Innovations in marketplace technology are making it easier for companies to launch their own marketplaces, especially for larger enterprises where the time to launch a marketplace internally can take years.
As a result of this period of innovation, the roadblocks that once prevented B2B from embracing the marketplace model have disappeared. And yet, many businesses looking to venture into the marketplace space are still running on the misconception those roadblocks still exist.
In a joint webinar with Balance, a leading B2B ecommerce payments solution, we cleared up common misconceptions about the complex B2B marketplace stack and shared how modernized solutions streamline an enterprise’s ability to scale and grow.
Our panel included:
Pat McGovern, Marketplace Consultant & Advisor (Moderator)
Ryan Lee, Nautical Founder & CEO
Bar Geron, Balance Co-founder & CEO
Reality: Technology reinforces the relational aspects of B2B business.
In the webinar, both Bar and Ryan acknowledged how vital the human aspects of B2B business are. To this day, many B2B businesses rely on picking up the phone to seal the deal. There's no debate: B2B is all about relationships. But new technology gives businesses an opportunity to, as Ryan put it, "automate the transactional to reinforce the relational."
Take payments, for example. Payments are a critical friction for B2B marketplaces. Due to bulk purchasing and big-ticket items, B2B transactions often involve large bills that go beyond credit cards and mobile payment limits. This has forced B2B to support cumbersome payment methods, like checks and wire transfers, which consume critical time and human resources. It’s hard to streamline operations when visits to the bank bog down payments.
“B2B is relationship based, but if you want to scale, you can't rely on offline payment processes," Bar said.
Fintech solutions have emerged to facilitate efficiency and release marketplace operators from menial tasks. Balance, for instance, automates transactional elements by creating a credit card-like experience for complex payment methods. Suppliers are paid on time, every time, which improves trust, and marketplace operators can refocus their relational power on customer service and business development.
Reality: Multi-vendor logistics require specific multi-vendor functionality.
Many hopeful marketplace operators see their B2B marketplace through the lens of commerce alone. This, Ryan said, is short-sighted.
"Most commerce systems think about logistics in a first-party context where there's no concept of multiple warehouse owners. A marketplace can have 1000 suppliers, all under various commercial terms. Each one of these might have hundreds of locations," Ryan explains.
"Your system of record, operational system, or marketplace engine needs to be able to allocate and have a place for that inventory that sits logically within the platform. […] As you plug in other connections, like commerce or product information management software, you need to ensure that you can segment and sequester different locations and determine who owns that location."
You can't run a marketplace in a first-party system because you're not dealing with one party. You could be dealing with tens, hundreds, or thousands of suppliers and buyers — each relationship with unique terms and conditions and each supplier with unique warehouse and delivery processes.
Reality: Seller experience or bust.
In the webinar, Pat asked Bar and Ryan to describe common points of friction B2B marketplaces should anticipate. Ryan believes the source of the friction comes from a fixation on commerce.
Consumers are already used to participating in marketplaces, especially in B2C through companies like Amazon, Uber, eBay, and more. This means even marketplace operators or businesses looking to launch a marketplace view the experience from a purchaser’s perspective, despite the buying experience representing just the tip of the marketplace iceberg.
"As buyers, we miss the things that reside under the water: fintech, logistics, and the seller experience,” Ryan said. “The friction B2B operators encounter when evaluating their stack is they think about optimizing for the buyer. In reality, you attract buyers by having sellers on board."
Seller onboarding, product cataloging, seller payouts, delivery integrations, return workflows: the easier it is for suppliers to do business on your marketplace, the more suppliers you'll attract. For this reason, Ryan believes removing the friction to sell is more important than removing the friction to buy. The more suppliers you have, the more selection you can offer. More selection means more buyers. And so, the flywheel spins.
Reality: B2B marketplaces sell trust.
Trust was a recurring theme throughout the webinar. Buyers need to trust suppliers to fulfill their orders so they can operate. Suppliers need to trust buyers to pay on time, every time. Ryan and Bar concluded B2B marketplaces sell trust as their primary offering.
For this reason, Bar believes the number one question B2B businesses need to ask themselves when embarking on a marketplace project is: who am I in the relationship?
"This is a very big question with different approaches to it. What am I responsible for? Am I a huge brand wanting to enhance supply? Who am I to my buyers in the context of third-party providers? Am I responsible for quality? An extra service? What happens when things go wrong?"
Ryan dovetailed on this, remarking that B2B marketplace communication is inherently collaborative, and that collaboration should be a critical part of your marketplace infrastructure.
"Buyers have a relationship with you, not the seller. But there may be instances where you need to connect the buyer and seller. For example, let’s say a buyer wants to ask the seller about specifications. If the supplier can't answer, it escalates to the operator,” Ryan said. “This whole escalation flow and communication wizardry don't organically exist in most systems, but it's critically important in running a B2B marketplace."
At the end of the day, if the B2B consumer were interested in the product or service alone, they'd head straight to the supplier. They come to a B2B marketplace for the trusted relationships they provide.
Reality: Buying is faster, cheaper, and more successful than building.
To close the panel, Pat asked if companies should buy a marketplace platform or build a custom solution from scratch. Building might appear to offer an opportunity to give businesses exactly what they want, but this thinking is misinformed.
"Over the last decade of building marketplaces, I found that the plumbing of every marketplace follows the same rubric, but it's not obvious. Companies, and even consultants, think of marketplaces through the prism of commerce only,” Ryan said. “They miss the logistics and fintech components."
The missing fintech and logistics components will inevitably force businesses to hire staff to bridge technology stack gaps. Based on their experience, both Bar and Ryan cautioned against the do-it-yourself marketplace approach.
"People believe building is cheaper, but that's BS. Engineers and time are the most expensive things in the world," Bar said.
DIY marketplaces tend to be a two-to-three-year project with a double-digit million spend. Because of these realities, many marketplaces fail due to deficiencies in the homegrown system. This inevitably requires them to throw bodies at the problem to augment what wasn’t digitized and built properly.
Their message was clear: let the marketplace technology experts be the experts in marketplace technology.
"No buyer goes to a marketplace and says, 'I love this marketplace because they did it themselves,'” Ryan said. “The buyer loves it because you're delivering a product they love."
In the webinar's closing statements, Ryan debunked one last myth: companies don't have to boil the ocean. Marketplace projects can and should be built in phases.
"B2B wholesalers and shippers whose world is analog should know you don't have to take on this big audacious project where you do everything right away. You can do it gradually."
Marketplace and B2B payment solutions like Nautical and Balance enable marketplaces to focus on creating great experiences for buyers and sellers while eliminating threats to success, including scope creep. These pre-packaged, expert-built solutions exist precisely because DIY marketplaces have pigeon-holed businesses into biting off more than they can chew. With more infrastructure than five years ago, B2B marketplaces are set up to thrive. According to Bar and Ryan, there has never been a better time to start.
Explore more about the B2B marketplace technology. Watch the webinar The Components of a B2B Marketplace Stack.