Ecommerce platforms were built for single-vendor transactions, and many don’t offer the kinds of warehousing, capacity, and integrations you need to truly scale your B2B marketplace, writes Ryan Lee, CEO of Nautical Commerce.

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Ryan Lee

As ecommerce becomes more distributed, B2B companies are realizing opportunities to leverage a company-operated marketplace alongside their existing business model. In fact, McKinsey & Co. recently reported 79% of online suppliers have built, are building, or are planning to build a company-operated ecommerce marketplace.

Ecommerce platforms have ecommerce functionality, but they can’t handle the financial technology and logistics requirements necessary to operate a marketplace.

By developing a company-owned marketplace, B2B companies can boost product depth, customer reach, web traffic, and, ultimately, revenue. After switching to a digital marketplace model, companies often see on average a 10% increase in revenue and 34% more web traffic.

While building company-operated marketplaces is a lucrative strategy for B2B companies, there are substantial challenges that B2B businesses face over their B2C marketplace counterparts:

  1. Higher Average Order Value (AOV)
  2. More complex B2B workflows
  3. Greater technical overhead

Despite the obstacles to building B2B digital marketplaces, some tactics are proven to increase a B2B company’s chance of success. But first, B2B marketplace operators must understand the inherent challenges to overcome them.

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Coping with high AOV in B2B ecommerce marketplaces

B2B transactions have an AOV much higher than B2C transactions, and ecommerce requirements are more complex — customers are expecting more from the marketplace. Instead of buying based on price and convenience, B2B buyers are often looking more for a trusted partner to offer a quality product.

By taking on the onus of curating vendors and products, B2B marketplaces serve as the trusted partner giving their stamp of approval for those participating on the platform. However, B2B marketplaces also must facilitate relationships between suppliers, vendors, and customers, acting as more than a simple matching service.

For instance, if vendors on the marketplace aren’t meeting shipping deadlines, aren’t communicating, or are delivering faulty products, trust in the marketplace will erode. Therefore, marketplaces need to thoroughly vet their vendors to ensure they are going to meet the criteria of the marketplace, have the means to meet service level agreements (SLAs), and provide a positive customer service experience.

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Some B2B marketplaces even offer insurance and guarantees to reinforce trust with their buyers. Overall, losing buyer or supplier trust is one of the quickest paths to B2B marketplace failure.

Simplifying B2B workflows

In B2B transactions, financial technology and logistics take center stage in the buying and selling process. Unlike B2C platforms, in which customers can have something shipped to their door with a single click, B2B transactions are generally more complex and require multiple touchpoints to close.

Some elements to consider when creating a B2B multi-vendor marketplace:

  1. Collaborative tools
  2. B2B payment options
  3. Automation

Collaborative Tools: In a B2B marketplace, there are usually multiple stakeholders involved in the delivery of the final product. For a B2B marketplace operator, they must continually assess various stakeholders appraised at every step of the transaction to bring value not only to the buyer, but also to the suppliers along the way. Communication is key to completing a successful B2B marketplace transaction.

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B2B Payment Options: One major difference between B2B and B2C transactions are payment options. B2B marketplaces need to provide customers with a wide range of payment options: lines of credit, purchase orders, invoices with varying payment schedules, etc. If you don’t offer the payment types your marketplace buyers are expecting to see, they likely won’t be your customers for long.

Automation: There can be many steps involved in a B2B marketplace transaction. The marketplace should automate as much as the workflow as possible. This includes things like contract management, document handling, payments, and delivery scheduling.

Managing technical logistics

Bringing traditionally offline B2B transactions online is a difficult task, in and of itself. Adding on multi-vendor capabilities, the need to onboard and integrate vendors into a single digital platform, and payout functionality, among other marketplace requirements, makes a difficult task even harder.

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Many companies have looked to solve this technical challenge by building a custom marketplace on top of an existing ecommerce platform. There are two significant issues to this approach that can cause marketplace failure:

  1. Ecommerce platforms weren’t built for multi-vendor transactions
  2. Creating a custom site can delay launch time and increase expense

Ecommerce platforms were for single-vendor transactions. Many don’t offer the kinds of warehousing, capacity, and integrations you need to truly scale your B2B marketplace. In fact, multi-vendor checkout — which is a non-negotiable requirement for a multi-vendor marketplace — is a considerable hurdle when building on top of an ecommerce platform. If you are building a custom marketplace on top of an ecommerce platform, you are attempting to work around a system that wasn’t meant for your business model from the start.

Also, ecommerce platforms have ecommerce functionality, but they can’t handle the financial technology and logistics requirements necessary to operate a marketplace. Payouts? Can’t do them. Vendor integrations? Don’t have them.

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Finally, custom builds are expensive and time-consuming. It takes millions of dollars just to start the project. And they take years to build. Years of shifting priorities, leaders, and market pressures, which can cause a marketplace to never actually make it to market at all.

Solving challenges with B2B ecommerce marketplaces

As a B2B ecommerce marketplace operator, your time should be spent generating supply and demand and establishing trust with your customers. It shouldn’t be used trying to retrofit an ecommerce platform into something it was never meant to do.

Luckily, using a multi-vendor marketplace platform to develop a company-owned marketplace can greatly reduce technical overhead. As opposed to custom builds, multi-vendor marketplace platforms require less time and effort, allowing a distributor/marketplace operator to outsource logistics and management to the platform’s tech support.

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For the complex workflows and technical infrastructure necessary, there are existing marketplace infrastructure platforms that can deliver best-in-class marketplace solutions.

By using a multi-vendor marketplace platform, you can:

  • Utilize marketplace best practices right out of the box
  • Validate your B2B marketplace quickly by reducing time to market
  • Automate B2B marketplace workflows to shorten transaction times
  • Unleash your scaling potential on a modern platform

As you look to launch your company-operated B2B ecommerce marketplace, just as your buyers are looking for you to be a trusted partner, ensure you work with a trusted technical partner to set yourself up for B2B marketplace success and limitless potential for growth.

Ryan Lee is the founder and CEO of Nautical Commerce, a multi-vendor marketplace platform.

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