B2B Marketplaces future? it’s all about Shipping!

Why online marketplaces, like Amazon and eBay, that have such a huge success in B2C trading, cannot replicate this success in the B2B trading?

Today’s B2B Marketplaces – old news

Current B2B marketplaces who sell hard goods like Alibaba.com are much closer to a yellow pages websites than to matured B2C marketplaces like Amazon and eBay, in which you have a full turn key solution, fast ordering, billing and shipping within days.

In these B2B marketplaces you mainly can search for the product (like Machinery, Chemicals, Tools etc.), ask for a specific quote, and start negotiating deal terms (usually offline).

Today such an online E-Commerce experience seems ancient and outdated. we can hardly call it a marketplace according to today’s B2C standards. So far no single marketplace has cracked the enigma of serving businesses completely with a full turn key E-Commerce solution, like it is done on B2C marketplaces.

B2C Vs B2B – Short term Vs Long term relationships

One question, do we really want to know the seller?

B2C buyers on marketplaces mainly care about a single transaction they do with the seller. After it is done, in most cases they will never contact the seller again. On the other hand, B2B buyers usually care about having a long term relationship with the seller.

B2B buyers would like the seller to be consistent with quality, products availability and shipping lead times, so buyer can build their entire product offering on their suppliers promises to meet their commitments repeatably. B2B buyers usually manage a limited number of trusted sellers that supply the demand of the same products repeatably.

Therefore, B2B buyers invest heavily in building long term relationships with the sellers and vice versa. They prefer this trust and consistent offering over the chance to save costs by ordering from unfamiliar sellers online.

This relationship requirement is the major entrance barrier that no company has yet to overcome in scale.

Catch 22 in starting new B2B marketplaces

Every new marketplace tries to solve the Catch 22 problem of raising the traffic of buyers and sellers into the site simultaneously. Without buyers, sellers won’t invest in posting their inventory, and without sellers buyers wont come.

In the B2B marketplaces, even giant sites like Amazon and eBay could not find the solution to make businesses trust them solely to deliver their needs. Also Alibaba.com, that for my opinion has the best B2B solution of all for now, struggles with selling B2B products directly from its site and suggests the option to ask for a quotation – meaning serving as Yellow pages for such products.

The reason for that is simple, B2B buyers simply don’t trust the marketplace to give them the best terms and they are willing to invest a huge amount of time and money in order to set the long term relationships with the sellers.

Therefore, the solution for this catch 22 to my opinion, is on the hands of the buyers. How do we make B2B buyers purchase online directly from the sellers without the need to negotiate deals terms offline? where shall we focus our efforts?

Where shall we focus our efforts?

Online marketplaces are built on 5 major pillars:

• Product offering and availability
• Searching capabilities (including SEO exposure)
• Fulfillment functionalities – Billing, Shipping, Support etc.
• Trust between buyers and sellers – Served by mutual Feedback and trust/guarantee programs managed by the marketplace
• Reducing Cost

The first three pillars are very much the same between B2C and B2B needs. All current marketplaces can use their existing capabilities also for B2B selling.

Fourth pillar – Trust. Tough marketplaces have also solutions for the fourth pillar, Trust, by using mutual feedback, site guarantee and trust programs. Trust on B2B is much more critical than in B2C because any issue on transaction can lead to major indirect damages to the buyer’s business – meaning the costs of handling trust issues for a B2B buyer are much higher than for a B2C buyer.

So, it’s all about costs! Shocking?!

But for a B2B buyer, it’s not enough to get just a small discount. E-Commerce should have a significant cost advantage that will dominant the advantage of long term relationships with sellers. Only then a buyer will shift a significant amount of his purchasing volume to online marketplaces.

Breaking the barrier – Superior Shipping solution

The biggest cost driver of hard goods production is inventory cost. Storing, managing and monitoring inventory is costly. By reducing this costs driver we can brake the catch 22 problem and drive buyers into our marketplace.

The solution – a guarantee of products availability and a short shipping service.

Such a solution will enable B2B buyers reducing their inventory and its costs intensively. Buyers will pay even more for such a service due to the overall cost reduction.

B2B buyers are ready to go online, good evidence is their adoption of soft goods online (Analytics services, Web site building, purchase information etc..). But for hard goods they are stiil behind.

The first marketplace that will successfully enable an effective shipping solution will dominate the B2B hard goods huge market.

In my next post  of “How Can eBay Regain Its Throne?“, I will share my opinion on factors that are critical for offering such a shipping service and my opinion on the marketplaces I personally believe that can lead the breakthrough in eCommerce.

 

Ori Feldstein is a senior manager, experienced in eCommerce and in management of multi-million dollars programs in several industries – Big data, e-commerce and Defense. He is a co-founder of two family owned websites in the B2B eCommerce of chemicals (cheta.biz ; chemcenters.com). Follow him on Linkedin, @ori-feldstein.