Your retail business has built a strong base of loyal customers. You’ve developed a reliable manufacturing process and can deliver consistent profits. Now what?
You could scale up manufacturing if you have the resources to afford additional production equipment, warehouse capacity, and labor. You could expand to more locations, but that would require building new supply chains. You could offer new products — after investing time and money in research, development, testing, and marketing.
Or you could adopt a B2B marketplace model.
Consumers have fully adopted the marketplace model, flocking to platforms like Amazon, Etsy, Alibaba and most recently, Temu. The rewards for these marketplaces are clear: strong customer loyalty, high revenue, and wider product variety.
Businesses are increasingly getting into the marketplace game, too. Digital Commerce 360 reports that B2B marketplace sales grew from USD 24.6 billion in 2020 to USD 260 billion in 2023. More than half of business buyers report that their company lets them purchase from the largest B2B marketplace, Amazon Business.
For a business looking to take its revenue to the next level without taking on many of the risks of expansion, a marketplace model might be the answer. Here’s how the marketplace model works in B2B and what businesses need to build a marketplace successfully.
What is a B2B marketplace?
Marketplaces have been around since the inception of commerce ecommerce. A modern digital marketplace isn’t so different from the markets of antiquity: it brings together multiple vendors selling diverse goods and services so consumers can fulfill all of their shopping needs in one place.
A B2B marketplace is simply a marketplace geared toward business buyers. B2B marketplaces typically offer pricing structures and benefits that uniquely appeal to business buyers, such as volume discounts, financing options, and supply chain visibility.
Some of the most popular B2B marketplaces are run by companies that previously mastered the B2C marketplace model, such as Amazon, eBay, and Alibaba. But beyond the major players, there is a wide variety of niche B2B marketplaces catering to different industries, selling everything from tools to toothbrushes.
What benefits does a marketplace model offer?
The benefits a marketplace offers to B2C buyers are obvious. Thanks to volume discounts, purchasing through a marketplace is easier, more convenient, and often more affordable.
However, the marketplace model also offers plenty of benefits for business buyers—in fact, it may be the key to low-risk growth.
Increase revenue
Launching a B2B marketplace unlocks multiple revenue streams and provides a scalable model for sustainable growth.
Most obviously, you’ll tap into a larger business buyer base by providing access to a broader range of brands and products. Within that broader opportunity, there are many different ways to make money through a marketplace model. You can:
- Charge a commission on purchases made through your marketplace
- Sell ads
- Charge a subscription fee to sellers
- Offer lead generation programs
- Monetize data
By combining supply and demand within your marketplace, you may also be able to save money by negotiating lower shipping costs or payment processing rates. You can pass these savings along to your suppliers, creating goodwill and increasing loyalty to your marketplace, or treat them as increased margins.
Deepen customer loyalty
By offering a wide variety of goods relevant to your industry, you can become a one-stop shop for your customers. Operating a marketplace also lets you capture more data around the customer journey and SKU performance, providing greater insight into what your customers want and how you can meet their needs.
A marketplace is also a more effective defense against big tech platforms that could be taking a cut of your industry’s market share. Combining the convenience of a one-stop shop with your knowledge of your customers’ unique needs, you can defend your market share and build your reputation within your industry.
Expand product range
The obvious path for a successful business looking to grow is offering new products, which comes with significant costs and risks. Launching a marketplace can rapidly expand your product range, bypassing the need for additional warehousing or new supply chain investments.
Moreover, you can enhance the resilience of your supply chain by diversifying your supplier base within the marketplace, ensuring consistent product availability. This decreases your dependency on any one supplier and ensures that you can always fulfill customer demand.
What do you need to do to adopt a marketplace model?
There are countless logistical considerations you need to address to launch a marketplace. But before you deal with this, you need to decide whether your company is prepared to take on a marketplace model.
Is your culture adaptable and resilient?
Adopting a marketplace model will change how your business operates. You’ll need to make a number of necessary decisions about how you structure your marketplace, engage with suppliers, measure success, and –depending on your business model– even take care of logistics.
To manage the transformation, your team needs to be open to change and collaborative. You can’t just think about the long-term vision of launching a marketplace — you have to do the hard work to bring your marketplace to life. And in addition to all of the decisions you make at the beginning, you’ll need to be agile as you encounter all the considerations that come up when you’re dealing with hundreds of suppliers.
What does your business model look like?
Marketplaces can offer different extras to entice potential sellers. Programs like “Delivered by Amazon” take care of storing and delivering orders, having a stronger grasp on every element that could affect the buyer’s experience.
This comes at a cost: according to VTEX customer examples, around 23% of net sales is spent on shipping and fulfillment costs. This is a huge percentage, second only to the initial cost of sold goods (COGS). Taking care of a bigger part of the fulfillment operation might make it easier for sellers to jump into your marketplace, but it also means that the marketplace itself needs to structure its seller fees carefully.
On the other hand, if a marketplace decides to leave the entire fulfillment process in the hands of its sellers it has to take special care in providing satisfactory customer service that deals with returns, unfulfilled orders, and any other issues pertaining to the products it offers.
With this in mind, before thinking about starting your own marketplace, we advice you to make sure your ecommerce operation is as mature as it needs to be. This includes having inventory and orders integrated for all your channels, having a strong network of supply that works based on past data, and having a variety of fulfillment options.
Additionally, for a B2B-focused marketplace, it is important to consider the payment options and bulk buying capabilities that your buyers will need to use your platform as their one-stop shop. Solving these needs depends highly on the technology you’re working with.
Do you have a strong technology partner?
Operating a digital marketplace requires robust technological infrastructure. Partnering with a technology provider that can scale and innovate alongside your business is crucial for long-term success.
For example, bisco industries, a global distributor of electronic components, specialty fasteners, and hardware, offers 4 million products on its digital marketplace from more than 450 suppliers. bisco previously used a legacy platform that cost the company hundreds of thousands of dollars a year in new feature development and “band-aid” upgrades.
bisco migrated to VTEX from its legacy platform, transitioning to a more modern and constantly evolving solution. This migration resulted in a 40% revenue growth in the first year, followed by an additional 20% growth over the next two years. Today, bisco industries has expanded its customer base, enhanced brand recognition, driven international growth, and delivered personalized service globally. This success story highlights the importance of choosing the right technology partner and the growth potential of a well-executed marketplace strategy.
It’s not so much about selecting the right platform from a list of requirements. Your requirements will change over time as your business grows and technology evolves. Instead, it’s about finding a vendor that constantly invests in their products, a vendor that will partner with you to understand your needs and update their offerings to ensure that you remain competitive.
Embracing the marketplace model could be the catalyst your B2B digital commerce needs to break through growth plateaus and capture new market opportunities. It’s not an easy undertaking, but with the right mindset and the right partners, your business can supercharge growth — and maybe even transform your industry.
