As manufacturers and wholesalers continue to digitize their sales processes, there often needs clarity about which strategy to choose. Should businesses opt for electronic data interchange (EDI), one of the most popular digital sales channels, or embrace B2B eCommerce solutions? What is the difference between EDI and e-commerce? Let’s dive into the world of EDI and eCommerce and discover the key differences between the two.
According to Digital Commerce 360, EDI accounts for over 75% of digital B2B sales, while B2B eCommerce makes up only around 13% of digital sales. This stark contrast shows EDI’s significant role in the B2B landscape. But what exactly is EDI?
EDI, short for Electronic Data Interchange, is a digital way for businesses to transfer documents using predetermined formats and digital rules. It enables direct data transfer between companies, eliminating the need for translators or additional processing. It’s like a secret language that computers use to communicate seamlessly.
One of the primary reasons EDI emerged was to address the challenge of transferring documents between businesses. When humans create documents, errors are bound to occur. But when computer programs generate the documents, the chances of errors dramatically decrease. Moreover, computer-to-computer information exchange is much more cost-effective than handling paper documents, with manual processing costs reaching up to $70, while computer processing costs are less than $1.
To make EDI work, businesses must agree on implementing specific EDI standards like ANSI, EDIFACT, TRADACOMS, or ebXML. These standards provide predetermined formats for the information in the documents. While larger businesses usually set the standards, smaller businesses must conform to them to conduct business. However, there are instances when an EDI relationship can be customized with different pricing, fulfillment terms, and protocols.
EDI enables businesses to efficiently process documents such as purchase orders, invoices, shipping notices, and remittance letters. These documents are encrypted and transferred securely, then decrypted and translated into a structured format by the receiving system. The data is integrated into the receiving system and can be sent back and forth between businesses using the same predetermined format.
Now, let’s get to the benefits of EDI. From cost savings to increased speed and efficiency, here are the reasons why you should consider adopting EDI in your eCommerce operations:
- Boosts Efficiency: With EDI, businesses can communicate and transmit data faster and more efficiently than traditional methods. This enables companies to manage their operations and inventory more efficiently, reducing the time and labor required to process orders and invoices.
- Reduces Cost: By automating manual processes, businesses can reduce the cost of handling paper-based documents. This eliminates the cost of printing, mailing, and processing paper-based documents, saving time and money.
- Increases Accuracy: Manual data entry is prone to human error, leading to costly mistakes and delays. EDI eliminates the need for manual data entry, reducing the risk of errors and ensuring that the data is accurate and up-to-date.
- Enhances Supply Chain Management: EDI provides real-time visibility into inventory, order status, and shipping information, enabling businesses to manage their supply chain more efficiently and reduce lead times.
- Improves Customer Satisfaction: With EDI, businesses can provide faster and more accurate order processing, quicker access to critical product information, and improved customer service. This, in turn, enhances the overall customer experience, which is crucial in building long-term customer relationships.
Let’s address the big question: Is EDI different from eCommerce?
Technically, EDI is a form of eCommerce since it involves electronic transactions. But the main distinction lies in their focus. EDI is primarily about transmitting documents, whereas eCommerce encompasses the complete buying and selling process, including a front-end store where buyers can browse and compare products.
For instance, if Company A wants to purchase a specific product from Blue Widget Express, EDI is the perfect way to place the order. However, if Company A is unsure about the product they need, requires product specifications or comparisons, or wants a more interactive shopping experience, EDI will only help a little.
EDI is great for transferring large amounts of data quickly and securely, automating ordering based on inventory levels and complying with supply chain requirements. On the other hand, B2B eCommerce shines when you want to educate buyers, provide self-service options, integrate with existing business processes and systems, and have more online visibility.
While EDI is highly efficient for existing customers who know exactly what they want, eCommerce allows businesses to reach new markets, expand sales, and showcase their brands. It provides a complete shopping experience, enabling upselling, cross-selling, and new marketing strategies. With product catalogs indexed by popular search engines, eCommerce can attract new buyers and boost sales.
It’s important to note that the optimal strategy usually involves a blend of digital solutions, such as integrating eCommerce, EDI, and a B2B online portal. This approach ensures that the ordering and approval processes are streamlined for existing customers who rely on specific systems. It’s a win-win situation that combines the efficiency of EDI with the growth opportunities and enhanced buyer experience of eCommerce.
So, when should you use eCommerce, and when should you use EDI? B2B eCommerce is best for displaying an interactive product catalog to educate buyers, offering a self-service buying platform, and adding value with cross-sells and upsells. On the other hand, EDI is best for supporting electronic format ordering, automating ordering based on real-time stock levels and complying with supply chain requirements from major retailers.
But why choose when you can have both?
The benefits of combining EDI and eCommerce are clear. Using both systems allows your business to satisfy diverse trading partners as opportunities arise and reduce your costs simultaneously. In fact, companies that combine the two can reduce B2B order processing time by up to 70%. It’s a win-win situation.
There’s no reason to choose between EDI and eCommerce since the two can complement each other. By employing both strategies, you can improve efficiency, reduce processing time, and appeal to a broader range of customers.
In conclusion, EDI and eCommerce have unique benefits and use cases catering to different aspects of B2B sales. Understanding your business requirements, customer needs, and the market landscape is key. By leveraging EDI and eCommerce strategically, businesses can strengthen their position in the digital commerce world and truly offer B2B buyers the best.