B2B Marketplaces Expert Voices

Building a Triple-A customer experience for B2B marketplaces is the most important goal. For long-term economic success, marketplaces have to focus on customer lifetime value. They will only be able to exhaust the value potential of their customers and users, when they manage the “3 Ps” right.

Pricing

Let’s face the harsh reality of B2B procurement: The most important topic on the buyer’s side is to decrease purchasing costs. Still, the product price is presumed as the biggest lever to drive down costs and budgets. Depending on the size and complexity of a customer, some B2B purchasing organizations are working on that intentionally, others more unintentionally. However, creating a price dynamic on a marketplace is one of the most important success factors. Fortunately, in B2B this doesn’t usually mean “be the absolute cheapest” but “be competitive regarding value for money”. Good examples are Conrad or Amazon Business.

Processes

What we have seen in every B2B Industry in the last couple of years is that marketplaces will not be able to succeed long-term if they only focus on the basic of “provide a large product range for competitive prices”. This is just too easy to do and eventually, at least one big company from Seattle might be able to outperform you in this area. The good thing is that there is no “General B2B” or at least, the chance for every B2B marketplace lies in mastering the specific, procurement-related process steps in its niche, from a customer’s perspective along the procurement process. In other words: Support your customer’s purchasing process as perfect as possible and your marketplace will get the chance to become a “mini SCM” (supply chain management) software for their customers – high lock-in effects guaranteed. Examples therefor are WUCATO or Sourceability.

For long-term success, it is critical to think in non-linear business models. So build your marketplace not as a desktop-oriented online shop, but more as a machine that can dock to any kind of frontend that might be relevant in the future. In construction, for example, without being able to plug into BIM systems, you might be irrelevant in the near future. For c-parts-marketplaces of any kind, without the ability to seamlessly integrate into ERP or SCM software, you won’t be able to target larger customers. Examples therefor are Magicplan or Autodesk.

Performance

Often, I observed that becoming a marketplace only went as far as “let’s throw several assortments on the platform and market them to what, we believe, is our target market.” The idea of an asset-light marketing machine is sweet, but seldom sees the light of the day, at least not for long, before going down in the dark valleys of irrelevance. To build a relevant, wellperforming, digital selling platform, you have to get your hands at least a little dirty. You need to have the right sellers on board with the right products – and still be able to manage a growing number of product data for example. Therefor, seller and data management is a key success factor. Metro Markets managed to onboard more than 400 sellers within their first year of existence – so approx. 2 per working day. That seems like a good benchmark.

Also, your customer experience does not end with successful check-out of a shopping basket, but with the successful delivery of the order. For marketplaces in B2B, however, shipping three order lines in four packages quickly becomes a nightmare for your customer’s goods receivables department. So managing logistics is crucial to a marketplace’s success. A trend you see is that not only Amazon, but other B2B marketplaces like Manomano (Pro) or Klarx are building their fulfillment centers to offer better logistics services to their customers.

An essential prerequisite for a successful B2B online marketplace is that it operates smoothly, securely, and intuitively. Therefore, the marketplace operator will require a high level of technical competence. That’s why professional master data management (MDM) plays a massive role in success. Data quality directly affects all important transaction and analysis processes – both positively and negatively. A consistently maintained high-quality product database is therefore indispensable, especially for B2B marketplaces. Because poor data quality leads to poor results when searching for products. The quality of the product data is also an important differentiator to set yourself apart from the competition.

Another decisive factor for the success of a B2B platform is that, in contrast to B2C, the variety of products for an industry or brand is always available. If I can’t find a red t-shirt on a B2C platform, I’ll buy a blue or green one. But if, for example, a spare part for an Audi is not available on an automotive B2B platform, I cannot buy the spare part of a BMW as an alternative or postpone the purchase. I NEED the spare part for Audi! If a B2B platform does not have a deep and wide range of products, there is a risk that customers will migrate to the competition in such cases.

User focus is another crucial success factor. The people responsible for purchasing in B2B are ”creatures of habit” and often buy their products from the same supplier for many years. It’s worth investing a lot in relationship management initially because it takes a lot to break the procurement patterns in B2B. Commercial buyers are also used to the convenience of AMAZON from their private lives; a B2B platform should also offer these same standards. An open and neutral B2B online marketplace is, in most cases, a bilateral market and must take those needs of buyers and sellers into account. Agile and continuous further development of the B2B online marketplace is the key to ensuring products and processes are designed according to the needs of the actual users, i.e. the user is placed at the center of all considerations. It is also vital to anchor transparency and neutrality as values of the B2B online marketplace.

Thanks to the neutral positioning on the supply and demand side, B2B online marketplace operators can convincingly and objectively structure offers and inquiries in addition to the independent quality check of the information. Transparency is also crucial for success because the more transparency and competition there is on a B2B online marketplace, the more appealing the marketplace is for users. Industry know-how is one of the other success factors, viz. an understanding of how the market works, how transactions occur, what problems the suppliers and buyers of goods and services are confronted with, etc. Only those with industry knowledge can adequately digitize the business processes and convey credibly that the platform offers added value.

B2B marketplaces create value by removing trade frictions between sellers and buyers in a market. The higher these frictions, the more distinctive the value proposition of a marketplace can be on both sides, leading to strong entrenchment in a specific trade, and ultimately, long-term prosperity.

Thus, the pre-existing market structure and size become a first, relevant exogenous factor and predictor of the ultimate success of a player. High relative fragmentation of demand and supply is a necessary condition for a healthy marketplace with low disintermediation risk in the long run. In addition, product complexity with multiple SKUs, a heavily intermediated value chain with a ‘fat’, offline middle layer ripe for disruption and a large addressable market (in the several tens of $ billions) are the typical foundations for building a marketplace of scale and consequence.

Once a suitable end market has been picked, fun begins, and marketplaces start driving demand for goods on their platform. In a B2B context, the most important thing to crack early on is supplier onboarding and curation. To varying degrees depending on the end market, B2B customers have stringent SLA and compliance requirements, and marketplaces act as the gatekeeper and bridge of trust for fulfilling purchase criteria. This could go as far as requiring marketplaces to deeply integrate with and fully tech enable business processes of suppliers, but once sorted, it generates strong demand-side tailwinds – leading to high logo retention, increasing order frequency, and higher AOVs – and deeply entrenches the marketplace in the trade. Failure at establishing this early on can lead to suboptimal unit economics and impair the longerterm prosperity of a player.

As the demand-supply flywheel gets established, marketplaces would further grow in relevance by taking full custody of the end-to-end supply chain. This means expanding product and geographic reach, as well as service levels, and ultimately grow wallet share of customers and increase net take rate per transaction. Over time, the most successful marketplaces will also manage to leverage their ‘unfair’ data and tech advantage, and vertical expertise to penetrate large, adjacent addressable markets such as commercial credit and procurement software, fully integrating into demand and supply-side backends.

Successful online marketplaces are characterized by the fact that they efficiently onboard thirdparty suppliers and their assortments – and have a handle on all the processes that complex marketplace models entail. In doing so, it’s necessary to align all business areas with the new model.

In concrete terms, this means that marketing, product presentation, and all buyer and thirdparty processes must be implemented properly in the value chain. With a holistic focus on the online marketplace, not only should all suppliers be advertised and handled on an equal footing, but the growth strategy should also be planned with the online marketplace at the center – and not as an experimental appendage. One thing must not be lost sight of – the customers. Successful marketplaces focus on the needs of customers and constantly optimize processes and services.

There are three key factors that make a marketplace model successful:

1. The first is the human success factor. An expert workforce that grows alongside the marketplace model is vital
2. The second factor is the quality of the providers in the marketplace: they need to be high-quality and reliable. The reputation of a one-stop-shop thrives on a diverse and first-rate offering. Therefore, both the merchant’s products and their logistics chain should be evaluated in advance. Marketplace processes must be designed to efficiently manage assortments, prices, availability, and shipments. For buyers, a user-friendly interface with a simple ordering and payment process is the key to success. Particularly for B2B use cases, excellent shipping and aftersales communication, such as for invoicing, status updates on deliveries, and reports are essential.
3. And last but not least, the choice of the right technology solution for your use case is, of course, a decisive factor. While planning, marketing and sales do their part, the platform must also be wellimplemented technically.

The challenge here is to build a future-oriented and scalable platform architecture. As a platform operator, on the one hand, you want to start as quickly as possible on the market. However, on the other hand, you always want to be in the position of being able to quickly and agiley implement new functionalities and individual processes. There are numerous commerce technology providers, some of which offer very industry specific solutions, or who have expanded their range of functions to include marketplace features. When selecting the appropriate technology, various factors must be taken into account.

Which functionalities are provided out-of-the box? To what extent can processes and features be individually extended and customized? Which APIs and integration capabilities are provided to implement automated data interfaces and integrate specific business applications? What are the total costs of ownership, i.e. initial implementation costs, licensing costs, and costs for hosting and operation? In an increasingly customer-centric world, the business model of online marketplaces has become firmly established and continues to grow. More and more suppliers are adding third-party products to their own portfolios – both manufacturing producers and service providers.

The emerging platforms offer a convenient shopping experience and feel similar to a digital supermarket. In addition, they offer customers competitive prices and allow the platform operator to constantly optimize their offering and customer experience with real-time data analytics. This holistic data sovereignty also enables targeted marketing concepts across different channels. Targeted shoppers who receive personalized offers and prices become loyal customers; and therefore increase the attractiveness for further third-party providers to sell on the online marketplace.

The network effect of this set-up makes a marketplace business model a logical and profitable extension of a company’s own web store. In addition, it offers a new source of revenue for affiliated groups or strategic partners to bundle and jointly handle sales and marketing. Various forecasts and trends, such as those from Gartner, show that this is not just a dream of the future, but may soon become essential for survival. The consulting firm predicts that enterprise marketplaces will grow to 70 percent by 2023, serving B2B business. Forrester takes a similar view, seeing online marketplaces accounting for 17 percent of B2B companies’ global revenue. To effectively capitalize on this trend requires not only action, but good preparation.