In the great supply chain snarl that has been a hallmark of recent months, as the holiday season looms, it has been the smaller suppliers that have been the most negatively impacted.
With a ground-level view of what’s been happening to small- to medium-sized business (SMB) in North America seeking buyers across borders, Caplan noted that demand from end consumers is high, logistics are snarled, container ships line up outside ports and factories, and trucking firms are short-staffed.
“It used to be that these firms would run their businesses in an analog way with ‘a little bit’ of digital,” he said. “But now being fully digital is a strategic imperative for SMBs, whether you’re a buyer or seller of goods to other businesses around the world.”
An ‘Outstanding’ Problem
The pain points in B2B show up in the numbers and point to the strategic imperative of going digital. Not all that long ago, PYMNTS estimated that there is a $3.1 trillion trade gap (and that’s in the U.S. alone) hindering SMB cash flow. That $3.1 trillion represents the receivables outstanding on any given day, and roughly a third of that tally, when paid at all, is paid late.
Caplan noted that online marketplaces, such as those on offer from Alibaba, can help solve that major pain point for smaller firms. Payments embedded into the mix can level the playing field between buyers and suppliers.
That embedded functionality, and the broadening of the platform itself, said Caplan, mirrors Alibaba.com’s own evolution from its initial existence as a digital yellow page directory, and with transactional capabilities in 2016. Fast forward five years, and the company facilitates tens of billions of dollars in B2B transactions.
As he told Webster, “The age of B2B marketplaces is upon us,” allowing firms to be geographically agnostic as to their suppliers, focusing only on quality and price, In the meantime “trade assurance” — through escrow services facilitated by J.P. Morgan merchant services and Alipay that protect buyers in the event suppliers fail to ship on time or product quality varies — can cement trust between buyers and sellers.
End-to-End Integrations — and Entrepreneurship
The integrations — of payments, of an end-to-end digital process, of drop shipping — help address the trade gap, maintained Caplan. The traditional bank processes of getting financing in place to keep operations humming have been inefficient for online sellers. In one newer initiative, Alibaba.com has introduced a program called Baba Select, which helps firms that sell large volumes and millions of dollars’ worth of personal protective equipment (PPE) to provide terms directly to buyers.
These solutions might even give rise to new business formation, said Caplan, who noted that the past year and a half of the pandemic has seen millions of new businesses get off the ground. For example, Mastercard’s Economics Institute has estimated that new business formation surged 32% in 2020 as measured against 2019.
With the digital age, capital isn’t the gating factor for smaller firms, he said; capability is.
“Technology and platforms have made it less challenging to start a business and get supply and be able to make a market,” he said.
The Tradeshow Transformation
Online platforms have also been a springboard for buyers and sellers to find one another, serving as a digital trade show of sorts, a critical function when, through the past two years, meeting in person was simply not an option.
Discovery — the process of sizing up vendors to see if they have what is needed, to get a sense of when it can be supplied, even to find out a would-be partner’s “reputation” — now can be shifted entirely online.
“This is where software ‘eats’ the physical world,” said Caplan.
Firms that want to find the best manufacturer for a given part, who want to sell their products to the world, should do it on platforms such as Alibaba.com, he said, as those formerly time-intensive processes can be done from one’s living room to save effort and save money. Platforms can offer virtual showroom and factory tours, livestreaming and even real-time translation to aid buyers and sellers in different countries.
“You can talk to a manufacturer in Spain who speaks Spanish,” he said. “And I can be here in New York and speaking zero Spanish. And we can communicate with each other effectively.”
Reimagining B2B Payments
Looking ahead, he said, as firms leverage online channels to tap new markets and even start operations, as firms move away from being underwritten by banks, business payments need to modernize so that smaller firms can stay independent longer.
“The business wallet is really missing for the digital entrepreneur,” he said. “And that is a white space that I know lots of folks are going after.”
Those wallets can ensure that B2B payments are done across preferred currencies and payment methods, and global payments can be done efficiently.
“The digitization of B2B lags the B2C side by about seven years,” Caplan told Webster. “I think there’s probably two decades of massive growth in the B2B side.”
“Long term, I’m pretty bullish on how folks are navigating the supply chain challenges,” he said. “It’s real disruption, but like every entrepreneur, when I see disruption, I actually get excited because I know there’s opportunity too.”