B2B commerce has finally crossed the chasm into the mainstream. If you don’t have a marketplace strategy, now is the time to develop one and lay out a roadmap for activation.
By Rocco Albano, Vice President, Customer Experience Strategy at Merkle
In the late 1990s there was a moment in the spotlight for digital B2B marketplaces, which collapsed during the dot-com bubble. People weren’t ready for conducting complex, high-dollar transactions online and Amazon was just beginning to cross the chasm as an ecommerce consumer marketplace.
In 2017, fifteen years after the dot-com bubble, B2B marketplaces began to rise again and accelerated quickly as COVID and the Amazonification of ecommerce reshaped the global supply chain. In Merkle’s B2B Futures - A Vision to 2030, we made the audacious prediction that by 2030, marketplaces will drive 50% of all global B2B commerce, equating to $12 trillion in value.
To take a piece of the rapidly growing pie, a sound strategy is non-negotiable. But first, it’s important to understand the current state of B2B marketplaces and the existing business models.
A Quick Primer on B2B Marketplaces
A marketplace is any intermediary platform that connects buyers and sellers. While the marketplace operator may sell its own products on the platform, a key component is the facilitation of commerce between buyers and third parties.
B2B marketplaces facilitate the buying and selling of a wide range of products: complex and turn-key, regulated and unregulated, globally and nationally. Exceptional ones make the buyer’s journey as frictionless as possible. They do this using data, state-of-the-art ecommerce platforms, and deep product and supply chain knowledge. Most importantly for sellers, whether they’re a Fortune 100 manufacturer or a medium-sized distributor, marketplaces provide qualified buyers.
Marketplace Models
Since 2019, the number of B2B industry marketplaces (e.g., food and beverage, construction, chemicals, medical, etc.) have increased by over 300%.
Mega-marketplaces like Amazon Business and Alibaba have continued to grow significantly, with Amazon Business alone offering over 2.5 million products in diverse categories.
There are three types of B2B marketplaces:
- Direct B2B Marketplaces: These are owned and run by manufacturers who sell their own products and, in some cases, those of third-party suppliers to other businesses. A notable example of a closed marketplace (the brand only sells their manufactured products) is Salonory, launched in 2021 by Henkel, a manufacturer of adhesives, sealants, and beauty care formulations for B2B customers. Salonory sells over a thousand Henkel-manufactured house brand hair and beauty products, such as Alterna and Pravana, to professional salons. Henkel runs the entire Salonory marketplace.
Another hybrid example is CheMondis, a European chemical marketplace with 1,600 manufacturers and distributors selling over 70,000 chemicals, including those of LANXESS AG, the founder and operator of CheMondis.
- Industry Marketplaces: Industry marketplaces typically don’t carry their own products and span numerous categories such as chemicals, additive manufacturing, construction, dental, and others. Industry marketplaces are growing rapidly. There were 100 in 2019, over 400 in 2022, and now more than 500 to date. One sterling example of scale and growth is Bees, owned and operated by AB InBev, selling beverages, snack foods, and OTC medicines to supermarkets and convenience stores, now running in 26 countries with $40 billion of gross merchandise value sold in 2023 and 3.7MM average monthly users.
Industry marketplaces manage the entire process of acquiring and connecting buyers with sellers. They bring an end-to-end marketplace platform to their sellers including state-of-the art ecommerce and CRM functionality, sampling, and RFQ/RFP facilitation, bid management, analytics, and transaction processing. Industry marketplaces make money from a variety of methods, including marketplace storefront setup charges, house ads, bid management, invoicing, and a percentage of sales fees. Keep in mind that in most cases, they don’t hold or ever touch inventory.
- Mega Marketplaces: Amazon and Alibaba have B2B marketplaces selling everything from office supplies to industrial equipment to bulk food ingredients. Amazon is global, with most sales in the US, while Alibaba is global with over 85% of their total B2B sales in China.
Marketplaces like Alibaba’s operate in 20 countries inclusive of China, with AOV’s of more than $5,000 and over ten million business accounts. Amazon Business, which runs across North America, Europe, India, and Japan, has been assessed to have over one million credentialed business accounts.
Developing A Marketplace Strategy and Activation Plan As a Seller
For B2B business executives defining a digital channel strategy, marketplaces supply an obvious on-ramp to increased ecommerce sales. A key decision is whether to join an existing marketplace or build your own.
Join An Existing Marketplace
If your business’s annual sales are under $100MM, you should start by joining an existing marketplace.
Pros
Industry Marketplaces:
- There are many industry marketplaces to choose from.
- They require inimal startup fees.
- Pre-built marketplace platforms make launching easier.
- Marketplace-acquired base of buyers enables quick access to relevant audiences.
Mega Marketplaces:
- These work well for commoditized to moderately complex products.
- You can quickly reach millions of established B2B buyers.
- On Amazon Business, sellers can be running in weeks instead of months or years.
- Businesses conducting ecommerce in China will launch faster on Alibaba than trying to build their own due to trade barriers.
Cons
All Marketplace Types:
- Your brand is competing with other B2B vendors wide-out in the open.
- Distributors may encounter contractual hurdles with their manufacturers to selling on a marketplace.
- Regulatory constraints and tariffs may affect your product catalog and profitability.
Build and Run Your Own Marketplace
Before you decide to build and run your own marketplace, you need to develop a roadmap and ROI plan to ensure your product and supplier portfolio can drive demand.
Pros
- It opens a new revenue stream to directly sell your brand’s products.
- It provides a new income stream if the marketplace is available to third-party suppliers and manufacturers.
- Companies with at-scale ecommerce platforms in place and the in-house capability of running national and international supply chains have a leapfrog advantage.
- If you’re a large brand, your company’s brand equity, funding, and reach is highly attractive to sellers.
Cons
- Your business is competing with other B2B vendors wide-out in the open.
- Building and running a marketplace is an expensive undertaking.
- A moderate-scale marketplace can cost $10MM to $20MM+ to build and $8MM to $12MM+ to run, depending on industry, supplier base, and geographic footprint.
- Marketplace brands take on fulfillment, regulatory, tariff, and geo-political risks.
Riding The Wave
It’s a watershed era for B2B marketplaces. In 2022, the ten largest privately held US B2B marketplaces received $6 billion in PE and VC investment. Amazon Business is projected to bring in $43 billion in sales in 2024.
B2B commerce has finally crossed the chasm into the mainstream. If you don’t have a marketplace strategy, now is the time to develop one and lay out a roadmap for activation.