B2B | Digital Commerce 360

Alibaba rolls out an AI-powered B2B sourcing tool

Mark Brohan — Thu, 01 Aug 2024 19:17:08 +0000

Alibaba introduced its latest use of artificial intelligence (AI) to push B2B marketplace services — this time in the form of a new tool for sourcing.

About 30,000 businesses on the marketplace use Alibaba’s AI tools to increase product exposure in targeted markets. Sellers on the marketplace say the practice helps them grow, even with limited internal staff.

Now Alibaba is rolling out its latest tool: an AI-powered conversational sourcing engine.

Alibaba owns the world’s two largest online marketplaces by gross merchandise value (GMV), Taobao and Tmall. Taobao ranks No. 1 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of the largest such marketplaces by GMV. Tmall ranks No. 2. Both operate in China.

How Alibaba’s new AI tool for B2B works

Unlike traditional search engines, which rely heavily on simple ranking and indexing, Alibaba’s AI sourcing engine will focus on understanding natural language and transforming it into professional sourcing requests.

It can even predict sourcing needs and provide suggestions. Another feature also allows complex queries or full documents as inputs. The system will distinguish and respond to them in natural language, according to Alibaba.

“Traditional search engines evaluate web page importance through interlinking, credibility and ad spend,” said Alibaba.com president Kuo Zhang. “In this AI era, the B2B sourcing engine offers an intuitive and organic way to query, as well as rapidly and accurately match business buyers and business sellers based on their proven track record.”

The sourcing engine’s features

Alibaba’s sourcing engine includes two significant features:

Reconstruction of information.
A digital assistant.

First, in reconstructing information, Alibaba looked at how ecommerce has traditionally used product listings with titles, descriptions, keywords and pictures. Business buyers often need to compare multiple suppliers. With that in mind, the sourcing engine will reorganize such information to enable direct, custom-made and side-by-side comparisons, Alibaba said.

Next, the digital assistant will leverage 25 years of expertise in digitalizing various trade aspects — products, payments, logistics, customs and currency exchanges. Alibaba believes its AI technology in this context can now mimic the experience of having a sourcing professional at a buyer’s side.

“This technology can level the playing field and significantly reduce costs, enabling small to medium enterprises (SMEs) to become integral players in the global supply chain,” Alibaba said.

Alibaba’s larger push for B2B AI tools

In November, Alibaba International Digital Commerce Group introduced its generative artificial intelligence (AI) toolkit, branded “Aidge,” which has been adopted by approximately 500,000 merchants, with daily API usage reaching 50 million calls.

Features include a virtual try-on tool for apparel and a 24/7 AI customer service capability.

Since last April, Alibaba International has assembled an AI business team of 100 analysts and developers.

In May, the marketplace company surveyed 500 micro-, small and medium-sized enterprise (MSME) companies that do business on Alibaba.com and range in size from one to 250 employees.

Among the survey’s findings:

25% to 35% of respondents use AI daily.
Using AI tools led to an average 37% increase in product exposure to promote growth in commerce.
Companies using AI tools accepted 70% of product optimization suggestions.

The survey also found that companies from developing countries accounted for much of the use of the marketplace’s AI tools.

“Among the top 20 countries making the most frequent use of Alibaba.com’s AI tools, approximately 50% are from developing countries,” Alibaba assessed.

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Israeli B2B digital payments startup Monto gets new funding

Mark Brohan — Wed, 31 Jul 2024 22:00:59 +0000

An Israeli startup, Monto, that wants to simplify and digitize B2B payments has received $9 million in new funding.

Monto builds an artificial intelligence (AI) connector for enterprise resource planning (ERP) systems for universal B2B payments. And it will use a big part of the funding money to begin operations in the U.S.

Monto’s platform connects users’ ERP systems to its customers’ payment platform.

“Monto is a strategic decision for CFOs, futureproofing them against a landscape where most, if not all, customers will soon use portals,” says Maya Cohen, the company’s co-founder and CEO. “With Monto, getting paid by customers will be fully automatic, a concept we call ‘zero-touch.’ And we succeed in achieving that by working with, not against, the portals, an important distinction.”

Monto gets new funding

The funding comes from Scale Venture Partners with participation from Verissimo Ventures, F2 Venture Capital, Firsthand Alliance and Room40 Ventures. Monto will use the funding for its U.S. expansion and continued product development.

Monto’s AI connections between ERPs and accounts payable (AP) portals learn each customer’s invoicing requirements to ensure a payment flow for the supplier to significantly reduce manual workload, mitigate the risk of overdue payments and improve cash flow management, the company says.

Monto serves large enterprises from various industries, including publicly traded companies like Shutterstock and TechTarget, as well as technology companies like Miro and G2.

The company’s AI platform has helped suppliers get paid $1 billion through thousands of smart connections to different buyers in more than 300 portals, Monto says.

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Pitney Bowes reworks its biggest unit by revenue: Global Ecommerce

Paul Demery — Wed, 31 Jul 2024 21:57:09 +0000

Pitney Bowes Inc. has its eye on Global Ecommerce, the primary but changing revenue-producing business unit at the worldwide shipping and mailing products and services company.

Global Ecommerce made over $1.35 billion last year for Pitney Bowes. That was more than 40% of Pitney’s total revenue of $3.27 billion that year. It also led Pitney Bowes’ fiscal first quarter, which ended March 31, with segment revenue of $333 million. Global Ecommerce provides business-to-consumer online companies with logistics services for domestic and cross-border fulfillment, delivery and returns throughout the U.S. and more than 200 other countries.

132 retailers in the Top 1000 use Pitney Bowes as a shipping carrier. Those 132 retailers made more than $529 billion in 2023 web sales, according to Digital Commerce 360 data. Additionally, 68 use it for international ecommerce services, and 16 use it for fulfillment services. The Top 1000 is Digital Commerce 360’s database ranking North America’s largest online retailers by their web sales.

Pitney Bowes Global Ecommerce hits growing pains

In this year’s first quarter, “Global Ecommerce grew domestic parcel volumes 20% in a challenging market and reduced operating expenses,” Pitney’s then-interim CEO Jason Dies said on a Q1 earnings call.

But Global Ecommerce, one of three Pitney operating segments, has also been reporting the company’s steepest segment revenue and earnings declines: a Q1 EBITDA loss widened 14% year over year to $21 million as the unit’s revenue fell 26% to $333 million. By comparison, Pitney’s other two segments — SendTech Solutions (a mailing technology and services unit) and Presort Services (a mail-sortation business) — each amassed relatively strong financial quarters, as Pitney Bowes’ total revenue dipped by 0.005% to $830.51 million.

In 2023, Global Ecommerce’s revenue fell 14% year over year to $1.36 billion, as Pitney Bowes total revenue dropped 8% to $3.3 billion.

Lance Rosenzweig, interim CEO, Pitney Bowes Inc.

The Stamford, Connecticut-based company, under a new interim CEO appointed in May, Lance Rosenzweig, is conducting a review of Global Ecommerce’s options going forward. In addition, it recently sold the unit’s fulfillment services business to Stord, an Atlanta-based company that specializes in providing fulfillment services to online merchants. Pitney Bowes didn’t provide details on that sale but told industry publication Freightwaves that fulfillment services were a “small piece of the business.”

Rosenzweig joins Pitney Bowes after serving as a top executive at several public and private companies, including Boingo Wireless, technical support services firm Support.com, and customer experience software company Startek.

Pitney seeks a new head of Global Ecommerce

Gregg Zegras, former president, Global Ecommerce, Pitney Bowes

The Global Ecommerce unit’s recently departed president, Pitney veteran Gregg Zegras, retired earlier this month. Pitney Bowes has yet to name a replacement for Zegras.

Pitney Bowes said earlier this month that it was in the final stages of an “expedited strategic review of Global Ecommerce to eliminate ongoing operating losses.” The company recently identified $70 million in cost savings outside of Global Ecommerce and expects to eventually realize overall savings between $120 million and $160 million.

Stord’s acquisition of Global Ecommerce’s fulfillment services includes a 640,000-square-foot warehouse facility in Hebron, Kentucky, with robotic automation and other features. Stord said that facility is now the largest warehouse in its North American network.

Earlier this year, Stord acquired Pro-Pack Logistics, a fulfillment services provider to multichannel merchants in the U.S. and Canada, and it launched Stord Europe with fulfillment centers in the United Kingdom and the Netherlands to support B2B and B2C markets throughout Europe. Stord says it manages more than $5 billion in commerce annually through its fulfillment, warehousing and transportation services.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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Sign up for a complimentary subscription to Digital Commerce 360 B2B News, published 4x/week. It covers technology and business trends in the growing B2B ecommerce industry. Contact Mark Brohan, senior vice president of B2B and Market Research, at mark@digitalcommerce360.com. Follow him on Twitter @markbrohan. Follow us on LinkedIn, Twitter, Facebook and YouTube.

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Distributor Global Industrial delivers mediocre Q2 results

Mark Brohan — Wed, 31 Jul 2024 18:13:33 +0000

Through the mid-point of 2024, it’s been a so-so year financially for Global Industrial Inc. and its sales.

For its fiscal second quarter ended June 30, Global Industrial posted revenue of $347.8 million. That compares to $325.8 million the prior year, a 6.8% gain. Global Industrial does about 60% of all its sales digitally.

But the growth in sales came primarily from the company’s acquisition of Indoff, which Global Industrial acquired for $72.6 million in cash in May. Indoff is a B2B direct marketer of material handling products, commercial interior products and business products with operations in North America.

Without Indoff, Global Industrial sales increased 1.8% in Q2 and 1.7% on an average daily sales basis. Net income for the second quarter was $20.3 million compared with $21.5 million in the second quarter of 2023.

Global Industrial sales in Q2

For the first six months of the year, Global Industrial sales increased 11.9%. That’s up to $671.2 million and compares to $599.6 million for the previous year. Excluding Indoff, sales increased 3%.

Global Industrial’s “retention trends remain healthy,” interim CEO Richard Leeds told analysts on the earnings call.

“During the quarter, we saw a continuation of cautious customer purchasing behavior with mixed revenue performance on a monthly basis,” Leeds said.

However, for the year, company growth predictions remain uncertain given current economic conditions, he told analysts.

“It’s been a challenging environment the first 6 months of the year, and our focus remains on the things within our control,” he said. “We continue to make investments that will strengthen our competitive position, help us capture market share and drive long-term revenue performance.”

Check back for more earnings reports. For reference, here’s last quarter’s update on Global Industrial sales.

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ProcureCon Europe 2024

Megan Veltman — Tue, 30 Jul 2024 21:17:11 +0000

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B2B distributor ecommerce sales are inconsistent so far in 2024

Mark Brohan — Tue, 30 Jul 2024 19:26:29 +0000

B2B distributor sales are struggling to grow so far this year.

In May, the sales of merchant wholesalers — except manufacturers’ sales branches and offices — totaled $666.7 billion. That’s up 0.4% from $654.3 billion in May 2023. And seasonally adjusted U.S. wholesale sales rose 0.7% in the first five months of 2024 compared to the same period in 2023, after declining 1.6% for 2023, according to the U.S. Census Bureau.

But for B2B distributors and ecommerce sales, the story thus far this year is a tale of uneven growth. While it may be a fat city in one vertical, times are leaner in others.

Through the first five months of the year, monthly sales of merchant wholesalers, except manufacturers’ sales branches and offices, totaled $3.223 trillion. That compares with $3.299 trillion in January through May 2023, according to the Department of Commerce.

Government data for the monthly sales from distributors and wholesalers trails the calendar by two months, meaning the U.S. Department of Commerce only now just released data for May.

B2B distributor ecommerce sales

Most big public B2B distributors in 2024 are following a common theme of softer sales due to weaker performance in manufacturing productivity and slower overall economic activity.

But some are reporting stronger sales. A case in point is Global Industrial.

Global Industrial Co. started its 2024 fiscal year on a positive note, growing net sales year over year. Global Industrial revenue was $323.4 million for the first quarter ended March 31. That’s an 18.1% increase over $237.8 million in Q1 2023.

Ecommerce sales were particularly strong, the distributor said, even as the industry faced continued economic challenges.

Executives were optimistic about growth potential going forward.

“The industrial distribution market remains highly fragmented, and we have numerous opportunities for growth as we drive sales enablement across our channels, expand current relationships and acquire new customers,” outgoing CEO Berry Litwin told investors.

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How Watsco grows ecommerce sales and an entrepreneurial spirit

Paul Demery — Tue, 30 Jul 2024 14:30:49 +0000

Watsco Inc. owes its market position to a long-running strategy of acquiring family-owned businesses and giving the freedom to continue operating as entrepreneurs — and to a substantial dose of ecommerce technology and sales strategy, founder, chairman and CEO Albert Nahmad said today.

Albert Nahmad, founder, chairman and CEO, Watsco Inc.

The company said quarterly revenue rose 6.8% year over year. That’s up to a record $2.139 billion for the second quarter ended June 30. And ecommerce grew at nearly twice that rate, at 13%, to $770.16 million.

In Q2, Watsco ecommerce sales accounted for 38% of total sales. Watsco is well-known as a prominent online distributor in the highly fragmented, $64 billion North American HVAC and refrigeration products industry.

“A cornerstone of Watsco’s growth strategy is the acquisition of long-standing, family-owned businesses,” Nahmad said on the Q2 earnings call. He noted that, since its founding in 1989, Watsco has completed 69 acquisitions, “achieving industry-leading scale and preserving many wonderful business legacies into future generations.”

Nahmad added, “Over the last five years, Watsco has acquired eight businesses that today generate approximately $1 billion in annual sales.”

Watsco’s entrepreneurial spirit and ecommerce sales focus

The company’s growth strategy relies heavily on continuing the entrepreneurial spirit of acquired companies, whose executives typically remain to lead their operations.

“Simply put, Watsco’s entrepreneurial culture, which empowers local leaders to make local decisions, continues to perform well,” Nahmad said on the earnings call today.

He noted that Watsco’s long-running strategy of investing in digital commerce technology “continues to have an impact” on financial performance.

“Greater adoption and use of our platforms by a growing number of contractors has produced growth and market share gain,” he added.

Watsco is a Miami-based company that other HVAC suppliers have said they emulate for its digital commerce strategy. It also noted other developments related to its “digital ecosystem of technologies” configured to “transform the customer experience and transform how our industry operates.”

Watsco’s digital ecosystem

The digital ecosystem includes:

OnCallAir
Watsco’s HVAC Pro+ Mobile Apps
Watsco’s product information management (PIM) system

OnCallAir is Watsco’s ecommerce sales platform that lets HVAC contractors digitally engage with homeowners and sell them products and services. It compiled approximately $1.4 billion in gross merchandise value for the 12-month period that ended June 30.

For the six months ended June 30, contractors used OnCallAir to present quotes to about 160,000 households. That’s an 18% year-over-year increase. It also generated a 27% increase in GMV to $743 million.

Watsco’s HVAC Pro+ Mobile Apps provide contractors and their customers with real-time access to ecommerce activity. They also include such information as product specifications, inventory availability, systemwide product matchups, and technical support. For the 12 months until June 30, the number of HVAC Pro+ Mobile Apps users grew 12% to approximately 60,000.

Watsco’s product information management (PIM) system is a repository of rich product data. It provides data on over 1.5 million SKUs to more than 375,000 contractors and technicians who visit or connect digitally with one of its nearly 700 physical locations across the United States, Canada and Latin America.

Watsco is updating its technology systems to “optimize the launch of new GWP (Global Warming Potential) A2L” refrigeration systems designed to be more efficient and sustainable to reduce the adverse effect of refrigerants on climate change.

Though it accounted for 38% of total Q2 sales companywide, Watsco ecommerce sales exceeded 60% in some regions.

Watsco’s pitch to would-be partners: ‘Come to Miami to see us’

In his earnings call remarks, Nahmad, forever on the lookout for acquisitions, said, “Our proven culture, customer-focused technologies, scale and access to capital provide unique advantages and opportunities.” He added to anyone listening: “If you have an interest in learning more, please come to Miami and see us. We are transforming an industry, and we would enjoy telling you about it.”

Here’s last quarter’s update on Watsco ecommerce sales.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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Tax-hungry states eye ecommerce delivery fees to fund road repair

Mark Brohan — Mon, 29 Jul 2024 19:00:36 +0000

Cash-starved states and other municipal governments are no strangers to taxing ecommerce to generate revenue.

States, for example, have been collecting sales tax on ecommerce purchases by consumers and businesses for years.

Now, a growing number of states, including Colorado, Minnesota and Washington, are looking for options. Solutions include collecting a percentage of the fee consumers and businesses pay to have ecommerce packages delivered to homes or offices to pay for road repair and related projects.

How ecommerce is taxed in Colorado and Minnesota

For example, in 2022, Colorado became the first state to impose a retail delivery fee. That became one component of a 10-year, $5.4 billion transportation funding package. The retail delivery fee is expected to bring in $78 million a year. At that level, the fee represented approximately 15% of new revenues in the package.

All businesses were initially required to collect and remit a 27-cent fee on each retail delivery order by motor vehicle placed to a location in Colorado. Since being implemented, the fee has increased to 28 cents. However, Colorado also has amended the law to exempt businesses with $500,000 or less in annual sales from having to collect the fee.

Currently, two states — Colorado and Minnesota — have passed bills that collect a percentage of ecommerce delivery fees for fixing roads, bridges, and related transportation infrastructure.

Now, Washington is considering similar legislation. Washington has 57,000 miles of city and county streets. They account for 71% of the total miles in the state, according to the Washington State Department of Transportation.

Cities primarily fund their transportation systems on their own. As they do, 69% of transportation expenditures come from local sources, which face pressure due to competing local demands and structural budget deficits.

Meanwhile, the state’s share, which comes from state fuel tax receipts, is in decline. As a result, local governments are searching for new transportation revenue sources, according to a newly published report from the Washington State Joint Transportation Committee.

Why Washington is considering new legislation

A fee in Washington of 30 cents per order could generate between $45 million and $112 million in revenue in 2026, according to the report. The authors estimate that could grow to between $59 million and $160 million by 2030.

The cost to implement is estimated between $200,000 and $540,000 per year over the first several years.

So far, Washington has produced only one report. Meanwhile, no bill thus far has been introduced in the Washington state legislature.

Still, consumer and business ecommerce spending continues to increase. As it does, even more deliveries are being made. And more states including New York, Ohio, Nevada, Minnesota, Colorado, and Washington are exploring taxing delivery fees for road repair revenue.

“While neither Nevada nor Ohio has moved forward with a delivery fee, both states assessed the mechanism’s viability as a revenue mechanism including its revenue stability, efficiency, ease of administration, social equity, user equity, and transparency,” the report says.

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B2B buyers are all-digital all the time and sellers must be too

Mark Brohan — Mon, 29 Jul 2024 15:54:09 +0000

Across the board, B2B buyers are a mobile and an increasingly digital group, according to data and analysis contained in the newly published 2024 B2B Omnichannel Buyer and Seller Report from Digital Commerce 360. Just four years before the global COVID-19 outbreak, B2B buyers made about two-thirds of their organizational goods and services purchases offline. […]

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Distributors see uneven ecommerce sales growth as the year races by

Mark Brohan — Fri, 26 Jul 2024 20:44:31 +0000

The macro numbers speak for themselves: U.S. wholesale sales are doing slightly better than the previous year.

Government data for the monthly sales from distributors and wholesalers trails the calendar by two months, meaning the U.S. Department of Commerce only now just released data for May.

But for distributors and digital commerce, the story thus far this year is a tale of uneven growth. While it may be a fat city in one vertical, times are leaner in others.

Wholesalers and distributors’ ecommerce sales so far this year

The biggest public distribution companies have yet to break out second-quarter earnings, but some such as W. W. Grainger started the year with respectable but hardly stellar results. Grainger is a prominent distributor of maintenance, repair and operations (MRO) products that businesses need to operate their facilities.

For the first quarter ended Jan. 30, Grainger reported moderate first-quarter growth in total and web-only sales, but it expects stronger growth ahead, president and CEO D.G. Macpherson said on an earnings call.

“Amid a slow but steady demand environment,” Grainger produced “solid results,” he said.

Grainger’s web-only Endless Assortment business — which Zoro.com and Japan-based MonotaRo.com comprise — posted a 3.7% sales increase to $751 million. By comparison, Grainger’s High-Touch Solutions segment grew 3.4% to $3.405 billion. The High-Touch Solutions segment includes the full-service sales through Grainger.com and the company’s sales team.

Most big public distributors in 2024 are following a common theme of softer sales due to weaker performance in manufacturing productivity and slower overall economic activity.

But even with softer sales, the emphasis is on shifting more, and not less, sales activity to digital commerce. A case in point is Fastenal Co.

For its fiscal second quarter ended June 30, 2024, the fastener distributor grew total sales to $1.916 billion. That’s a 1.8% increase from $1.883 billion in the second quarter of 2023. Net income was $590.4 million compared with $593.1 million in Q3 of the previous year.

As in other recent quarters, digital sales made up two-thirds of all Fastenal revenue.

“On digital footprint, 59.4%, that’s taking all of our ecommerce, all of our FMI, it was 59.4% in the second quarter. Actually, in June, it hit 60%,” CEO Daniel Florness told analysts. “We had expected that we’d get to about 66% this year. We now think it’s about 63%, and that’s not because we’re not acquiring customers. It’s because customers are spending less, and it shows up in our numbers.”

For the second quarter, using 59.4% and 55.3% of digital as a percentage of all sales, Digital Commerce 360 estimates Fastenal digital sales grew year over year by 1.8% to $1.138 billion from $1.041 billion.

How are smaller distributors doing in 2024?

Like Grainger and Fastenal, smaller distributors also are seeing only moderate to steady increases in year-to-date ecommerce sales.

Bay Supply, a distributor of fasteners, tools and hardware, is on track to hit its forecasted growth of 10% in 2024. But a downturn could lower that, says chief operating officer Michael Eichinger.

“We are at a pivotal point in the coming eight weeks based on our historic trends, and it appears we are on track to hit that 10%,” he said. “However, the sluggish performance has also thrown forecasting a wrench. I do believe our worst case is 5%-8% growth for 2024.”

For ecommerce, the outlook is also mixed.

“Digital sales are up single digits over 2023 (5%). However, this is attributed to reduced average order volume,” Eichinger says. “Order volume is up 15%.”

At MC Tools and Safety, a small distributor of industrial equipment based in Blaine, Minn., ecommerce remains an exceedingly small part of the company’s operation, says president Erika Scherman. The company does $2.5 million in annual sales, and only about $20,000 online.

MC Tools has had an ecommerce site for a decade. But after experiencing fraud, it pulled back from selling online and made its website informational only. When COVID hit, it went back to selling online. Within the last three months, it launched a new Shopify site. So far, results have been “minimal.” Scherman says.

One problem is that its enterprise resource planning (ERP) system doesn’t communicate with the Shopify site, so a lot of work, such as on pricing, must be managed manually. As a result, MC Tools is trying to turn that to their advantage by hiring someone to compare their individual prices with online prices of competitors. That may be an opportunity to raise prices on certain items, Scherman says.

“Our next adventure is to look at our pricing compared to other people out there, to make sure our online prices protect our margin,” she says.

Scherman says a small company like hers doesn’t have the resources or time to invest in ecommerce the way larger competitors do. And ecommerce offers less return because she focuses on serving customers in Minnesota and western Wisconsin. “I don’t want to sell shovels to California,” Scherman says. “I can’t ship them well.”

Overall, she’s not sure where the website fits into the company’s business model that was built on personal relationships with customers, midsized contractors as well as operators of warehouses, offering them great service and stocking the products they need.

Speaking of ecommerce, she said, “I was telling my marketing gal, we could sell a million dollars there, but I’m not sure we’re well set up for that. I don’t know how to change how we do business to support that.”

Digital Commerce 360 contributing editor Don Davis provided reporting for this story.

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