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Wednesday, November 16, 2005

Study: Buying into business-to-business sales online

2004

Most people gauge the impact of e-commerce on the basis of retail sales to consumers because this has become part of everyday life. In reality, the most important aspect of e-commerce is the way firms interact with one another, according to a new study.

The vast majority of gains in e-commerce during the past few years have been the result of increased sales from one business to another, not sales from businesses to households.

The study compared the performance of e-commerce sales in the retail sector to that of the two large business-to-business sellers: manufacturing and wholesale trade.

Data came from the 2004 Survey of Electronic Commerce and Technology, which included the entire economy except for local governments. The survey covered about 17,000 enterprises.

In 2004, total online sales by private firms reached an estimated $26.5 billion. Sales from business to business represented 75% of this total, or about $19.8 billion. This was roughly the same proportion as in 2000.

The three industries covered in this study accounted for just over one half of online sales made by private companies in 2004.

Firms in manufacturing and wholesale trade were most likely to engage in business-to-business sales. Of the $4.2 billion in goods manufacturers sold over the Internet in 2004, 94% or $3.9 billion was to other firms. Among wholesalers, business-to-business sales accounted for some 84%, or around $5.1 billion, of their online total.

The firms in these two sectors have adopted e-commerce strategies that enhance their natural position as business-to-business sellers.

The retail sales sector sold close to $3 billion of goods and services over the Internet last year. The vast majority of these retail e-commerce sales, 85%, were to households and individuals, a proportion that was virtually unchanged from 2003.

There are promising signs that online sales will continue to become a more important facet of retail trade as e-commerce extends its reach. In 2004, online sales by retail firms grew by 51%.

Experts in the field say the basic principles of business-to-business sales are simple. Companies that buy and sell on the Internet may potentially be able to manage their inventory more efficiently; get goods to markets faster; reduce the cost of paperwork; and get lower prices on some supplies.

Definitions, data sources and methods: survey number 4225.

The analytical article "How business-to-business sales dominate e-commerce," no. 33 (11-621-MIE2005033, free) is now available online in the Analysis in Brief (11-621-MIE) series.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Mark Uhrbach (613-951-2856), Science, Innovation and Electronic Information Division.



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