The rise of online B2B marketplaces
It's not news that the digital revolution of commerce has changed how we shop and buy things we want and love.
But let's be honest.
This digital transition has mostly affected our personal lives and less our business matters.
B2B commerce is nowhere near B2C when it comes to factors like convenience, digital streamlined processes, speed and transparency. But as we step into the digital zeitgeist, the way people interact on a business level also changes - just like in the B2C sector. Nowadays, companies and people prefer to do their operations digitally as they can connect and collaborate more easily with their partners and customers.
Businesses who operate online benefit from global opportunities, can streamline their operations, can cut costs and leverage technology like APIs, data analytics and much more. At core, this is exactly what B2B marketplaces are targeting with their value proposition. They offer businesses an easy to reach large customer base, credibility, and tools to simplify the operational processes. And recently, their momentum started to gain traction.
That's why in this article we will deep dive into the digital B2B landscape and analyze what facilitated the recent rise of B2B marketplaces fueling a market much bigger than its B2C counterpart.
Three types of B2B marketplaces
Generally speaking, B2B marketplaces function as centralized platforms that bring together multiple buyers and suppliers. These marketplaces' value proposition is to provide a broader range of products or services from various suppliers, offering businesses a one-stop-shop experience and ease of life when it comes to procurement - thereby reducing costs and increasing efficiency for the buyer and increasing brand exposure or sales potential for the seller.
With the ongoing digitalization of commerce, the world of online marketplaces has become much larger and more diverse than it appears at first glance. This is especially true for B2B marketplaces which are constantly expanding in variety as industries evolve and new platforms emerge. Generally, we can categorize the following types of B2B marketplaces:
Service B2B marketplaces
These B2B marketplaces specialize in connecting businesses with service providers. They cover a wide range of professional services, including marketing, IT, consulting, or design. One of the examples of a service B2B marketplace is Meero, an on-demand photography company founded in 2016. Meero connects businesses who require photography or content creation services with professionals in these areas. There are plenty of such marketplaces, often times even segmented into different types of professions (eg. cleaning services or construction services), but at core always offering services in a B2B context.
Wholesale B2B marketplaces
These marketplaces facilitate purchases and wholesale transactions, catering to businesses that require either large quantities of products or specific kinds of products whose use case is usually reserved for the B2B industry. These marketplaces represent essentially a collection of suppliers where in an offline world, businesses had to order separately or drive to brick and mortar wholesale shops.
The most prominent example in this field is probably Ankorstore which facilitates matching and ordering between retailers and diverse manufacturers. This comes especially handy for shops which require relationships with multiple suppliers or multiple countries. Ankorstore is able to offer with its platform lower minimum purchase values for shops and a more reliant procurement.
But also in more traditional business models like construction we find more and more examples of B2B marketplaces. Schüttflix for example is connecting construction materials sellers, disposers, carriers and contractors to facilitate and ease construction site processes.
All in all businesses who choose to buy on marketplaces can make better sourcing decisions based on benchmarks, supplier evaluations, buyer reviews, product rankings, and product-popularity indexes, thereby reducing risk and increasing efficiency.
Manufacturing B2B marketplaces
These B2B marketplaces focus on connecting manufacturers with businesses seeking custom or outsourced manufacturing services. They streamline the process of finding suitable manufacturing partners for specific products. Worcom, a European company headquartered in Croatia, is an example of these types of B2B marketplaces. Once two parties connect through the platform, they can collaborate and exchange information easily about the manufacturing process, delivery and even capacity management. Speaking of the latter, these manufacturing marketplaces are often used, when normal capacity is at limit and businesses seek out help for their order flow.
A hidden champion with huge growth potential
When we think of big e-commerce companies, we hear the success stories of B2C e-commerce marketplaces such as Amazon, eBay or Otto and how these revolutionized the way people shop.
B2B e-commerce is mostly overlooked in such growth examples although its market, valued at $17.9 trillion in 2021, is five times bigger than the B2C e-commerce market.
This huge difference underlines the true transactional volume of the digital B2B commerce landscape. The best thing, it's growing fast and shifting increasingly towards marketplaces.
According to Digital Commerce 360, online sales in 2022 that took place on B2B marketplaces grew to $130 billion, doubling the previous year’s sales. With this dynamic, B2B marketplaces are growing 7x times faster than traditional B2B commerce. In addition, Gartner estimates that 80% of B2B sales interactions will occur in digital channels by 2025, showing the massive potential for business and software platforms to establish a strong marketplace presence in order to respond to the changing demands of their buyers.
Benefits of B2B marketplaces
With this huge market opportunity, it begs the question: Why now? Why didn’t B2B marketplaces “go viral” alongside B2C marketplaces?
To understand why B2B marketplaces are succeeding only now (and not together with the B2C commerce boom), we need to first understand the dynamics of the industry.
B2B transactions happen mostly offline - even in today's day and age.
Pricing is often not standardized, conversations happen on an individual and face-to-face level. This results in a longer sales and procurement cycle, often taking several months and involving several business functions. Shops and businesses have to perform tasks like supplier research, KYC and compliance checks, reliability checks or terms and pricing discussions. Payment is also not as simple as with the B2C sector since most payments are done via invoices and include some kind of payment term/goal (eg. 14, 30, 60 days).
But things started to change within the last couple of years.
On the one hand, users and buyers have become more digitally sophisticated. The new working force has grown up in a digital environment and is used to shop on marketplaces where you can compare offerings and prices. So online transparency has become one of the main decision criterias. Additionally, market trends like white label offerings, dropshipping and more generally the pandemic required businesses to be more agile, flexible and meet demands fast in order to stay alive.
On the other hand, technology has catched up with solving some of the complex operational hurdles with B2B transactions. With the rise of embedded systems (more general) and embedded finance, the purchase process has seen several technological innovations like digital invoices, and buy-now-pay-later solutions.
With marketplaces owning most of these technologies, they offer unique benefits across the following dimensions:
Trust and reputation: The reputation of a marketplace spills over to businesses which use that platform, making consumers have more trust when they purchase products from platform sellers. As customers’ are protected by the marketplace in case of any problem, they make purchases with less concerns. This also accounts for sellers, since payment of goods and services is oftentimes guaranteed by a marketplace.
Established local or global customer bases: Unlike setting up a website, doing marketing and sales, B2B marketplaces offer businesses a ready-to-buy customer base. These platforms already have many customers who are actively searching for specific products. Businesses can thus leverage the existing networks which reduces the complexities of international trade.
Operational efficiency: Marketplaces essentially act as a technology layer. They can help businesses to streamline their operations and cut costs by providing value added services such as fulfillment, payment processing and logistics. With the ability to leverage economies of scale, sellers can offer for example flexible payment methods and faster fulfillment to their buyers. B2B Marketplaces are also a huge opportunity for startups and small companies which don’t have a lot of budget. Starting an e-commerce website from scratch can be costly and time consuming while selling on B2B marketplaces means less costs and faster time-to-market.
Seamless customer experience: With a well executed user experience including functions like unified merchant onboarding processes or optimized payment checkout, never before has buying (and selling) been so simple thanks to B2B marketplaces' infrastructure. Given that buyers now more than ever have higher expectations and demands for their shopping experience, marketplaces have a resource advantage for bringing all of these solutions together in one location.
The Amazon moment lies ahead
Huge market, double digit growth rates, plenty of room for innovation - sounds like a fairytale. But the last couple of months have shown that B2B e-commerce is necessitating a novel solution to spur innovation and ease-of-use on par with the B2C experience. More and more B2B marketplaces are popping up in order to capture this astronomical market opportunity. From metals recycling, buying timber to small shops procurement, the use cases are countless.
And with marketplace sales numbers practically doubling every year, we expect that many businesses will either switch to these platforms or at least find some kind of hybrid model. The key for a marketplace's success will be then to not only see their platform as a mere “bring buyers and sellers together” play, but rather to act as a technological ecosystem on top of the marketplace. By adding value added services like fulfillment and by streamlining business payments with digital solutions like BNPL, net terms (factoring) and digital invoicing, B2B marketplaces can truly create their own Amazon moment. Because the market is big enough to support multiple successful players.
