The WHY behind the B2B Marketplaces boom
Where do most people shop online? The data shows that it might be one of the online marketplaces. According to Digital Commerce 360, sales on marketplaces accounted for 62% of global online sales in 2020. In addition, it shows that on the 100 largest online marketplaces, users collectively spent $2.67 trillion. What a number!
The marketplace has become one of the key sales channels not only in B2C but a B2B sector too. Most of us are familiar with B2C marketplaces, and we’re quick to give an example, such as Amazon, eBay or Etsy. But what about a B2B marketplace? How do you really define it? What are the advantages of using it for the suppliers in B2B eCommerce? And most importantly, what made them such a popular shopping destination for businesses?
What is a B2B Marketplace?
In general, a marketplace is a type of an eCommerce website where third-party vendors can sell products or services directly to buyers. It offers a wide variety of choices from many different suppliers, doing a great job at connecting buyers and sellers, and thus, facilitating sales.
B2B marketplaces are not much different from those that target consumers. They also let their users buy and sell products and services using their site. Yet in this case, they connect businesses that want to find the right item or get a specific job done with manufacturers, wholesalers, and retailers.
Online marketplaces are the primary example of applying a multichannel eCommerce strategy, that is the kind of approach to sales that goes beyond just having a storefront. This entails selling via social media, face-to-face interaction, Zoom calls, or finding another platform to market on (aka a marketplace).
But there’s more to B2B marketplaces than just a way to increase sales. They can be a way to streamline the production process, find out if there is a niche for a B2B product or service, and learn more about the target market. Those are some solid benefits. Yet before you start selling on them, let’s see what kind of marketplaces are out there for a B2B sector.
How to differentiate between B2B marketplaces?
We can distinguish different marketplaces based on sold products and services or depending on their business model. The first division includes vertical and horizontal B2B marketplaces.
Vertical and horizontal marketplace
A vertical B2B marketplace allows buying and selling products or services between all the segments of a particular industry only. A good example is Metro Markets, a marketplace dedicated to the HoReCa industry or Joor dedicated to the fashion industry.
In contrast to vertical marketplaces, horizontal B2B marketplaces connect the businesses across various segments. The most standard example would be Amazon Business, where large enterprises, as well as SMB’s from a cross-section of industries, come together.
As far as the division based on the business model, we distinguish product, service and hybrid marketplace.
Product, service and hybrid marketplace
B2B product marketplaces connect different businesses for product supply fulfilment. For example, a construction company and an equipment supplier.
B2B service marketplace is a marketplace that connects companies that can offer services to each other. For example, a construction company and a human resource supplier for engineers, labourers, technicians, etc. The same applies to a construction company and a finance company.
A hybrid marketplace is any marketplace offering more than one type of business model. It’s a complex network that involves both B2B and B2C relations. Moreover, it also involves products, services, B2B, and B2C elements. For example, Amazon and Alibaba are both B2B and B2C product marketplaces. On the other hand, eBay combines B2B, B2C, and the C2C product-based business model.
B2B Marketplaces are definitely on the rise
B2B marketplaces enjoyed continued growth before the pandemic. Nonetheless, 2020 proved to be a milestone for this mode of eCommerce sales. Studies show that as much as 57% of purchasing managers are spending more on marketplace eCommerce sites as a result of circumstances brought about by COVID-19, including 22% significantly more.
The same goes for the rise in B2B marketplace startups. Almost overnight, startups such as Faire and Mirakl transformed into powerful platforms, earning billion-dollar valuations along the way. Other than that, some common examples of the most popular B2B marketplaces still include Amazon, Alibaba, Rakuten, Mercateo, Global Sources or IndiaMART.
The pandemic is not the only factor that contributed to the B2B marketplaces growth. What are other reasons why those types of eCommerce sites have become so popular? Let’s find out.
Why have B2B marketplaces become so popular right now?
COVID-19 aside, marketplaces have obvious advantages that will always work in their favor. They will always be hype for typical reasons, such as revenue without the burden of an own inventory and warehouses, high margin or network effects. Those kinds of things will continue to attract sellers no matter if we are talking about the B2B or B2C sector. Nevertheless, that’s not an enough answer as to what makes them so attractive in the B2B world. What is it then?
When it comes to the B2B sector, many companies (even very big ones) didn't invest in digitizing their customer relations in the past. As the main focus of digital transformation was in the "inside" (ERP and CRM systems), sales still happen offline. What is more, B2B companies suffer from a super high complexity which is hard to digitize (e.g. special prices for single customers, different inventories per customers, regions, countries, etc.), so one of the biggest challenges will be to meet those constraints. There's a lot to do here.
Marketplaces remove the burden of dealing with those kinds of problems. B2B firms can use an available platform to find customers for their products and services. They can set up an account in just a few steps instead of modernizing their existing site or building one from scratch, driving traffic to it and dealing with data analysis. Such an approach would involve a lot of learning while there is no time for that.
Will the Direct-to-Consumer trend stump the marketplace growth?
Big vendors in the B2C sector have turned their back from massive platforms, such as Amazon, or they slowly remove themselves from marketplaces and focusing on their own website. They are following a growing trend that is called a Direct-to-Consumer approach to eCommerce, or D2C for short.
There’s no denying that D2C will be one of the biggest trends in the next few years. Yet, connecting new technologies (web applications and mobile apps) with existing enterprise landscapes is still a huge challenge. Many managers are often not digital-natives, and likewise, big companies often don't have a product IT department, or at least, it is not in the same location. Thus, there are many challenges ahead for D2C.
For now, marketplaces solve that problem. There’s no need to work on the website if you can use a platform that’s optimized for traffic and conversions.
Can anyone build a successful B2B marketplace?
As the overall complexity of a marketplace is very high, it's recommended to use a capable system. From a feature perspective, the marketplace is all about three important functionalities. Let’s choose Spyker as an example.
The first feature is a "merchant portal". It allows merchants to list their products, sync their stocks, prices and export orders, which is either included in the shop system (as in Spryker) or added as a SaaS solution (as in the case of Mirakl). The second crucial feature is the ability to merge catalogs, which actually is a quite complex problem. Finally, the third important feature is to have a store system that allows "merchant products," meaning that each product has a "price plus merchant inventory." Almost all store systems can't handle this, except the big ones like Spryker or Hybris.
Challenges ahead of B2B marketplace
With plenty of B2B procurers applying a multichannel strategy in their purchasing processes, marketplaces have become an encouraging B2B business tool. Every vendor, large or small, should consider either starting one or listing one. And although, as mentioned above, many B2B companies still have not moved their sales to online, modern technologies make such transformation easier.
However, we must remember that all online sales channels have their pros and cons. One of the significant drawbacks that concern all eCommerce platforms is the lack of opportunity to build strong business relations with the buyer, which in the case of B2B is essential to maintain long-term cooperation between companies. Another challenge is decreasing shopping cart abandonment. Vendors race to come up with innovative solutions to this issue, but still without success. We at Meetsales are working on a solution that could tackle that. The Meetsales widget connects your sales reps with your customers and acts as a liferaft whenever your clients, for some reason, don’t finalize the purchasing process. Read more about that on our blog in the chat with our CEO.