How to start the learning journey?
The Basics of Sourcing & Buying Quality Products for Your Business
How e-commerce can streamline your procurement processes
- If you own or run a business, you need an efficient procurement process, so that you can consistently get the right quality products at a good price.
- Traditionally, procurement has been a manual and challenging process of finding dependable suppliers, ensuring stock availability and arranging orders and delivery.
- During the global pandemic’s lockdowns and social distancing, both retail consumers and business buyers moved into the e-commerce space, out of necessity.
- This led to accelerated growth in e-commerce, especially in the Middle East and North Africa (MENA) region.
- For businesses of all sizes, there are significant benefits in continuing to prioritise a digital-first procurement strategy.
The challenges of traditional procurement
Traditional offline business buying is often a slow and demanding process: it depends on the management of manually issued Requests for Quotations (RFQs), detailed spreadsheets and physical paperwork. Product orders can take a lot of time to complete, either through back-and-forth e-mails or numerous phone calls – and must be tracked manually, as delivery deadlines loom.
Buyers often find themselves limited to a handful of local or regional suppliers, with little guarantee of stock availability, and with little power to bargain for more affordable pricing.
Tracking, analysing and optimising long-term procurement spending is difficult, since the data is all stored manually and most buyers simply don’t have time to spend on strategy. While still chasing up one procurement order, they are already moving on to the next. Traditional procurement is a short-term, reactive process subject to constant time pressure.
Another common challenge in traditional procurement is risk management, with buyers not always able to verify that suppliers are financially viable, or compliant with supply chain- and import-related legal requirements.
Along with most aspects of daily life, traditional procurement has been profoundly disrupted since early 2020, as a result of the global pandemic.
The unprecedented growth of e-commerce
In 2020 and 2021, prolonged Covid-19 lockdowns and social distancing saw both retail consumers and businesses moving from offline to online buying. Around the world, people spent approximately USD $2.67 trillion on the top 100 online marketplaces (e-marketplaces) in 2020 alone.
The e-commerce sector in the Middle East and North Africa (MENA) has grown faster than anywhere else and is expected to reach US$49 billion in value this year, according to a 2021 Checkout.com report. An estimated 209 million MENA consumers shifted to online shopping, between 2020 and 2021.
B2B e-commerce, though it lagged retail e-commerce initially, is expected to grow by 234.78% more than B2C e-commerce between 2022 and 2030, according to a Frost & Sullivan analysisof the Gulf Cooperation Council (GCC) Region.
In a study by PSB Middle East, businesses in the United Arab Emirates and the Kingdom of Saudi Arabia reported a rise in B2B e-commerce due to the Covid-19 pandemic, with 82% (on average) citing increased use, and the majority saying they expected e-commerce to become universal in coming years.
One long-time barrier to e-commerce adoption in the region, highlighted by the survey, is the transition from in-person to online payments – but the constraints of the pandemic have driven a sharp uptake in contact-less digital payments.
Between 2020 and 2021, 85% of consumers in MENA made purchases from brands or retailers outside of their country, over a 12-month period (Checkout.com). A large number of these purchases were made on online markets, where buyers from MENA and wholesale suppliers from around the world congregate to do business.
Today the B2B sector in MENA is flourishing with cross-border buying and selling, thanks to widespread e-commerce adoption as well as the region’s strategic location between Europe, Asia, and Africa.
Exploring the online marketplace
Established online marketplaces give buyers the ability to shop the world from wherever they are based, through global sourcing. Thanks to technology it is now possible for businesses to buy from anywhere in the world. In other words, product relevance and pricing are the deciding factors in the buying decision, instead of distance.
While an e-commerce website is owned by one seller who caters to multiple buyers, an online marketplace is a central place where large numbers of sellers and buyers can reach each other. Online marketplaces are attractive to sellers because they can gain exposure to a large, multinational customer base, get support from the marketplaces’ logistics, warehousing and support services and devote less time to sales and marketing efforts for their own websites. For buyers the benefits of an online marketplace include product variety, easy price comparison and less manual paperwork.
The history of online marketplaces goes back to 1995 and the launch of Cadabra Inc – now known as the Internet giant, Amazon. In MENA, several regionally focused online marketplaces have been launched, specifically to bring products from countries around the world to MENA buyers.
An online marketplace is in many ways like a physical “bricks and mortar” marketplace but without the size limitations. Transactions are much brisker, there’s no need for buyers to go from vendor to vendor or wait to be served, and no closing time – an online market trades around the clock.
How online marketplaces can liberate business procurement processes;
In the business sector, online marketplaces serve different types of buyers including retailers and drop-shippers buying in bulk to re-sell; buy-to-use customers like manufacturers or restaurant chains, and small or large companies buying products for everyday use, like office equipment or stationery. Whatever their needs, they all benefit from six key benefits of online procurement:
Greater variety of products
An established online marketplace can enable buyers to browse a million or more unique products, from thousands of sellers based in scores of countries. Buyers can search for products by category
(for example Food & Beverage, Health & Wellness, Consumer Electronics and more); brand name; country of origin, or price range. Advanced search functionality helps buyers to quickly find what they are looking for using customisable search settings – and save time when sourcing the same or similar products in the future. With multiple suppliers for almost every product type, buyers can rely on always finding the products they need, or can forge relationships with their favourite wholesale suppliers, lodging future orders with them in a few simple clicks.
Cost savings
On an online marketplace sellers may be leveraging lower material, manufacturing or labour costs in their country, enabling them to offer MENA buyers lean wholesale prices on bulk purchases. Secondly, cross-border e-commerce pricing factors in favourable exchange rates between MENA countries and those of many suppliers. Thirdly, with so many sellers in an online marketplace, competitive pricing is a must for sellers – and buyers benefit.
As well as searching for products, verified buyers can digitally submit Request for Quotations (RFQs) in seconds. The online marketplace then alerts a relevant pool of verified sellers about the RFQ and gives them a timeframe to submit quotations. The buyer receives multiple competitive quotations and can pick the one that suits them best.
Buyers can also bargain with sellers on individual product pricing at the click of a button. The seller can then either accept or reject the buyer’s offer, or make a counteroffer. In this respect, online marketplaces maintain an important age-old tradition of in-person trading.
Risk mitigation
In offline business buying, it can often take time for an understanding of trust to be reached between individual buyers and sellers. It may be a complex and challenging process for buyers to verify that suppliers are dependable, professional and ticking all the right boxes in terms of compliance. On reputable leading online marketplaces, sellers must meet strict terms and conditions in order to be verified as sellers on the platform.
Multiple ways to pay
In e-commerce, buyers find many convenient ways to pay for products including Credit Card payments, Bank Transfers and Buy Now Pay Later (BNPL), which has become a popular option in the MENA region. Other options may include Amazon Payment Services, which enables buyers to structure their purchases in instalments via banks including Emirates NBD, ADCB, First Abu Dhabi Bank, and RAK Bank.
The MENA region still primarily being a cash-based economy, online marketplaces often have cash on delivery (COD) as an optional payment method, for smaller orders. However, cashless payment methods and mobile wallets are a growing trend in MENA.
With so many ways to pay, e-commerce enables business buyers to complete secure transactions conveniently and in line with their organisation’s stipulated procurement policies.
Easier tracking of orders
In traditional procurement, business buyers have to chase up their orders by e-mail or phone, often waiting on responses. In an online marketplace, e-procurement makes order tracking effortless. Buyers can log in to their account at any time, search for the order number provided to them on confirmation of their purchase, then view the status of their order in real-time. Importantly, even if a buyer isn’t logged in, the best e-commerce platforms will send them notifications whenever the status of an order is updated.
Better reporting and more strategic procurement
Because all purchasing data is automatically housed in a business buyer’s online marketplace account, they can accurately track their procurement spending and consolidate it for their own or their line manager’s assessment and strategic overview.
Because buying online saves time in comparison to traditional manual procurement, business buyers find they can spend more time improving their long-term procurement strategy and can generate future cost savings by analysing the accurate data that the online platforms give them access to.
This move from reactive to proactive procurement can greatly elevate the procurement function in an organisation and make it fundamental to the bottom line – read about how Aon’s procurement team drove nearly $300 million in savings over the course of three years.
