Online B2B Marketplaces are Changing Traditional Wholesale Industries
Online marketplaces have taken off with platforms such as Amazon, Taobao and Tmall comprising 65% of the entire Top 100 Online Marketplaces sales in 2019. While these sites are commonly known for propelling B2C eCommerce forward, they have also accelerated B2B eProcurement.
According to Statista, the global B2B eCommerce gross merchandise volume totalled 12.2 trillion U.S. dollars in 2019, a marked increase from approximately 5.83 trillion U.S. dollars in 2013. A growing number of B2B buyers are likely to turn to eProcurement first through online B2B marketplaces. Currently, 75% of B2B product purchases are already made online, but this number is forecasted to grow. In just three years, Amazon Business reached $10 billion in sales although some verticals are growing at a slower pace. Be that as it may, Amazon Business’ success sets a precedent for newer B2B marketplaces which can position themselves based on verticals that Amazon Business’ has experienced weaker growth in.
The trend towards the digitalisation of e-commerce leads to the rapid growth of the global B2B eCommerce industry. More importantly, it indicates a disruption to traditional B2B practices. With online platforms providing lower prices, easy exposure to customers and logistical expertise, traditional wholesale companies are finding it a challenge to keep up.
Removing the Middleman
In 2017, Nike announced its “disrupt yourself” plan, cutting out its then 30,000 strong group of retailers to focus on only 40 distribution partners. Nike placed a strong emphasis on selling directly to consumers through its online store. Its strategy to reduce the number of go-betweens paid off as Nike saw online sales increase by 82% in 2020. Nike’s actions in this instance are part of a larger trend of cutting out the middleman to sell directly to consumers.
Cutting out the middleman can also be done through online marketplaces. Although a brand sells its products on an online marketplace, it owns its relationship with the customer and has the freedom to manage its pricing and inventory as compared to if done through a wholesaler. One such online B2B marketplace is 88spares which helps the Indonesian textile industry to compete on a global scale. 88spares is a niche marketplace, focusing on spare parts for machinery in the textile and garment industry. Previously, the use of agents to communicate between textile factory owners and machine manufacturers would significantly increase the cost of production of textile and garments. However, their online marketplace simplifies processes, cutting down the intermediaries. Overall, with this removal of the middleman, operational costs can be reduced, allowing garment and textile factories to produce goods at a more competitive price.
Horizontal Expansion Of Markets And Crossing Borders
The horizontal expansion of markets is one of the benefits of online B2B marketplaces. In the last decade, multiple platforms that promote the ease of eProcurement have developed at a rapid pace. This allowed wholesalers and potential buyers to connect with more ease than ever before. These multicategory, generalist marketplaces both cut across several different markets and borders.
For instance, the Chinese eCommerce leader Alibaba has been monumental in facilitating the ease of cross-border eProcurement. Originally a B2B eCommerce portal, it now includes a broad range of services for B2B, B2C and C2C eCommerce, mobile payments, and logistics services. As a horizontal marketplace, it is significant in selling a wide variety of products and services and appealing to the needs of buyers across different segments and across borders. Most notably, it allowed businesses to easily source their products from overseas suppliers and purchase directly from China. This opened up the number of suppliers to choose from while making suppliers more open to working with smaller businesses and lowering the cost of manufacturing. Alibaba is certainly living up to its name as an “everything company”, providing an array of items so diverse that caters to other businesses and consumers.
In the past decade, we have seen not only that horizontal marketplaces are expanding online but that niche marketplaces are going online as well. Statista reports that the rise of vertical marketplaces which operate within a niche industry is on the rise. E-procurement is being verticalized to all manner of industries such as stationery or equipment. Increasingly, marketplaces are growing in a hyper-vertical fashion, providing a deeper range of products or services within its category with specialized services. One advantage of vertical marketplaces is that they encourage high quality and high value. By developing a platform that is centred around a niche industry, the platform can be further tailored to users’ needs. Companies in a vertical market gain expertise in their market’s trends, terminology, regulations, and an increased level of competitiveness. In addition, there is more focus on high quality and value.
One such example is Fiber2Fashion which serves the B2B textile, apparel and fashion industry. Fiber2Fashion also provides specialised, industry-related information regarding textiles, fibre and feedstock. The B2B chemical market which is a fragmented industry with $5 trillion worth of transactions taking place annually did not have an online marketplace till recently. Yet, this has changed with the introduction of Knowde, a highly verticalised marketplace that combines the previously dispersed information about chemicals from small manufacturers into an online marketplace.
Adapting to Buyers Behaviour and Expectations
B2B customers are expecting more out of their interactions with 80% of B2B buyers expecting the same user experience as the B2C marketplace. This can be attributed to a larger proportion of B2B buyers becoming progressively internet-savvy. In 2020, over 80% of consumers across the world did their shopping online. This proportion almost reaches 90% in both South America and Asia. Furthermore, over half of B2B buyers were millennials in 2020. With such buyer behaviour and demographics, having an online presence is abruptly becoming a necessity for brands. B2B buyers are now looking for wholesalers to provide the option of purchasing products online rather than traditional methods such as making purchases in person or over the phone. An example of a marketplace which has adapted to these changes is Laparsar, which specialises in corporate procurement and offers its buyers a B2C marketplace experience. With more marketplaces adopting such changes, it is imperative for the wholesale industry to understand the change in behaviour of B2B buyers and keep up through online B2B marketplaces.
B2B customers have also come to expect a seamless experience across various touch points. In a study by Forrester Research, it was found that two out of three customers expect an omnichannel user experience across all platforms from one company. To elaborate, customers expect a certain level of consistency in the products, information and services of a company despite different methods of interaction. This includes their social media, website, mobile application or brick-and-mortar shop amongst others. Online B2B marketplaces enable companies to meet these expectations by helping brands establish an online presence and incorporating multiple platforms such as web browsers and mobile applications. For instance, Global Sources is an online B2B marketplace which has developed an omnichannel customer experience. Customers can easily browse the Global Sources application for products, suppliers and receive news on products. Any changes made on a web browser will be updated in the application. This application also allows customers to easily contact the supplier for quotations and inquiries. As such, Global Sources has adapted to customer expectations of a seamless user experience.
It is evident that online B2B marketplaces can introduce innovation to the wholesale industry. From crossing borders and providing every product imaginable on one platform to possessing specialised knowledge and skills in a specific industry, online B2B marketplaces have proven their merit and utility. As more B2B buyers bring over their online consumption habits from their daily lives, wholesale industries will also have to adapt to meet their changing expectations. When all is said and done, online marketplaces shape the future of B2B procurement.