If you’re a business that sells to other businesses, there’s a good chance that you’re accepting orders through a variety of channels – an ecommerce site, brick and mortar locations, email, phone, maybe even via EDI. While these are tried-and-true ways for your customers to transact with you, there’s a significant challenge that spans all of them – brand awareness. Prospective customers need to be able to find you and learn more about your brand before they can even begin to gain interest in what and how you sell. As a result, you’re likely making significant investments in advertising and brand awareness just to get people to your site/stores/call center to ultimately capture their business.
What if you could quickly and easily promote your brand and the products/services that you sell to a network of buyers that may not already know you? What if you could automate (and possibly simplify) some of your manual processes during the sales lifecycle? What if someone could handle the not-so-enjoyable aspects of fulfillment like returns and damaged goods? What if you could easily connect your existing systems to these types of services? B2B marketplaces aim to address these points and more by providing a platform on which *trusted* sellers can easily transact with buyers that are genuinely interested in those sellers’ offerings. These marketplaces provide much of the plumbing to do business so sellers can get to market much quicker than they could through traditional channels (think days or weeks to start selling, not months or years).
The Rise of B2B Marketplaces
Recently, you’ve probably been hearing quite a bit about B2B marketplaces. They aren’t new – the idea of connecting businesses through a technology-based marketplace has been around for decades. Some of the early pioneers in this space have sustained, SAP Ariba, for instance, while others, like Commerce One, have fallen by the wayside.
So, why the sudden interest? First, there’s a tremendous amount of potential revenue with marketplaces. A late 2020 report from Statista estimated gross merchandise volume (GMV) from B2B marketplaces from 2020 at $31b, up from $22b in 2019. Second, as more Millennials enter the B2B buying process through their jobs, expectations around how to transact are shifting from traditional purchase processes to fully self-service digital commerce. Third, as technologies around APIs have improved and more businesses are embracing these technologies, getting up and running in marketplaces is easier than it’s ever been. Lastly, COVID-19 has forced the hand of manufacturers and distributors to enable their buyers to purchase through more modern channels that require fewer touch points. Because marketplaces offer sellers the promise of getting up and running quickly, they’re becoming the “go to” place sellers look to digitize the sales process.
On this last point, McKinsey has an incredibly insightful article about this shift, represented in their image below.
Wait, This Sounds Familiar
Unless you’ve been living under a rock for the last 20 years, you’ve heard of Amazon and likely do business with them on a regular basis. While Amazon’s catalog certainly contains Amazon-branded products, the true scale of their catalog comes from 3rd party sellers, many of which you’ve never heard of. Amazon seamlessly connects buyers and sellers through their B2C marketplace – amazon.com.
You may not think about it often, but as a consumer, you’re putting trust in Amazon that the products and services they offer come from reputable, trusted sellers. If you ran a Google search for kids backpacks and found a link to Acme Co’s Brazilian ecommerce site, you may skip it entirely. If you ran the same search on Amazon, saw some compelling imagery of the backpack, highly rated reviews from real people and the “Prime” icon, you’d likely be less concerned that the brand is Acme Co. and more likely to purchase directly on Amazon. You trust that Amazon trusts Acme Co. You also know that Amazon’s got your back in case there’s a problem with the purchase.
Like B2C marketplaces, B2B marketplaces are in the business of connecting fully vetted sellers of goods and services to prospective buyers and doing it in a way that makes it incredibly easy for a buyer to find what they’re looking for in a trustworthy setting. Additionally, B2B marketplaces, like their B2C counterpart, provide tools and services for sellers to set up shop relatively quickly in the marketplace. If you dig a bit deeper, the differences between these types of marketplaces start to become clear:
In B2C, buyers generally deal with simple shipping options – they want their order delivered in x amount of time to a residence or business address which would mostly be handled with carriers like UPS or FedEx, with the occasional freight shipment for larger items like furniture.
In the world of B2B, products come in all shapes and sizes. In addition, buyers may have very specific requirements around how, when and where goods are delivered. Some products may require specialized logistics to get them from point A to point B. Others may have time-sensitivity for products to arrive in an acceptable condition. B2B shipments may span multiple countries with different processes around customs handling.
As a result of these challenges and complexities, B2B marketplaces often emphasize their ability to solve these challenges as a key selling point for their platform. In some cases (like Amazon Business), the marketplace will provide options to take care of logistics on behalf of their sellers. This can remove significant stress from the seller so they can focus on capturing and fulfilling orders up to the point of shipment.
When it comes to paying for goods in the B2C market, things are relatively simple. A buyer can use a credit card through a variety of payment gateways, use services like PayPal, more modern payment methods like Apple Pay or Amazon Pay or even finance their purchase with services like Klarna. Generally speaking, payment processing is a one-time transaction that happens as the customer is completing their order.
B2B buyers, particularly those doing business digitally, expect the same sort of options that B2C buyers have. However, depending on the nature of their business and the relationships that they have with sellers, they will often require payment methods that are tailored to their use cases. For example, paying on terms (e.g. 30, 60, 90 days) is quite common for B2B transactions. Payments by paper check or ACH are also commonplace in the B2B market. Additionally, some B2B purchases may involve multiple payment transactions stretched out over periods of weeks or months (this is particularly the case when selling services).
B2B marketplaces understand these complexities and will often times provide a wider-range of payment options for marketplace buyers than what would generally be available for B2C transactions. Some marketplaces will also allow sellers to configure which payment options will be available to their buyers. For example, if your business isn’t willing to take on the risk of terms-based payments, this option could be disabled when buyers attempt to complete a marketplace order for your products.
The Buying Process
When consumers shop online, they may not always know what they’re looking for – the online version of window shopping. Additionally, consumers can be a finicky bunch whose tastes, interests, hobbies can change on a whim, even within the same shopping session. As a result, B2C buyers are more likely to start their purchase process by searching and then filtering/browsing based on what grabs their attention – they often want to discover products rather than jumping to a particular product.
B2B buyers, on the other hand, usually know exactly what they need and want to spend less time trying to track down items they need to purchase. According to a 2019 Zfort article, over 50% of B2B buyers already have approval for purchase by the time they inquire with a seller. The same report shows that average conversion rates for B2B buyers are 10% compared to 3% in the B2C market. As such, it’s critical that sellers optimize for the following:
- Findability – it should be incredibly easy for customers to find what they need. In many B2B scenarios, this is probably a SKU or part number
- Relevancy – prospective buyers should only see information that’s relevant to their needs. Products likely don’t need paragraphs of supporting content or lifestyle-type imagery
- Checkout Optimizations – Buyers’ data should be pre-populated at checkout, including previously entered choices (e.g. if a buyer purchases on terms, that should be the default option at checkout)
- Ability to Quickly Reorder – If a buyer trusts the relationship with their seller (even through a marketplace) and the goods and services align with their expectations, they’ll likely give the seller repeat business. It should be incredibly easy for buyers to place reorders
B2B marketplaces focus on these types of optimizations in an effort to get B2B buyers what they need, as quickly as possible, so they can order products and move on to the next thing on their to-do list.
No, we’re not talking about Tinder or Bumble. We’re talking about establishing seller/buyer relationships based on very specific needs.
In B2C marketplaces, consumers don’t generally think of the relationship they have with the seller. They may purchase a product on Amazon and never hear from the 3rd party seller. Occasionally, they may get an email from the seller asking the buyer to rate their product. Rarely does this relationship extend beyond this transaction.
For B2B transactions, the requirements of the buyer may be so unique that searching/browsing a marketplace would be a futile effort. In these scenarios, buyers may need to have multiple conversations with potential sellers to determine if those sellers can successfully deliver on goods and services. On the flip side, some sellers may not want to be bothered with these types of requests if they already know they won’t be able to help.
Some B2B marketplaces will offer “matchmaking” as a service. Buyers provide information about what they’re looking for and sellers can choose to accept those requests and continue the process with the buyer. The marketplace facilitates the entire process. An example of this is Ontruck, which provides matchmaking between those businesses that need to have products delivered and carriers that have trucks available for pickups. Shippers can enter the specific routes they need for delivery and carriers can accept those routes. Ontruck facilitates the entire process through their marketplace.
Nurturing Buyers Post-Sale
You’ve shipped an order, paused to take a breather and moved on to fulfilling your next order. You’re done, right? Not always. Your buyer may not get their shipment or products may arrive damaged. Or your buyer may need to return products for a variety of reasons. For your traditional sales channels, you have a process for this – the buyer fills out a form on your site or calls their account representative. But what happens with orders placed on a marketplace, particularly those where the buyer may not have a way to directly contact the seller? You still want the customer to be happy but may not have the resources to help with post-sale nurturing.
Faire, a B2B marketplace geared to local retailers, offers buyer-focused services like free returns. Other marketplaces will front customer service calls on post-purchase inquiries, so the seller doesn’t need to be directly involved but the buyer still gets the attention they deserve.
Key Features of a B2B Marketplace
Every B2B marketplace has unique attributes that are highlighted when luring prospective buyers and sellers, but many have a set of common features:
- Payment Methods – As mentioned above, B2B transactions can be complex. As a result, a marketplace should offer a wide array of payment methods, allowing the seller to choose which methods they’d like to offer prospective buyers.
- Financing – Products and services in the B2B market can be incredibly complex and expensive. Sellers may not be willing to offer financing terms for buyers, particularly those with which they don’t have an established relationship. Some marketplaces will offer buyer financing as a service. They’ll take on the financial risk of terms purchases and pay the seller immediately upon a buyer ordering through the marketplace.
- Discounting – You likely have high-LOV customers that get discounts through your traditional sales channels. Your loyal marketplace customers should also have the same opportunities for discounting. A good B2B marketplace should offer this and allow you to customize and even feed discounting data from backend systems like a CRM or ERP.
- Contract Pricing – Many B2B marketplaces offer tools to help with quoting and negotiating as part of that quoting process. Once a seller and buyer have come to an agreement on pricing, the seller may want to extend that pricing for all subsequent purchases from the marketplace.
- Flexible Shipping Methods – Shipping can be challenging in B2B and the better marketplaces will provide buyers with a plethora of options that fit within any constraints sellers might have (e.g. perhaps a marketplace can facilitate a freight shipment but your warehouse doesn’t have support for freight so you wouldn’t want to enable this as an option for buyers).
- Insurance – Given that many B2B transactions can be high-stakes from a financial standpoint, either party may want to carry insurance for transactions. Some B2B marketplaces will offer insurance as part of the purchase process so the seller and buyer don’t need to go to yet another party to insure a transaction.
- Regulatory Compliance – Few people want to deal with regulatory compliance but often don’t have a choice when it comes to B2B. While large manufacturers may have full-time staff dedicated to compliance, smaller businesses likely do not. Some marketplaces offer regulatory compliance tools and services (sometimes at an additional cost). For those marketplaces that don’t provide these services, sellers may still be able to leverage 3rd party services that integrate with their marketplace. An example of this would be solarisBank’s Platform and Marketplace solution that uses APIs to provide payment compliance to marketplace transactions in the EU.
- Tax – Similar to regulatory compliance, tax law (and compliance) isn’t everyone’s cup of tea. Some B2B marketplaces have, at least until recently, been leaving collection of sales tax or VAT up to sellers. Look for marketplaces to provide native integrations with tax services like Avalara in the near future.
- Analytics – When you run your own eCommerce site, you have direct access to performance data – what products are selling best? Who are your top customers? What is the site conversion rate? If you’re doing business on a marketplace, you’d be asking similar questions. Most marketplaces will provide these insights to sellers (although as a value-added service, in some cases). In addition, some marketplaces can provide cohort data analysis so you can better understand how you’re selling relative to others in your industry.
- Advertising – As a seller, you’ll want to expand brand awareness within the marketplace. We’ve all seen sponsored listings on Amazon, right? B2B marketplaces are no different – if you want people to see your products, you’ll need to have an advertising strategy in the marketplace. Many B2B marketplaces offer tools to help set up and manage advertising campaigns directly in the platform. Some marketplaces, like Amazon Business, offer marketing services to manage campaigns on your behalf.
Generalized vs. Specialized
We’ve probably all heard something along these lines – “Be good at many things or be the best at one thing.” In the B2B marketplace space, this rings true. There are several generalist marketplaces that will work for many buyers and sellers but break down whenever a complex business workflow is required. As a result of the somewhat inflexible nature of these marketplaces, more specialized B2B marketplaces have cropped up. These marketplaces focus on verticals (banking, agriculture, etc.) and incorporate tools and services that are highly customized for the needs of that vertical.
The folks from Bessemer Venture Partners wrote a great article talking about a renaissance in the B2B space. In the article, they discuss the differences between generalized marketplaces and those that are focused on specific verticals. Their image (below) is a great visualization of the different marketplaces and how they’re categorized.
Horizontal Marketplaces tend to be more generalized in terms of supporting the procurement process. These marketplaces may be more appropriate for merchants selling commoditized goods. The sales process for these types of products tends to be simpler so a one-size-fits-most model for a horizontal marketplace may be just fine for a seller.
Vertical Marketplaces, on the other hand, tend to involve products that are complex and/or the sales lifecycle for these products can be intricate and have a much longer lifecycle than highly commoditized products (see the “B2B Buying Journey” image from Gartner below to get a better sense of how complicated this can be).
Additionally, some verticals involve highly customized products and services to the degree that a buyer doesn’t simply browse the marketplace. Instead, requests for quotations are made in the marketplace and suppliers can create custom bids for those quotes. The vertical marketplace is helping to facilitate this process with tools and services tailored to this process.
Players in the B2B Marketplace Space
There are far too many marketplaces to enumerate here, particularly vertical marketplaces. So, we’re going to highlight a few. Be sure to look for future posts where we’ll do deeper dives on some of these marketplaces.
Amazon is a multi-billion-dollar giant in the B2B marketplace space. In 2014, Amazon took all the good things about amazon.com and enhanced them to build a marketplace built for businesses. Amazon offers a variety of services for sellers including tiered-discounting, ability to display quality certifications for products (which may be a requirement for prospective buyers), negotiated pricing with buyers, advertising services and Fulfillment by Amazon (FBA).
Buyers on Amazon Business can set up accounts with multiple users and permissions for those users. Additionally, buyer account managers can define approval workflows on purchases so buyers can’t make unauthorized purchases on behalf of the account.
While not quite to the same overall scale as Amazon, Alibaba is known as the “Amazon of China.” Their offerings closely align with Amazon B2C, Amazon Business and cloud computing.
Similar to Amazon Business, Alibaba offers a variety of business seller and buyer features.
Unlike Amazon, Alibaba will not compete with their own sellers. This is something that’s been a sticking point with sellers doing business with Amazon – once their business gets sufficiently large, Amazon starts to take notice and steps in and offers Amazon-branded products of a similar nature.
Founded in 1996, Ariba was launched to help companies use the Internet to connect their systems to make procurement more efficient. Soon after, Ariba Network was launched as one of the first online B2B marketplaces. The network promised to connect sellers and buyers and provide tools to help facilitate the entire process.
Today, SAP Ariba Network (Ariba was acquired by SAP in 2012) is the largest network of suppliers and buyers in the world with millions of suppliers in nearly every country. Ariba Network offers tools and services that touch every part of the supply chain, making it easy for sellers to quickly join the network and connect with relevant buyers.
Faire is a marketplace that connects wholesalers to over 200,000 local retailers in the US and Canada. While you probably won’t find heavy machinery or industrial filters on Faire, you will find innovative ways to attract new retail buyers and keep them in the marketplace. For example, Faire offers free 60-day returns on all unsold goods. This gives retailers peace of mind knowing that they can experiment with new products without the traditional risks. Additionally, Faire offers tools for sellers like commission tracking for sales reps and integrations with seller backend systems like ERPs and order management systems.
Mirakl is a software company that provides a platform for businesses to establish and manage *new* B2B marketplaces. Imagine automotive manufacturers that work with suppliers, dealers and consumers. The manufacturer can utilize Mirakl to establish their own marketplace that brings these parties together in a single place. If dealers need new parts, they can order them from the marketplace. If a customer needs to replace a part, they can place that order on the marketplace and have it fulfilled directly by the suppliers. The manufacturer controls the ecosystem and has greater visibility into all aspects of the sales lifecycle.
What Should a Seller Look for in a B2B Marketplace?
With the recent explosive growth in the B2B marketplace space, it may be challenging to find the right marketplace that fits for your business. Here are some thoughts on helping you to narrow things down a bit:
Ease of Onboarding
You want to sell your products to as many people as possible, as quickly as possible. When researching marketplaces, pay close attention to the requirements for onboarding. Remember, one of the key elements of a marketplace is establishing trust with potential buyers. That starts by ensuring that sellers have gone through rigorous verification steps when entering the marketplace. Expect this process to take time.
Additionally, if your sales processes are relatively simple, getting up and running on a B2B marketplace should be something that takes weeks not many months (note: if your processes are complex, you should expect that modeling these processes in any marketplace may present challenges and, in some cases, may rule some of them out entirely).
Services that are Above and Beyond
As described above, many B2B marketplaces will offer the same set of core features for sellers and buyers. As a result of the growth in this industry, marketplaces are being forced to differentiate themselves by offering additional, value-add services. For example, Faire provides buyers with an Insider program like Amazon Prime for consumers. This gives buyers who participate access to special promotions and free shipping.
Look for the types of services that can help make your life as a seller easier while at the same time elating your buyers.
Access to Data
In order for you, as a seller, to understand the true value a marketplace may bring, you must have access to data about your marketplace customers, orders and products. If the marketplace cannot provide this in the form of reports, dashboards and/or direct access to the data, you’ll be missing key insights that can help you grow.
While you may use industry-standard sales processes or have a catalog of commoditized products, your business still has unique characteristics. Be sure that a marketplace can be tailored to your specific needs. For example, if your products have custom metadata that’s critical for backend processing, confirm that the marketplace can support this metadata so your processes that rely on that data can continue to operate as they do today. Or if you have steps in your order workflow that must be followed, ensure that the marketplace has workflows that can be modified.
Ability to Define Business Rules
A common theme across every ecommerce solution that Blue Fish designs and implements is the incorporation of business rules into the buying process. Have certain products that can’t be shipped to certain locations? What about maximum order values? Or what if a customer needs to provide specific information while checking out that’s required by you to fulfill their order? If you’ve implemented these types of rules on your ecommerce platform, there’s a good chance you’ll need similar rules in a marketplace.
If you’ve already implemented an ecommerce site and/or have built modern backend systems like ERPs/CRMs/PIMs for your business, you’ll want to be sure marketplaces have connectivity to these systems via APIs. This will make getting data in and out of the platform easier if your product catalog is extensive and/or your order volumes are significant.
This Sounds Expensive
Of course, B2B marketplaces are business too and need to make money. So, how do they monetize their offerings? This is highly dependent on the nature of the marketplace. Horizontal marketplaces may have “take rates” – a percentage of each transaction and/or a fee for listing a product. Or, in some cases, the marketplace is free for merchants but value-add services like marketing tools and analytics come at a cost.
In vertical marketplaces where buying can be complicated and involve many parties, marketplaces can make their cut either by removing some of the middle layers in the process (e.g. brokers) or offering compelling tools/services (E.g. workflows, offering financing for purchases, etc.)
So, is it worth it? This can be a tough call for sellers. Are you willing to give up some of your margin to get the reach that a marketplace can promise? Or do the additional services in a marketplace justify the fees as they’ll offset operational costs you incur today because you’re doing this work yourselves (and may not be as good or efficient as the marketplace)?
Our daily lives as consumers center around being able to make purchases anywhere, anytime using all sorts of devices (phones, tablets, TVs). Business-to-business buyers and sellers’ expectations are quickly shifting from traditional, high-touch, offline purchase processes to quick, easy, self-service digital experiences. Just as B2C buyers expect to hop on to Amazon to find just about anything, B2B buyers are starting to have similar expectations when it comes to getting what they need for their businesses – one place to find exactly what they need, without the hassle and inefficiencies of outdated sales channels.
The potential of B2B digital commerce is incredible, particularly in relation to the potential for B2C. Forrester estimated (pre-COVID) that the B2B ecommerce market in the US alone would see sales of $1.8 trillion by 2023 while DHL saw global B2B sales (for ecommerce sites and marketplaces) in 2019 at $12 trillion with a growth potential of almost $21 trillion by 2027. Compare this to an estimated market of $3.6 trillion for B2C in 2020 and the sudden interest in B2B marketplaces becomes obvious.
If you’re not already selling your goods or services in a B2B marketplace, you’re likely behind the curve. Not to worry – there are very good marketplace options that have low barriers to entry so you can sell quickly and easily, depending on your requirements. Additionally, these marketplaces are constantly improving their capabilities and offerings based on market demand so you can be confident that the platform will grow and evolve, helping to reduce your risk of choosing the wrong marketplace.
How do you select a marketplace? This can certainly be a daunting exercise given the options that are available. Our advice – don’t go it alone. Find a partner that’s helped other buyers who were once in your shoes. Contact us if you’d like to see how we can help you with this journey.