For most companies, selling online takes the mystery out of how and when customers buy, at least in direct transactions. But for the many businesses that rely on online marketplaces to build brand exposure and sales, there can be a knowledge gap if the marketplace doesn’t provide data on sales volume across multiple products and categories.
“In many marketplaces, it’s a black box—a seller just gets an order and ships it out,” says Erin Magee, vice president of sales for Classic Accessories, a manufacturer of protective coverings for such items as outdoor patio furniture and grills.
But since Classic Accessories started selling its coverings through the BuildDirect.com Technologies Inc. marketplace to both consumers and businesses in late 2015, the manufacturer has compiled data on customer demand that’s helped it better plan its production and the product assortment it distributes to wholesalers and retailers, Magee says. That helped the manufacturer grow its total sales last year at a double-digit rate over 2015.
New marketplaces like BuildDirect.com that offer robust data are helping sellers signal a new stage in the progression of business-to-business marketplaces. Today’s marketplaces, for example, offer broad access to global markets and provide new services, including online payment options, to sellers and buyers that only fully came into being in the past few years.
Apart from BuildDirect, Classic Accessories traditionally distributed its products to channels ranging from mom-and-pop retailers to large garden centers, catalogers and wholesale clubs. It also designed products and planned assortments according to its forecasted demand from those channels.
Now, with more sales coming direct through the BuildDirect portal, Classic Accessories can work with its own data on consumer demand and how its coverings can be cross-sold in new product combinations. BuildDirect provides demand information through web analytics and customer surveys that have led Classic Accessories to expand offerings in such areas as car covers in the garage products category and coverings in various sizes to protect stacked patio furniture and individual pieces.
BuildDirect, which specializes in selling large quantities of building materials and finished products for home improvement projects, in early 2016 launched Home Marketplace as an online marketplace where buyers can purchase from a number of manufacturers and distributors of products ranging from roofing and flooring materials to furniture and granite countertops. (Some sellers, including Classic Accessories, started selling through BuildDirect’s marketplace before it officially launched as the Home Marketplace in early 2016.)
Joseph Thompson, BuildDirect’s head of marketing and growth, says the company continues to build ways for sellers to use marketplace data to improve how they sell and ship products, including bulk orders from overseas suppliers. A seller portal performance dashboard, for example, shows sellers how their products perform according to multiple demand metrics. “If a seller logs into the portal, he can see on the dashboard how customers are engaging with his products in recent days or the same day,” he says. BuildDirect also uses predictive analytics to project demand.
BuildDirect is but one example of a business taking advantage of B2B marketplace opportunities. Following are a few examples of the expanding importance of these portals:
▶ Direct sales opportunities for manufacturers. Many B2B manufacturers have taken minimal steps in direct e-commerce because of “concerns over lack of experience with e-commerce, costs associated with building the required technology and potentially alienating their distributors, or channel conflict,” according to the report “Manufacturers Reap Benefits From Selling Direct,” compiled by Forrester Consulting and commissioned by marketplace technology vendor Mirakl and SAP Hybris, which is a B2B e-commerce technology company.
Of 125 e-commerce and marketing executives from medium and large B2B and B2B-to-consumer manufacturers in the United States, United Kingdom, France and Germany, many have taken only half-steps toward enabling e-commerce for end customers, the report found. 53% of companies said they sell on unidentified third-party marketplaces or through channel partners, but that relying on resellers “interferes with the business’s control of the customer experience and reaping valuable customer data and insights.” Yet manufacturers that sell on marketplaces said they are “more confident” in their abilities to execute critical functions through direct marketplaces.
▶ Capital is finding marketplaces. Tradeshift, a growing global B2B e-marketplace received $75 million in a Series D round of venture capital funding from new and prior investors in mid-2016. Tradeshift has raised a total of $174 million in venture capital, according to business information firm Crunchbase. Tradeshift will use the new funding to “serve a wider range of global customers” and expand its services in such areas as supply chain financing, procurement software and online payments, the company says.
Prior to the latest funding round, Tradeshift made a number of improvements, the company says, including expanding the range of products buyers on its plan can purchase under spend-management programs; enabling buyers and sellers to exchange electronic purchase orders and invoices, and gives them the option to complete payments through such online payment systems as PayPal and Intuit Payments; and a service buyers and sellers can use to check the financial viability of new trading partners.
▶ Amazon Business is hiring. Amazon Business has already made a mark on the world of B2B e-commerce, reporting it surpassed $1 billion in sales during its first full year of operation. While it’s widely recognized as a major force driving other sellers to build and perfect B2B e-commerce sites and marketplaces, Amazon.com Inc. thinks its B2B site still has a ways to go to reach its potential. “It is still very much day one for Amazon Business,” Amazon says. It is still focused, it adds, “on building solutions that enable B2B customers to find, research, and buy products and services.”
Those quoted comments were pulled not from a statement by an Amazon executive, but from a job description listed recently on Amazon’s own recruitment website for a senior program manager for Amazon Business. It’s one of dozens of job openings at Amazon Business, according to a search for “Amazon Business” on Amazon’s job site, Amazon.jobs.
Amazon Business went a step further in April, adding a British B2B marketplace to its European territory targeting an online B2B market estimated by the U.K.’s Office for National Statistics at more than $120 billion.
The site, at Amazon.co.uk/business, features more than 100 million products ranging from office and janitorial supplies to electric motors and metal-cutting drills for companies of all sizes, says Bill Burkland, head of Amazon Business UK.
Amazon hasn’t released figures on the numbers of buyers and sellers on the U.K. site, though it notes on the site that U.K.-based businesses already selling on Amazon marketplaces were “expected to achieve export sales of more than 1.8 billion pounds ($2.32 billion) in 2016, up 29%” from 1.4 billion pounds ($1.80 billion) the prior year.
The launch of the newest Amazon Business site has stirred various responses from U.K. businesses. “We are very excited about Amazon Business, which will simplify sales for us and allow us to make our offers more attractive to institutional buyers through business-specific pricing,” Dariusz Dubis, a director at Microdream Ltd., a firm certified by Microsoft Corp. to refurbish computer products, says in an online testimonial.
Others are more wary of Amazon’s presence. In preparation for Amazon Business’ expected arrival, SPOT Group, a wholesaler of business supplies under the Spicers brand, has upgraded its distribution center network and delivery services over the past two years to be more competitive, CEO Jeff Whiteway said late last year.
The U.K. Amazon Business site is the second in Europe and follows the December launch of Amazon’s B2B portal in Germany, at Amazon.de/business. More than 50,000 business customers and 10,000 sellers now use the Germany-based Amazon Business portal, Amazon says.
▶ Payment options multiply. Amazon Business is one of several B2B marketplaces offering payments services, in this case for buyers. Visa Inc. and Amazon Business have agreed to provide businesses with purchasing accounts on Amazon Business with access to data tied to purchases made with Visa Commercial cards. The free service is designed to let buyers access full line-item details of purchases made on Amazon Business to reconcile or audit their financial records, regardless of how many suppliers they purchase from. Amazon Business features products sold by some 45,000 sellers in addition to Amazon itself.
Visa and Amazon Business announced the new service in April, noting that it will initially be available for Visa Commercial cards issued by three banks—Bank of America Merrill Lynch, Citibank and PNC Bank N.A.—before being rolled out to other Visa card issuers. The service also provides for delivery of payment transaction data—including the item description and name of vendor, invoice number, number of units purchased, order date and shipping address—to a client company’s financial management application within its own enterprise resource planning system.
“B2B payments require enhanced data for proper audit, reporting and purchasing control,” says Morgan Salmon, global commercial cards B2B product head at Citi Treasury and Trade Solutions.
Jennifer Petty, head of card and comprehensive payables for Bank of America Merrill Lynch, says her bank sees increasing demand for the service as businesses rely more on web shopping portals like Amazon Business to make more of their purchases. “As organizations’ buying patterns move toward online marketplaces, access to this critical data will help with reconciliation and audit,” she says.
Other providers of B2B payment services are breaking new ground. Basware Corp., for instance, is growing the number of suppliers and buyers on its Basware Network as it expands its services for companies to exchange purchase orders and invoices and process payments. Over the past few years, Basware has launched services including Basware Pay—designed to let midsized companies process B2B payments through the MasterCard network. A program for buyers, Basware Discount, allows them to set up early payments to suppliers in return for a discount on invoices.
In the past year, the number of suppliers participating on the Basware Network increased about 16%, says Mikael Mangs, vice president of Basware Network & Financing Services. The Basware Network currently has more than 1 million connected buyers and suppliers. Its volume of transactions has increased in double-digit percentages over the past three years, with 2016’s volume reaching more than 100 million transactions with a gross value of close to $550 billion, he says.
▶ Brighter lights shine on BidSlate.com. For some marketplaces, the ability to manage online payments between buyers and sellers can make a huge difference in their ability to succeed. Take BidSlate, an international marketplace launched in October 2016 for buyers and sellers of the distribution rights of feature films and other forms of media.
In its first six months of operation, BidSlate has offered hundreds of buyers (also known as distributors) about 150 films, including the dramas “Apocalypse Child” and “Americana” and comedies “Fighting Belle” and the Spanish-language “Piter Pan.” BidSlate already serves hundreds of buyer-
distributors from nearly all parts of the world, and hopes to expand its marketplace activity to include thousands of content titles and thousands of buyer-distributors, co-founder and CEO Roland Rojas says.
One key to its growth, he says, is simplifying the complicated method of how buyers pay for distribution rights. Buyers typically pay a flat fee upon receipt of content, a minimum upfront payment followed by revenue sharing as buyers resell the content, or share revenue. Traditionally, such payments have been made offline with paper checks, requiring extensive paperwork and bill-collecting, Rojas says.
When planning BidSlate’s launch, Rojas and his film industry partner decided to start with an electronic payment escrow system that would not only cut out paper checks, but instill more confidence among internationally dispersed buyers and sellers who may not know each other. Buyers on BidSlate, he says, take about five minutes to fill out an online form to begin using the escrow service. Regardless of the payment schedule, funds from the buyer-distributors on the marketplace are held in escrow by Payoneer, BidSlate’s payment services provider, and released to sellers once the buyers receive the content under their agreed-upon terms. Under the revenue-sharing model, Payoneer receives the funds from the buyer-distributors’ end-customers, then disperses it to the buyer-distributor and filmmaker according to their revenue-sharing terms. BidSlate retains 20% of each transaction as its fee.
Payoneer, which doesn’t charge any fees to integrate its technology into marketplaces, charges its clients a percentage of transaction value starting at 1.5% for transactions valued at under $5,000, according to Payoneer CEO Scott Galit. The rate goes down as transaction value rises. For a marketplace generating sales of more than $1 million, the rate is 0.35%.
▶ Marketplaces go global. B2B marketplaces are also looking to grow their geographic reach. For example, Newegg Inc., a retailer of technology products, is helping third-party sellers sell more to its consumer and business customers in the United States and abroad.
After launching as a web-only retailer of computers and other electronics products in 2001, Newegg quickly grew to $1 billion in sales by 2004 and $2 billion by 2008.
Now it’s striving to go well beyond $3 billion, a threshold it inched past in 2014 with combined retail and business-to-business sales. Part of its strategy is to build more international sales, as it helps sellers throughout the world sell to more than 32 million customers in the United States, Europe and Asia.
Newegg sells to businesses on NeweggBusiness.com, and to consumers on Newegg.com. It’s taking several steps to bring more sellers and product categories to each, including such new categories as automotive products it sells to repair shops and company fleets on NeweggBusiness.com.
In addition to the United States, Newegg.com currently ships to customers in Singapore, the United Kingdom, Ireland, Netherlands, Poland, India, Australia and New Zealand.
In the meantime, Newegg is also working with sellers worldwide to build up its sales to North American customers on NeweggBusiness.com and the retail site Newegg.com.
Newegg works with overseas sellers to help them test sales in the United States and other markets, helping them with marketing campaigns that can gauge demand for a new product before committing to sell large quantities through Newegg’s retail or B2B sites. It also offers logistics services through its Shipped By Newegg program, through which Newegg will hold inventory for third-party sellers, ship orders to end-customers, and handle customer service and returns.
Newegg also looks to expand its reach in such regions as Asia-Pacific, Europe, Latin America and the Middle East.
The expansion of B2B marketplaces and services of all sizes are proving that buyers and sellers are open to new ways of doing business. l