In addition to having their own Ecommerce site, many B2B businesses sell on 3rd party marketplaces. That is another excellent way to grow the business by capturing the attention of shoppers searching through online marketplace listings.
According to research by McKinsey, a sizable 60 percent of B2B buyers indicate they are open to purchasing on digital marketplaces. In one of many signs that marketplaces are becoming part of mainstream ecommerce, collective marketplace sales grew 130% year over year in 2021 to $56 billion, according to an estimate by Digital Commerce 360.
Today, Business-to-business marketplaces are part of the mainstream of ecommerce. That trend is driven by the dominating presence of Amazon Business and the proliferation of scores of marketplaces springing up to serve numerous vertical markets from healthcare and automotive to chemicals and agriculture.
Amazon Business is set to top $31 billion in revenue and $52 billion in gross merchandise volume by 2023, including sales by third-party sellers and by Amazon itself on the marketplace. The growing dominance of Amazon and Alibaba is not deterring other entrants.
There are different types of marketplaces.
- Firstly, there are Horizontal Marketplaces, generalists offering a comprehensive inventory of products to a broad range of sectors. That is where you will find the likes of Alibaba.com and Flipkart.com.
- Then, there are the Vertical Marketplaces. These are specialist-focused and tend to deal with one type of product or industry. For example, in the automotive industry, buyers and sellers meet at sites such as Car-Part.com or PartsMarket.com. In machinery, that could be Klarx.com. In tools, Tolexo.com.
- Marketplaces can also differentiate along geographical lines. The big, global players transact worldwide, such as GlobalSources.com and AmazonBusiness.com. Local B2B marketplaces connect buyers and sellers within a specific country or region, such as Railali.com in Indonesia and ManoMano.com in Europe.
- Then, there are product, service, and hybrid marketplaces. Some marketplaces offer more than one type of business model.
While marketplaces offer a significant opportunity to grow the business, companies need to carefully consider how to balance Direct Sales Channels with selling on Marketplaces. Marketplaces give you access to a vast customer segment, yet these customers do not belong to you (even when they buy from you). You won’t have access to insightful data about your customers, nor can you market directly to them. That makes it challenging to build your business. On Amazon Business, the listing cost ranges from 5% to 47%, depending on the product category. That can cut profit margins significantly.
However, marketplaces would not enjoy their success if sellers did not believe that the advantages outweighed the direct cost of listing. Though buyers are turning to marketplaces to protect their supply chains, they also want to save money. One of the bugbears of traditional Business-to-business commerce is the lack of price transparency. It is a maze of long-term relationships, tiered discounts, and complex payment terms built upon vast product catalogs.
Historically, the price comparisons we take for granted in B2C have never been possible in B2B. That all changed with the arrival of marketplaces. For better or for worse, the principal differentiator in marketplaces is price. That puts the squeeze on brands. The marketplace is not interested in what makes your brand stand out. The opposite is true. Marketplaces create a level playing field where each seller presents its products in the same way, minimizing the influence of the brand. The order in which products are listed puts you at the mercy of an algorithm. Few companies truly understand how they can influence their position in the listing without paying more for the privilege. You are cut off from your brand and distanced from your customers.
The solution is not black or white regarding marketplaces. You don’t have to choose between going all-in or shunning them altogether. Technology allows you to be smart and fluid in your strategy and take advantage of both elements. The way to take the fight to marketplaces is to leverage what you know about your customers and their pain points and offer value-added services. You can create customer journeys on your e-commerce site that allow for rich, satisfying, and personalized interactions and experiences that make the customer feel valued, not commoditized.
With the explosive growth in the B2B marketplace space, finding the right marketplace that fits your business may be challenging. Here are some thoughts on helping you to narrow things down a bit. Every marketplace should allow you to grow both bulk sales and your network. A marketplace should also allow you to reduce the time and money spent updating catalogs or monetizing marketing channels. It’s essential that your marketplace allows you to connect with buyers directly – owning business relationships – and utilize automated solutions that save time gathering leads and orders by email or phone.
Start by reviewing a payment model you can afford. Marketplaces offer commission-based models and charge a commission on every order you receive. Subscription-based models charge you a membership fee, which might also include additional services like account management, advertising, and logistics support. You may also encounter Listing Fee-based models, which charge an extra fee for each product you list. When researching marketplaces, pay close attention to the requirements for onboarding. Find a straightforward, easy-to-use interface you find intuitive – you want to get up and running ASAP, not spend hours trying to work out how to upload product and business information. Remember, one of the key elements of a marketplace is establishing trust with potential buyers. That starts by ensuring that sellers undergo rigorous verification when entering the marketplace. Expect this process to take time.
As a seller, you must have access to data about your marketplace customers, orders, and products to understand the actual value a marketplace may bring. If the marketplace cannot provide this through 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 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.
A common theme across every ecommerce solution is incorporating business rules into the buying process. Have certain products that can’t be shipped to specific locations? What about maximum order values? Or what if a customer needs to provide specific information during checkout that you require 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 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. Suppose you’ve already implemented an ecommerce site and have built modern backend systems like ERP, CRM, or PIM for your business. In that case, you’ll want to be sure marketplaces have connectivity to these systems via APIs. That will make getting data in and out of the platform easier if your product catalog is extensive and your order volumes are significant.
As a result of the growth in this industry, marketplaces are being forced to differentiate themselves by offering additional value-added services. For example, giving buyers access to special promotions and free shipping. Look for the types of services that can make your life as a seller easier while simultaneously elating your buyers. Business-to-business merchants need many B2B-specific Ecommerce features that we will explore in detail in the following sections of the course. When selecting a marketplace as a sales channel, you must ensure that it offers the necessary functionality.
To sell on a Marketplace, you must integrate it with your existing systems. On a high level, you send information about products and prices to the marketplace and receive backorders to fulfill. If we go into detail, implementation is, of course, more complicated. First, each marketplace has its own format for data exchange. That means you need to implement a separate data mapping if your ecommerce platform does not support marketplace integration out of the box. As placing products on the marketplace costs money, you need tools for business people to define what portion of the catalog you want to send, where, and when, and coordinate this with your marketing campaigns.