How to work b2b marketplace in a global market?

In: Advertising

If you’ve been recently interested in B2B eCommerce, you’re not alone. In fact, the industry has seen remarkable growth over the past few years. According to Forrester, US B2B eCommerce transactions are expected to reach $1.8 trillion by 2023. The pandemic has certainly spurred the pace of digital adoption and brought massive dislocations in the business fabric, prompting B2B companies to look for digital channels to boost their sales. Here we present the general guidance for anyone interested in B2B eCommerce and B2B marketplaces in particular: even those who are familiar with B2B will hopefully discover something new.

What is B2B?

B2B or business-to-business is an arrangement where one business makes a commercial transaction with another business, which typically occurs when a business sources materials for production, employs the services of another business, or re-sells goods and services produced by other businesses.

What Is a B2B Marketplace?

A B2B marketplace refers to a B2B eCommerce platform that unites both B2B buyers and sellers. In contrast to a single-vendor B2B eCommerce platform, in a B2B marketplace, there are typically three involved parties, such as a marketplace operator or owner, B2B buyers, and sellers. Unlike B2C, where the buyers are consumers, in a B2B marketplace, both buyers and sellers are businesses, such as wholesalers, distributors, or retailers. Most B2B marketplaces tend to be multi-vendor marketplaces.

B2B Compared to B2C, C2B, and C2C

B2B is often compared to B2C, or business to consumer; however, in B2C, a business sells products or services to a consumer rather than a company.

If in B2B, the involved parties typically have equal negotiating power that oftentimes includes legal counsel to arrive at an informed decision, in B2C, on the contrary, decisions are affected by information asymmetry. Unfortunately, however, economic equality within B2B is not a ubiquitous phenomenon: larger companies tend to have commercial and informational advantages over smaller players.

When comparing the B2B to B2C shopping behaviors, the former is generally thought to be driven by the need, whereas the latter, is by expectations, something we’ve extensively covered in our previous piece on Personalization. Among other notable differences between the two business models are the sheer volume of transactions and the amount of an average check, which is significantly higher in B2B than in B2C.

C2B, or consumer to business, is a business model where, instead of a business creating value, it’s the consumer who does. An example of a C2B arrangement might be situations when consumers suggest ideas that are later adopted by the business, or when consumers offer products and services to companies. C2B can oftentimes be observed in blogs and forums where consumers link to products on Amazon and suchlike websites to facilitate the purchase of those products, thereby earning an affiliate revenue in case of a successful sale.

C2C, or consumer to consumer, is a business model whereby customers, or individual consumers, trade with each other. Classified ads and auctions are all examples of the C2C business model. Online C2C companies include such websites as Craiglist, Etsy, and eBay.

Types of B2B eMarketplaces

There are different taxonomies of Business to Business marketplace, depending on the business type and business model they utilize.

Vertical marketplaces concentrate on trading in products of a particular niche or industry, such as construction materials, pharmaceuticals, or automotive parts. CheMondis is a prominent example of a vertical B2B marketplace for the chemical industry.
On the contrary, horizontal marketplaces, do not boast of any particular specialization and sell products of varying industries instead. The most notable example of a horizontal marketplace is Amazon, which offers a multitude of products across different categories and industries and serves a wide range of buyers.
Depending on the business model, B2B marketplaces are typically distinguished as product, service, and hybrid marketplaces.
This way, B2B product marketplaces connect many businesses for product supply fulfillment, B2B service marketplaces connect companies for exchange of services, and hybrid marketplaces involve the sale of both products and services.
The global consultancy firm Roland Berger, in turn, recognizes four marketplace models, such as the ‘one-stop-shop,’ business model transformation, procurement networks, and B2B after-sales. Since we’ve covered the above models in detail in our previous piece The Marketplace Revolution, we’ll just brush over them here.
One-stop-shop broadens a company’s activities (either vertically or horizontally) and enables a smooth transition from an online shop to a B2B eCommerce marketplace. One-stop shops typically monetize on subscription, transaction, or marketing fees.
Business model transformations are marketplaces that initially started off as B2C but expanded their offering and partnership network to include B2B eCommerce.
Procurement networks are member-only clubs with a limited number of partners and subsidiaries that unite their efforts to support one or more procurement processes.

B2B Marketplace Functions

Besides providing goods and services to the business buyers, enterprise marketplaces serve other important functions in the businesses’ supply and value chains. Here’s the list (by no means exhaustive) of those important functions:

1: Curation of supplier

2: Facilitation of marketplace transactions

B2B marketplaces help the demand and supply to connect and transact at the accurate market price by matching sellers and buyers automatically, allowing buyers to pick up their preferred suppliers, or by allowing both parties to discover each other independently. Moreover, B2B marketplaces facilitate payments between the parties by offering multiple payment options, including trade finance.

3: Support for fulfillment

Support for fulfillment including warehousing, packaging, delivery, returns, customs handling, and inspections. While not all, some B2B marketplaces offer fulfillment services on top of their common value proposition.

4: Provision of value-added services

Enterprise marketplaces can repackage vast amounts of accumulated data and sell it to interested parties. They can also open up access to it for free to incentivize the sellers, enable better transparency, and help marketplace participants to make better decisions.

Benefits of Using B2B Marketplaces for Business

Firstly, they improve access to both quality information and quality merchandise. This way, smaller players have opportunities to trade next to larger international corporations. For buyers, a juxtaposition of regional, specialized, and international players means that they can now access a better offering that would have otherwise been unavailable. In a similar vein, by operating a marketplace, owners can reach new markets, extend their customer base, and unlock new, previously unfathomed revenue streams. Also, by connecting more vendors, marketplaces can significantly extend their offering, which, in turn, contributes to website traffic and increase in search engine rankings.

Moreover, marketplaces empower buyers to comparison shop entire inventories across different industries and refine their search by different criteria.
By adding products from multiple vendors into their carts, and thereby minimizing the number of invoices it takes to process the order, buyers also inadvertently participate in improving sales and fulfillment efficiency.
Since marketplaces combine the efforts of different parties, they tend to be much more efficient than if the participants had been operating independently.
B2B marketplaces also streamline and expedite the buying process through payment and fulfillment facilitation, contributing to customer satisfaction and loyalty. Such efficiency translates into more sales and revenue for both marketplace operators and sellers.

And finally, the marketplace model allows for testing new business concepts without running into additional unforeseen risks, such as incurring costs of holding on to unsold inventory.

Learn more about the pros and cons of B2B marketplaces here: Top Pros & Cons of Building a B2B Marketplace.

How To Succeed in a B2B Marketplace?

To make the B2B marketplace model work for your business, it’s worth adhering to a few common-sense principles.

The most important thing is to choose the right B2B eCommerce platform. It has to be an API-powered, headless, composable, and extensible solution for you to enjoy all the benefits of eCommerce technology and ensure your marketplace performs at its best.
Invest time and money in good user experience, design, and localization if necessary.
Think of monetization strategies, such as subscription, transaction, or marketing fees.
Develop internal procedures for partner onboarding and provide vendors and buyers with extensive information on how to use the marketplace.
Verify sellers and buyers whenever necessary to ensure solvency and accountability.
Employ reliable shipping and fulfillment providers.
Integrate with third-party systems, including internal systems of your own and those of your sellers.
Provide for a variety of payment methods, including trade financing options.
Engage in continuous feedback loops with both buyers and sellers to improve the efficiency of your marketplace.
Be flexible and adaptive to market changes.