“E-commerce isn’t the cherry on the cake; it’s the new cake!” said Jean-Paul Ago, CEO of L’Oreal, and it couldn’t be more true. Marketplaces are becoming more commonplace and many forward-thinking B2B enterprises have either already created one for their customers or successfully joined a marketplace to gain new customers.
Experts agree – Gartner projects that 75% of B2B procurement spending will happen via online marketplaces by 2023. In addition, Forrester’s Jay McBain predicted earlier this year that upward of 17% of the US$3.5 trillion that businesses and governments spend on technology may go through marketplaces. So, what does this mean for traditional wholesale distribution models and how can you plan for the future? It starts with an understanding of which marketplace model is right for your business.
What Is a B2B Marketplace?
A marketplace is a type of e-commerce platform that brings together buyers and sellers and enables them to conduct business in one place. Within a marketplace business model, a wholesale distributor invites preferred vendors to offer their products and services for sale directly online as part of their expanded inventory. “A marketplace business model allows distributors to expand their product portfolio with minimal risk and create a great buyer experience, improve customer loyalty, and gain a larger share of their wallet,” says Angela Troccoli, senior director, Product Marketing, Global B2B, Mirakl.
New and Old Market Entrants
Traditional B2C marketplaces like Amazon Business, Alibaba, and eBay are the new disruptors increasing the competitive landscape for the wholesale distribution industry. These born-in-the-cloud marketplaces bring superior digital capabilities and can scale exponentially. “They [Amazon Business, Alibaba, and eBay] are the clear and present danger to wholesale distributors’ business since they can easily differentiate themselves from the traditional ‘buy and hold’ status quo,” says Magnus Meier, vice president and global head of the Wholesale Distribution Business Unit at SAP.
Marketplaces as a Growth Vehicle
Distributors need to avoid the mindset that e-commerce is simply enabling online ordering and instead turn this industry disruption into a springboard for growth. Today’s B2B buyers continue to demand consumer-like experiences that minimize purchasing complexities. They want search results that show products that meet their specific needs the moment they need them. In addition, B2B buyers want the ability to efficiently search and navigate a catalog with transparent pricing to support purchasing decisions.
The marketplace model can be a key driver of growth for a distributor’s business. In addition to providing a new option for B2B customers that prefer to buy online, marketplace platforms can serve as a new revenue stream. Distributors can sell products and services that differ from what’s available in a typical single-threaded commerce channel while driving revenue with new customers and marketing to new target audiences. But the real value is that a marketplace provides distributors the ability to differentiate from the competition. Per Gartner, by 2023, organizations that have operated enterprise marketplaces for more than one year will see a 10% or greater increase in net digital revenue.
However, creating a marketplace requires a level of expertise in e-commerce digital marketing, as well as the ability to manage a strong, reliable ecosystem of sellers, technology partners, and buyers. If you don’t have the in-house expertise, marketplace platforms can help. “SAP Commerce Marketplace Management by Mirakl offers a state-of-the-art, plug-and-play marketplace platform for any distributor looking to create their own,” says Krupa Singampalli, SAP product strategy leader.
Examples of Successful Marketplace Business Models
Parts Town, a billion-dollar distributor of original equipment manufacturer (OEM) parts for commercial kitchens, knows that minutes of downtime in the kitchen because of broken or missing parts in cooking equipment can take a significant toll on restaurant businesses. As such, Parts Town is constantly seeking out new and innovative ways to expedite the delivery of parts and service to commercial kitchens. “We’re a distribution company, but we’re really more of a digital technology company that has distribution,” says Parts Town’s Senior Vice President of Growth and Innovation, Emanuela Delgado. Technologies like SAP Commerce Cloud and SAP Commerce Marketplace Management by Mirakl have enabled the distributor to provide more than 100 customized microsites for many of its large customers and fuel the evolution required to meet a revenue target of $3 billion in the next few years.
Another example of a marketplace business model is Toyota Material Handling, USA Inc. (TMH), the number-one selling brand of forklifts in North America. Before adopting a marketplace model, there was no way to purchase Toyota Material Handling OEM parts online. Recognizing that business buyers’ habits were changing and more were buying online, TMH implemented SAP Commerce Marketplace Management by Mirakl to help develop an online marketplace that would allow the company to meet the growing demand for service parts online. Now, with the MyToyota Store, Toyota Material Handling is offering the only online source for real Toyota Genuine Forklift parts, offering customers quick access to more than 600,000 parts. “Using an online store, the company has seen parts sales increase by 220% year-over-year,” says Nicolas Posada, senior customer success consultant, Mirakl.
Want to find out how to create or join a B2B marketplace? Meier, Troccoli, Posada, and Singampalli have a lot of advice for distributors. Watch the webcast now to learn the key challenges facing distributors today along with practical guidance to help you create your own marketplace.
John McDonnell is industry value advisor for Wholesale Distribution.