How Business-to-Business Works

Unlike retailing, which is mostly a Business-to-Consumer (B2C) industry, B2B deals with working with vendors, distributors, and other businesses. How does Business-to-Business (B2B) work, and especially how does it work for retailers?
There are different types of B2B ecommerce sites that work in various ways and are broken into two major groups: the verticals and horizontals. Verticals are B2B sites designed specifically to meet the needs of a particular industry, such as retail. Vertical sites are the most likely to contain community features like industry news, articles, and discussion groups.
Horizontals provide products, goods, materials, or services that are not specific to a particular industry or company. Horizontals that retailers could use might provide travel, transportation services, office equipment, or maintenance and operating supplies.
Horizontals and verticals can connect buyers and sellers together directly or act as intermediaries who facilitate transactions. There isn't one ubiquitous model for B2B electronic commerce. B2B sites vary from those providing simple lead generation, to complex marketplaces serving a variety of buyers and sellers, to private extranets.
Auctions allow multiple buyers to bid competitively for products from individual suppliers. Auctions can be used to get rid of surplus inventory by item or lot, or excess fixed assets like display fixtures. Since the seller can set a minimum price with prices moving up from the minimum, the sellers can usually get more than a liquidator would pay for the same items. Buyers also have the ability to pick up product and equipment well below list prices.
Reverse auctions, in contrast, allow retailers to post their need for a product or service and then allow vendors to bid on fulfilling the need. Some reverse auction sites aggregate demand from many small buyers providing economy of scale. Small retailers ordering as a group will get a much better deal from a vendor than they could individually.
B2B sites also include catalog aggregators who act as intermediaries between many vendors and retailers. They standardize content by combining catalogs from multiple vendors. Catalog sites generally have fixed pricing, although pricing may be tiered based on the buyer's profile or quantity ordered.
Exchanges are two-sided marketplaces where buyers and suppliers negotiate prices. Frequently utilizing a bid/ask process where prices move up and down depending on the market. Exchanges can be used for new items and supplies, or used to trade excess inventory and fixed assets.
B2B sites can also provide project tracking or collaboration services to their members. Collaboration allows retailers and vendors to work on new products, provide better forecasts, and improve response.
Buyers and sellers can come together on B2B sites openly or by using infomediaries. Infomediaries are third parties that act as agents. They are frequently used to allow the participants to remain anonymous while transacting business. In addition to transaction services, an infomediary could provide advice or research helping retailers make informed buying decisions.
Facilitating B2B ecommerce in yet another way, are the channel enablers who create online marketplaces for existing distribution channels. Channel enablers support both buyers and sellers with B2B ecommerce services that vary from consolidating product information, to managing distribution and payment, to integrating with the members' back-end systems. This last service is a common use of channel enablers in the retail B2B area: translation services to EDI.
The translation service is needed because the underlying technology of B2B ecommerce replaces the current retail ecommerce standard, EDI (Electronic Data Interchange). EDI is less standardized and more costly than Internet based ecommerce, which typically uses XML (eXtensible Markup Language) to allow buyers and sellers to communicate online. Many B2B sites integrate EDI-to-XML transactions enabling trading between large and small companies.
XML provides a flexible way to describe product specifications or attributes. In simple terms, XML is similar in concept to HTML, which allows you to "mark up" language to control how it looks. Unlike HTML however, XML allows you to "mark up" language to describe what it is. Using XML you can label part number, UPC, price, color, size, etc. and the system will know exactly what the tag references without the complicated file structures and proprietary networks required for EDI. The only issue is that XML only works when everyone uses the same tag references, which is why groups are busily working to generate standards.
What do retailers need to know about these standards and how do B2B systems work with their existing legacy systems?