Business buyers are turning to online marketplaces for the same reasons consumers do: They can see a large selection of products, easily compare prices and often see customer reviews. B2B marketplaces are growing in the tech sector, and that means many B2B sellers have some work to do, a Forrester Research analyst says.

AllenBonde_Forrester

Allen Bonde, vice president and research director, Forrester Research

Selling computer hardware, software and related services to business customers increasingly resembles a retail transaction, especially on online marketplaces. After all, the seller must provide a product description and price, and often customer reviews, right next to similar information from competitors.

That’s ideal for buyers, but a challenge for sellers, and one that’s not going away, says Forrester Research Inc. vice president and research director Allen Bonde.

“This will massively disrupt B2B selling strategies,” Bonde writes in a report released last month entitled “Think SKUs, Not SOWs: How Marketplaces Will Shake Up Tech Selling.”

You don’t have a choice if your customers are already there or if your competitors are a step ahead.
Allen Bonde
Forrester Research

The phrase “Think SKUs, Not SOWs” in the title refers to Bonde’s contention that the products and services best suited for sale on ecommerce portals are standardized items that can be given a stock-keeping unit (SKU) designation, such as a computer or a software application. Anything that needs a price quote based on a custom scope of work, or SOW, is going to be more difficult to sell on an online marketplace.

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While this report focuses on tech products, Bonde says business buyers in many categories are likely to turn to online marketplaces for indirect goods—such as technology, janitorial supplies and repair parts—rather than the direct materials that go into the production process. “Beyond tech, we also see marketplaces emerging in other areas as diverse as chemicals or healthcare products,” he says.

Those categories cover a lot of ground, providing a big opportunity for online marketplaces to thrive. Bonde estimates there are hundreds of viable B2B web marketplaces today and could be thousands within a decade. Forrester defines marketplaces as: “A business model where a governed environment allows third parties to offer products, services or information to an audience and where the transaction is facilitated by the marketplace owner and fulfilled by the third party.”

Types of B2B marketplaces

Bonde highlights three categories of online tech marketplaces:

  • Those focused on software, computer systems and infrastructure, sites operated by such companies as China’s Alibaba Group, the Amazon Web Services unit of Amazon.com Inc., Salesforce Inc. and The Hewlett Packard Enterprise Company.
  • Broader tech marketplaces such as those run by Amazon Business, Newegg Inc. and electronics distributors Arrow Electronics Inc. and CDW Corp.
  • Industry- or role-specific marketplaces such as ePlane and GoDirect Trade in aerospace and Fisher Scientific and LabX in the sciences and pharmaceuticals.

Amazon is No. 1 in  the Internet Retailer 2019 Top 1000 ranking of North America’s top online retailers, CDW No. 21 and Newegg No. 30.

The projected growth of B2B tech marketplaces figures into Forrester’s projection that ecommerce—excluding sales through electronic data interchange (EDI)—will grow to 17% of the $11 trillion in B2B sales in the United States by 2023, up from about 13% in 2019 and 14% in 2020.

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While Forrester hasn’t made a formal estimate of the role of online marketplaces in B2B ecommerce, Bonde says his team estimates online marketplaces will capture between 10% and 20% of B2B spending on indirect materials and MRO (maintenance, repair and operations) supplies, categories that represent 15% of B2B spending. That would put ecommerce marketplaces at about 1.5-3% of total B2B spend, he says.

An estimate by Digital Commerce 360 B2B (formerly B2BecNews) put online B2B networks and e-procurement systems at 11.0% of total U.S. B2B sales in 2018, versus 7.2% for ecommerce websites.

What B2B sellers must do to sell on marketplaces

Bonde notes that online marketplaces won’t be suitable for products that require configuration or where several companies must collaborate to fill an order. “But once a critical mass of buyers embraces the new model in your category, your products and go-to-market engine had better be fired up or you risk losing out to more digitally savvy competitors,” he writes.

In the report and a related blog on B2B marketplaces, Bonde outlines several tasks facing manufacturers, distributors and wholesalers intent on selling via online multiparty portals. They include:

  • Upgrading product content: That includes ensuring product information is up to date and investing in compelling imagery and videos.
  • Rethinking pricing strategies, including tracking online competitors and potentially renegotiating commission deals with resellers.
  • Providing social proof, such as the kind of customer reviews that are common on retail websites.
  • Developing logistics capabilities in order to handle online sales that may be of smaller quantities than through existing sales channels.
  • Mastering such digital marketing skills as search engine optimization, or SEO, in order to show up when potential customers search Google and other search engines, as well as mastering how to place ads on search engines.

Entering the marketplace arena will mean a lot of work for many companies, Bonde says. But, he adds, “You don’t have a choice if your customers are already there or if your competitors are a step ahead.”

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