/  / 
B2B companies look to China for digital transformation
E-commerce model and rapid tech advances lay foundation for overhaul of entire value chain
30 Mar 2021 | Steven Yu

With the rapid development of mobile payments and related technologies, the consumption habits and lifestyles of people have dramatically changed. Consumer brands have shifted focus towards their online presence instead of their physical stores, and the Covid-19 pandemic has accelerated this trend.

With the “Double Eleven” shopping event setting new records in online personal spending in China every year, B2C companies operating in China have clearly become fully digitalized. Boosted by this increasing online consumer demand, corporates are transforming their sales models, leading to growing and more complex online supply chains.

More interestingly, during the pandemic, B2B companies have also sought digital breakthroughs to reach their clients, allowing them to redefine their core competitiveness and unlock new potential for growth.

But what is the significance of such digital transformation in B2B? It is far more than just the optimization of a company's own operations, digital management or cost efficiency. B2B companies that can successfully digitalize the complete value chain, including the procurement and sales sides, are poised to become long-term players in their respective industries.

Taking the sales model as an example, traditionally people believe that it is less relevant for B2B companies to upgrade their digital marketing and sales channels. However, digitalizing these channels can not only improve the operating efficiency itself, but also help to shorten the supply and distribution network, improve efficiency, and optimize costs.

The digital online distribution chain has already been successfully deployed by a number of B2B companies. For example, a multinational corporation in the chemical industry has recently built its own electronic sales platform and an open model for all distributors in China, who can in turn place orders on the platform, get real-time order updates, and complete the online payment process like in consumer sales.

It is just one of the many examples of MNCs choosing China as first destination for digital attempts.

Looking at the drivers behind this trend, we can see two factors.

First, in China, undoubtedly one of the world’s most innovative markets, the B2C space has skyrocketed in the past few years, whereby almost all aspects of life have now been digitalized. Therefore, the digital model of the B2C space lays out a good foundation for the digital transformation of B2B companies.

Second, the rapid development of technology has been a catalyst. For example, the development and popularization of 5G and cloud technologies, the application prospects of artificial intelligence, Internet of Things, and blockchain technology have helped to accelerate the digital transformation of corporate customers.

Compared with the consumer side, B2B companies generally have relatively long supply chain networks, but cover many industries and companies of many different sizes. As a result, for these companies to digitalize, it is not only about shifting operations from offline to online, but it is more akin to a disruptive change in the business models of all the industries involved in the supply chain.

In addition, the evolution of the internet for businesses has grown rapidly in the past decades but has not gone through the same drastic changes it has on the consumer side.

Artificial intelligence, Internet of Things, blockchain, cloud and other technologies closely related to the corporate side have only emerged in recent years. One can assume that with the continuous accumulation of data, and optimization of algorithm capabilities, the Internet of Things for businesses is about to enter a new stage of accelerated development.

Corporate strategy, culture, organizational structures, and the policies of these companies will also need to be adjusted to support their new digital strategies.

With the rise of industrial digitalization, banks need to enhance their own digital capabilities to meet the demands of corporates, which will also help to drive the evolution of the Industrial Internet.

 As businesses digitalize their models, new requirements for the banking and financial industry have emerged. Financial institutions need to have their own digital capabilities and accelerate their technology investments.

With a holistic perspective of the ecosystem it operates in, banks can start investing in enhancing their service capabilities for upstream and downstream suppliers and distributors in real economic chains with the objective to increase the integration between industrial internet and supply chain financing.

For example, in supply chain financing, the traditional financing for downstream distributors is often limited by cost-benefit, data and credit requirements. Therefore, not all downstream supply chain financing has been fully functional yet in the Chinese market. Digitalization can play an important role in addressing this issue.

Loan models have changed from manual to automated repayments based on business volume, credit data and other criteria. Distribution and resell of products and services to the bank's core corporate customers have shifted online, and with new technical solutions, the traditional banking industry will be able to provide a full set of distributor financing services, with both upstream and downstream supply chain financing solutions.

Many B2B companies, both MNCs and large local corporates, have seen the direct benefits of digital applications used in China, where the financial industry is more closely integrated with traditional industries. 

The adoption of advanced technologies will be key for the banking industry to stay relevant. 

In the context of supply chain financing, strengthening collaborations with fintech companies, exchanging and sharing information and data with corporate clients, as well as upstream and downstream suppliers and distributors, while using digital tools to improve efficiency in products and services, banks will be able to solve practical problems for their clients with holistic financial supply chain solutions.

With the explosion of e-commerce and digitalization of businesses, China may become the first market in the world where we see B2B companies operating like a B2C businesses.

Steven Yu is head of trade & lending North Asia and asset platforms Asia-Pacific at Deutsche Bank.