearest store, where you’d probably leave with more books than you returned.

You work for a B2B company. What does this have to do with you?

B2B companies have plenty to learn from retail. A good place to start is Paco Underhill’s highly readable book, Why We Buy. As you read it, I expect you’ll find lots of notions you can use in your own business.

Among those notions will be many examples of how limited a role IT has to play when a business meets its customers.

That’s a subject we’ll explore in more detail next week. Until then … go shopping. The economy needs you.

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|In: Industry Commentary|Last Updated:

The Internet stock bubble never burst, as Bob Metcalfe predicted it would in these pages last year. “Burst” implies explosiveness. As an investment category, the Internet looked more like a hot air balloon that ran out of heat and sounded more like a whoopee cushion than a POP!

Preferred metaphor notwithstanding, the wind left the dot-com sails far more quickly than I predicted last year, when I said we’d see a year of increasingly frantic and bizarre business models before the craze ended.

We may not have seen a proliferation of ever more weird e-businesses, but we sure did see a proliferation of just plain weirdness. For example:

  • After buying the movie rights for Harry Potter, Warner Brothers got stupid. Instead of embracing the hundred or so Harry Potter fan club sites put up by children around the world, its lawyers sent threatening letters to shut them all down. If you’re ever in a position to influence your own business in a similar situation, point out that fan clubs give you free publicity, and while threatening letters from your lawyers to children also give you free publicity, it isn’t the good kind. (The Register (www.theregister.co.uk) has covered this story extensively. In particular, look for a hilarious letter from Groucho to Warner Brothers defending the Marx Brothers’ right to call their movie A Night in Casablanca.)
  • Amazon.com, intent on destroying every bit of customer goodwill it created during its startup phase, adopted an arrogant “privacy policy” (as Ed Foster revealed, its amounts to collecting customer data now and using it according to privacy rules it reserves the right to rewrite as and when it pleases.) On top of this it tried out “dynamic pricing,” charging different customers different amounts for the same product. Microeconomic theorists defended the practice on the grounds that since products hold different value for different customers, companies should charge them different amounts.

    Memo to microeconomic theorists: Business theory states that sales to loyal customers cost only a fifth of what it costs to attract new ones. Charge one customer more than another for the same product and he’ll feel swindled. Then he’ll take his business elsewhere and tell everyone he knows what rotten people you are. Dynamic pricing may be good microeconomics, but it’s lousy business.

  • The German Finance Ministry decided people who use work computers for personal purposes should be taxed, figuring it amounts to an employee benefit. The Wall Street Journal quoted Andreas Schmidt, head of Bertelsmann AG’s e-commerce division, as saying German bureaucrats never run out of ideas to prevent economic growth.
  • And finally, in the Faux Porn department: www.blackplanet.com, through its diligent use of software filtering to prevent inappropriate language on its site, refused membership to LA attorney Sherril Babcock.

    Here’s a clue for Internet filtering software providers: Match to whole words, not syllables, and only flag sites or messages that include at least two words on your bad-word list.

Before the World Wide Web, the Internet had a reputation for weirdness due to some of the bizarre news group discussion threads. In a way, it’s nice to see the Internet return to its roots.

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