How to deal with marketplaces as B2B corporate, why you should do it, and why Amazon might not be the right marketplace for your industry

Marketplaces have increased in importance not in B2C but also in B2B. With the rise of eBay and Amazon B2C customers got used to the concept of a centralized and convenient online way for shopping any product they are interested in.

This habit paid in on the recent rise of B2B marketplaces. When we started ZAGENO (world’s leading life science marketplace) in 2015 we had extensive experience in its target industry. Just two years earlier I had launched a complex but very customer friendly webshop for one of the big brands of this industry and customers had confronted me with their wish to have an Amazon-like shopping experience across all brands. My employer at that time did not want to invest in the idea of founding a marketplace. We decided to do it ourselves and time has proven us right.

With the increasing success of Amazon B2B and industry-specific marketplaces like ZAGENO many suppliers of B2B goods now see themselves confronted with the question of how to deal with marketplaces. Questions like which marketplace to choose, how to present products to ensure correct branding, or how to get hold of customer data make suppliers struggle with the idea of partnering with a marketplace.

In this article, I want to give an easy introduction to B2B marketplaces and answer the most important questions on how to deal with them the best way.

There are many different marketplaces that corporates and their customers can use to do business with. For the purpose of this article, I would like to put them into three different groups: Broad product market places, niche product marketplaces, and service marketplaces.

Broad product market-places: 

There are marketplaces like eBay and Amazon that started their business with B2C products and like Amazon later to started to venture into B2B areas. Marketplaces like Alibaba started in B2B and later added B2C capabilities (Aliexpress) to their capabilities. But what all of them have in common is that they are not specialized in any industry, they are broadly applicable to any kind of product, not service, and not specializing in any specific industry. This is the first of three groups of marketplaces. The advantage for customers on these marketplaces is that they can browse for any kind of product and have a decent likelihood of finding a more or less suitable product before searching the entire web for a more specialized marketplace. On the downside, these marketplaces do not curate product data and often lack capabilities of presenting data of more complex products in industry-specific manners.

Niche product marketplaces

The answer to these problems is niche marketplaces like Contorion (tools) or ZAGENO (life science research). Niche marketplaces specialize in one industry and thus, only present products and suppliers that are relevant to this target market. Naturally, they will present product data in the required amount of detail and manner for their target market. Moreover these marketplaces curate product data, which means they will correct wrong entries and extend supplier data with other sources to ensure comprehensive product presentation and more importantly comparability of product data. Do not underestimate the work that goes into these actives. When I co-founded ZAGENO one of my first issues was to make products from different producers comparable. Even though two products from different suppliers might have the very same capabilities and similar scientific parameters, in many B2B industries suppliers try hard to make a comparison of products as hard as possible as they are afraid of losing customers to the competition. So if you have an industry-specific portfolio and this industry has an established marketplace, this would be your best choice.

Service marketplaces

The first two groups of marketplaces concentrate on tangible products as in distinct units that you can touch and that need logistics. While some of the above do offer a certain set of services that are either sold alongside the products or that are standalone, services usually need a different way of presenting and purchasing requiring a different breed of marketplaces: Service marketplaces. Examples are Scientist.com (offering services in life science research areas) and BEN (cleaning services for car fleets).

Services differ a lot from tangible products in the way customers search for them, which requires service marketplaces to present their products in a different way. Timing, for example, is of much more importance compared to tangible products. This is why service slots (pre-booked windows of time where the service is conducted) are a central parameter with much more influence from the customer side. This is only one of many examples why service marketplaces require a unique set up of product detail pages and checkout processes compared to other marketplace-types.

Surely there are marketplaces that cannot be directly allocated to one of these three categories. In other words, you need to identify the most important criteria for your industry and find the most suitable marketplace. If you are not sure which type to choose, don't be afraid to ask for help.

Typical problems and questions with marketplaces and how to deal with them

Product configuration

Often B2B suppliers have a certain set of products that are standardized and another set that is highly customizable. While marketplaces are a good option for standardized products, customization currently is an issue. The reason lies within the complexity as well as in the fact that all suppliers nowadays use their own customization logic and thus centralization, for now, is not possible. While this might change in the near future currently the golden rule is: Only if a product is pre-configured and has a standardized SKU you can offer it on a marketplace. Some marketplaces offer the option to connect your configurators and punch-back configured products, so this might be an option.

Brand presentation

Marketing often is one of the first departments to go digital in a B2B company. This leads to them being an important stakeholder amongst decision makers regarding the question of whether to deal with marketplaces or not. This is probably why one of the most frequent questions I get on conferences is how to maintain branding ownership on a marketplace. To me, the answer is to choose the right marketplace. A good partner will respect your brand ownership and help you out with different options to make your products identifiable. At ZAGENO we offer suppliers to upload their own product pictures (as long as they match certain quality criterions) and also offer brand profiles. Moreover, ‘good’ marketplaces can guarantee that only authorized re-sellers can offer your products how it is supposed to be.

Data ownership

Data has become increasingly important. Suppliers often are afraid to partner with marketplaces because they are afraid of losing customer access and will not have access to important customer data. The question of how to deal with this issue has a similar to brand presentation: choose the right marketplace. Of course, marketplaces are not allowed to share all customer data with you, but there are possibilities to get access to a big amount of data from marketplaces. Any order-related data will find its way to your service department and ERP system anyway, so here setting up a steady data stream is key. Regarding other data like search and click behavior some marketplace offer the option to get access to aggregated data sets as well.

Listing-fees, cost-per-click or margin business

Marketplaces are a business and like every business, they need to make money. Although there are different ways for marketplaces to make money, the most common ways are listing fees, cost-per-click, and sales-margins. Listing-fees are fees that vendors have to pay to upload products or services onto a marketplace. There is no guarantee that this listing will result in any visibility or additional business for the vendor, but they ensure access to the customer group of the marketplaces. Cost-per-click generates fees that vendors pay once marketplace customers click on their product, which means the likelihood of a correlation to additional business is higher. Sales-margins are margins that are paid only if a product is actually sold via a marketplace, in other words, you only pay for the actual business generated.

But which is a fair model when negotiating with a marketplace? Cost-per-click is decreasing in popularity. Most marketplaces ask for a combination of listing-fees and sales-margin so let’s concentrate on these two. Listing-fees are only fair if the marketplace is already established and known for its valuable customer base, otherwise, it is probably a waste of money. Sales-margins, of course, seem like a smart and fair setup, but the hight of the margin is a difficult bargain. The easiest and fairest model is a staged margin model where the hight of the margin decreases with the number of products sold. This way motivation for marketplaces is high enough to set up your business, but you ensure not to be ripped off in the long run.

SRM system compatibility

Many B2B customers use SRM (supplier relationship management) systems to streamline there ordering process. Check your customer base for two things: One, check whether your customer has the need to put every order into this system. If so the marketplace you choose should be able to connect to that system to offer a maximum of convenience. Two, check whether your customers already are connected to a relevant marketplace. If that is the case, you now have a strong indication of a potentially suitable partner.

ERP / CRM connectivity

At least as important as connectivity to SRM systems is connectivity to your order-handling systems. Handling orders from marketplaces manually, email by email, quickly can turn into a nightmare for your service team. One of the promised advantages of marketplaces is automation. Check marketplaces for compatibility with your order-handling system (ERP or CRM) and ask for a test-run before committing to a long-term contract.

Existing SRM / punch-out setups

Similar to general SRM compatibility but not quite the same. As mentioned before many B2B customers use SRM or punch-out systems to streamline their ordering process. Often suppliers already have set up direct connections to some of their customer systems. When partnering with B2B marketplaces one question is how to deal with your existing connections. The answer often is size and relevance to your customers. Punch-out and SRM systems are maintenance heavy. This leads to the fact that customers want to limit the number of suppliers they connect with. In other words, your own punch-out only makes sense if your business volume exceeds a relevant size for your customers. If you are not amongst the top 10 or 20 suppliers, it is likely that you will soon vanish from their system. In these cases, marketplaces might solve your problem as they bundle different suppliers as one Punch-out vendor.

Key accounts vs. long-tail

Often corporates want to parallelize their sales channels to maximize the outcome of their efforts. With this idea, the questions arise which customers to handle via a marketplace and which to handle via a direct sales approach. The answer is similar to distribution models. Marketplaces are useful to bundle many different customers and suppliers on one platform and thus enable standardization without too much effort. For key accounts, a direct sales approach might make sense. Corporates should not forget that this is a two-sided question, a customer might be a key account for a corporate, while the corporate is not a key supplier for the customer.

In what niches/industries are marketplaces useful

Marketplaces are not useful in every industry niche. Marketplaces give access and transparency to markets, that is the main reason for their existence and thus there is a certain set of criteria that will make customers ask for a marketplace and at least some of them should be met.

• The number of suppliers: Marketplaces make sense where a big number of relevant suppliers are present. Only then a centralized platform offers enough convenience to be relevant for customers
• The number of customers: Same is true for the number of different customers. Without a high number, the convenience advantage for suppliers is not high enough.
• Standardization of products/services: Products or service sold on a marketplace cannot be too complex, otherwise standardized sales on a centralized platform currently are not possible (see product configuration). Products need to at least have an SKU.
• The complexity of the industry: Without a certain amount of complexity of the target industry a niche marketplace might not be necessary. In such cases, broad marketplace like Amazon might be sufficient to display required product parameters and purchasing processes.

Conclusion

As a conclusion, we note that marketplaces offer convenience to customers and suppliers and thus are a good extension to existing sales and marketing channels. In some industries, marketplaces are even a necessity because they can restore balance to damaged markets by providing access and information transparency to these markets.

Different industries require different marketplaces, so choosing the right marketplace is very important for corporates and customers. On the one hand, it is about finding the right marketplace for the respective industry, on the other, it is about finding the right partner for the future. Always keep in mind that marketplaces are a winner-takes-all model, it is unlikely that a niche industry will have several parallel market places. Choose the right one and be open for future adjustments.

In case you need support, feel free to contact me. I and the Bridgemaker team have set up several successful niche marketplaces in the last 5 years.