In last week’s blog we touched on online marketplaces as being one of the significant industry-driven trends in eCommerce. Within five years they are expected to account for 30% of global corporate revenue, so now is the time to get started if you hope to attract high-quality sellers and make your marketplace a destination ahead of your competition.
It only took Amazon Business three years to grow from US$1 billion to US$10 billion in sales, passing that point in 2018. These numbers were driven by 87% of business buyers making business purchases on online marketplaces. This is certain to grow.
Inspired by Amazon, businesses of all sizes are building their own similar marketplaces to great effect. According to December report Imperatives When Building an Enterprise Marketplace by Gartner, businesses that have operated their marketplaces for over a year have seen at least a 10% increase in their digital revenue. Even mid-sized and smaller companies have been able to position themselves as industry leaders with their marketplaces, and have been able to quickly add customers as a result.
So, why have a marketplace?
– You can help your channel partners sell more. When businesses visit a manufacturer’s site they often just find product information and links to distributors. There is not the option to purchase. This hurdle to sales causes some potential buyers to go elsewhere. By setting up a B2B marketplace, not only are you helping your channel partners capture lost sales, you are enlisting them to act as sellers and providing an ecosystem in which visitors can compare your partners’ offerings without having to contact them independently. This additional traffic will also lead to more demand for your products.
– Increasingly online sales are occurring within ecosystems that emphasise marketplaces and communities, rather than one-to-one sales. By creating your own marketplace, you are helping future-proof your online sales, and can get ahead of your more risk-averse competition. After all, companies that move first with digital strategies experience nearly double the three-year revenue growth on average than companies that play it safe.
– You can use a marketplace to expand your online store offering without having to add additional inventory. Even if you only offer a limited range of products, like most B2B merchants, you no longer have to assume the inventory and fulfilment management that comes with adding new ones from third parties. Adding a marketplace takes advantage of your web traffic and increases income.
– By owning the marketplace you are able to take advantage of the insights it offers into the businesses that buy the products listed, such as where they are, how much they buy, and what industries they are in. When selling through channel partners, this information is usually kept by them. By capturing and analysing the data you can adapt your marketing and product development strategies.
– A marketplace gives you an effective heads-up on buying trends. If one of your seller’s products does well, you can examine the viability of offering your own, similar product. Amazon is known for doing this, identifying opportunities to create its own brands.
– Finally, a B2B marketplace is giving customers what they want, helping retain existing ones while also attracting new. Customers want to be able to buy multiple products on well designed, secure, and easy-to-use marketplaces. Additionally, B2B buyers prefer marketplaces due to their perceived price transparency.
Here are Magento’s marketplace dos and don’ts.
– Choose sellers that complement your product offering and resell your products
– Develop a multi-channel marketing plan
– Create a seamless and automated onboarding experience for sellers
– Include a modern eCommerce front end
– Use your data to improve your marketing strategy or inform your product roadmap
– Compete against your own channel partners and distributors
– Neglect to promote your marketplace
– Make it difficult for sellers to sign up and get approved
– Require manual steps (like a phone call) for buyers to complete a transaction
– Fail to analyse your transaction data
The new generation of B2B marketplaces are not “one size fits all”. Broadly, you will either want to be a niche player or a market leader. The former focus on a niche market or community of users, while the latter is for businesses that already have a large customer base and organic web traffic, and are looking to offer more choices to their existing customers.
Get in touch with our team and we can talk to you about this or any eCommerce questions you may have.