Top Pros & Cons of Building a B2B Marketplace

In our previous article “The B2B Marketplace Revolution,” we discussed how and why marketplaces have been taking over the world in the past few years. The success of well-known B2C and B2B ecommerce giants has inspired many and instilled confidence in the vast business populace that those achievements can be replicated if one tries hard enough. Few can deny that the online marketplace is indeed a fertile ground for business growth; yet, what are the costs?

A B2B marketplace is an ecommerce platform that brings together three parties: a B2B commerce platform owner, vendors and buyers. While marketplaces have been on the radar for a while, the recent pandemic has definitely accelerated their growth: In 2020, sales on marketplaces ($2.67 trillion) accounted for 62% of global online sales. The interest in online marketplaces keeps climbing, so we won’t be surprised if you’re thinking about it too. However, while there are many benefits to having your own marketplace, there are certain drawbacks. Let’s dive into both pros and cons, and see what’s at stake.

• ADVANTAGES
• DISADVANTAGES OF BUILDING YOUR OWN B2B MARKETPLACE

Expanding product range is one of the key strategies in accelerating online growth. The expansion provides an easy way of maximizing the potential of an existing audience while capturing the attention of new customers. B2B marketplaces provide a unique opportunity to expand the product range without having to spend months and millions on R&D or buying out new products from third parties (unless you want to). Expanding product assortment brings its own benefits: It maximizes the value of customers’ visits, improves customer loyalty and retention, widens the customer base, and extends your brand reach. 

B2B customers, especially those who have been nurtured on the likes of Amazon, expect the same seamless shopping experience as they would have while shopping for family and friends from home. B2B marketplace solution aim to bridge the gap between the B2C and B2B shopping experiences by providing B2B partners and customers with opportunities to engage in a trade that is quick, efficient and secure. However, because of the behavioral differences between customers in B2B and B2C, B2B customers value efficiency above anything else, meaning that personalization and recommendation mechanisms in business aim at making the B2B shopping experience as error-free as possible. Thankfully, because of the proliferation of AI/ML engines, businesses can now leverage predictive analytics to provide a customer experience that actually answers to B2B customers’ expectations and helps rather than hinders the customer journey.

Our experience shows that a lot of companies pursue building a B2B marketplace in an attempt to access valuable customer data and insights that can be further used for analytics, forecasting and monetization purposes. Customer data is an invaluable, intangible asset that unlocks many benefits. It enables superior customer service, provides a deeper understanding of the market and helps to tailor a business strategy for the company’s specific business goals. Moreover, the collected data can be sold to interested parties, including vendors that trade on your marketplace, provided it’s relevant, secure, and anonymized if necessary and required by law.

As soon as there are enough vendors and customers on your B2B marketplace and it functions on a regular basis without disruptions, you will notice that it’s capable of growing on its own, organically. This is through the “network effect” where existing suppliers and customers connect by word of mouth and recommendation.

With B2B marketplaces, you can tap into new geographical areas more easily by connecting to suppliers or finding other reliable partners in your desired area, as well as attracting customers from a particular region.

Most B2B ecommerce platforms support localization settings to assist the transition and deliver personalized experiences to local customers. Moreover, by adopting a headless B2B ecommerce solution, you can attach multiple ecommerce storefronts (each targeting a particular demographic) to one single backend, thus keeping all your sales channels in sync.

Interested in learning more about headless ecommerce?

Check out the interview with Virto Commerce CEO, Alexander Siniouguine, on how a B2B ecommerce platform with a headless API-based architecture can ensure a great customer experience and unlock new opportunities.

Implementing solutions like Virto Commerce can help your business launch marketplaces in different regions (with corresponding different languages and currencies) while maintaining a single ecosystem of applications.

According to McKinsey, more than 25% of total revenue comes from launching new products, meaning that continuous innovation and testing should be on the agenda of any company looking for sustainable and healthy business growth.

By leveraging data, companies can learn what products and services are in greater demand and use that knowledge to develop and add new products (or substitutes) where the supply falls short. Surely, any other concepts can be tested, such as different pricing strategies, website layouts, catalog representations and so on. You can also allow your vendors to test their concepts or ideas, which is what Amazon does, for example, by allowing its merchants to perform A/B title experiments so they can learn which product titles work better and contribute to more sales.

To put it shortly, B2B marketplaces offer a fertile ground to test new concepts and make informed decisions based on predictive short-term and long-term metrics derived from data

Unfortunately, B2B marketplaces come with a heavy price tag. The complexity of B2B processes requires building a sophisticated ecommerce ecosystem, which is in itself an expensive endeavor. Our experience shows that only companies with mature B2B ecommerce solutions can succeed in creating a marketplace. So if your company lacks a flexible and reliable B2B ecommerce platform, it’s best to re-platform first before thinking of embarking on a new business model. Be it re-platforming, building a stack from scratch or extending an existing ecommerce solution, all of it requires money, sometimes hundreds of thousands of dollars. Besides technological investments, you’ll need to hire new or train existing personnel, advertise to attract new customers and suppliers, and incur other costs associated with building a B2B marketplace.

While marketplaces do bring opportunities for providing excellent customer experience, they are not without the pitfalls. Unfortunately, as it happens, some sellers (or their products) can turn out to be unreliable and less trustworthy than you might have thought, leading to all sorts of problems. This can become even more problematic if vendors are responsible for functions such as delivery and fulfillment, which, however, doesn’t necessarily mean that you have to deprive your suppliers of additional responsibilities. To avoid potential problems associated with varying seller quality, we recommend having a verification process in place to ensure the solvency, reliability and trustworthiness of each individual supplier. While some accountability criteria can be checked automatically, others should be checked manually by your salespeople or account managers.

Some customers might turn out to be surprisingly less enthusiastic about your B2B marketplace ideas and prefer to do business the way they used to instead. In this case, it’s important to find the balance between all concerned parties’ needs and wants. A headless B2B ecommerce platform can solve this issue if you don’t want to spend time convincing your customers of all the benefits of the B2B marketplace. With headless ecommerce, you can keep your old storefront for less enthusiastic customers while operating a new (marketplace) storefront for customers willing to transition.

All things considered, B2B marketplaces present an incredible opportunity to unlock new revenue streams. Of course, considerable upfront costs require substantial initial investments. But provided you have a clear-cut, long-term business strategy, B2B marketplaces seem like the way to go.