The experts weigh in: Leveraging the B2B marketplace growth spurt
We've been building solutions for B2B marketplaces long before they became a popular trend.
Our payment rails have enabled global companies to launch marketplaces, with online transactions as high as $1.5 million. Most recently, almost 20% of the marketplaces on Applico's 2022 Top 50 Marketplace ranking list leveraged the Balance platform.
In our latest brochure, we share some of the insights and knowledge we've gained over the years. And we've partnered with Nautical Commerce, a leading multi-vendor platform, to share the tips and best practices that we believe will be helpful to anyone looking to start or grow a successful marketplace.
There's no denying that the advancements in marketplace technology have made it easier for businesses, particularly larger enterprises, to launch their own marketplaces. However, many companies are still operating under the misconception that the roadblocks that once hindered B2B from embracing the marketplace model still exist, when in fact, modern solutions and technology have the power to facilitate efficiency in payments, enhance loyalty, and bolster revenue. Now more than ever, are merchants well-positioned to unlock the full potential of a B2B marketplace.
Below, we present key industry lessons by Ryan Lee, CEO of Nautical Commerce, and Bar Geron, CEO of Balance, on how marketplaces can thrive in 2023 and beyond.
Lesson 1: Tech should not replace, but reinforce.
The importance of relationships in B2B business cannot be overstated. Building and maintaining strong relationships with customers and partners is essential for long-term success. However, in today's fast-paced business environment, it can be difficult to balance the need for efficiency and automation with the importance of personal connections.
One area where this tension is particularly evident is in payments. In the past, B2B companies often relied on offline payment methods, such as wire transfers or checks, which can be slow and cumbersome. However, new fintech companies are now offering solutions that provide a consumer-like experience for complex payment methods. This not only improves the customer experience, but it also allows businesses to focus on their core competencies, rather than being bogged down by finance and AR tasks.
For example, marketplaces might know that they need to offer net terms in order to help grow their buyer base. But the complex process of risk underwriting can limit the number of customers they can extend credit to. "Building a credit business is not something you do on the side," says Bar.
So why not turn to technology solutions? Merchants might fear that they have less control over the experience or that a digital solution will drive a wedge between customers. However, the idea of technology is not to replace existing sales relationships, but enhance them. It’s about creating an end-to-end experience that ultimately will improve productivity internally and reduce sales costs, while helping the end buyer purchase more easily and more smoothly.
Lesson 2: Prioritizing the seller experience levels up the B2B marketplace.
One of the main challenges that B2B marketplaces face is understanding the key areas to focus on in order to be successful. According to Ryan, one of the main issues is a lack of focus on logistics and the seller experience. While consumers are accustomed to participating in marketplaces like Amazon, Uber, and eBay, the business-to-business marketplace is a different beast. Marketplace operators can’t launch a marketplace with an experience only from a purchaser's perspective while ignoring the behind-the-scenes work.
As buyers, we miss the things that reside under the water: fintech, logistics, and the seller experience. The friction B2B operators encounter when evaluating their stack comes from thinking about optimizing for the buyer. In reality, you attract buyers by having sellers on board.
To address this, Ryan believes that it is essential to make it easy for suppliers to do business on your marketplace. This can include providing easy-to-use tools for listing products, managing inventory, and processing orders. Additionally, providing a high-quality customer service experience for sellers is crucial in keeping them engaged and coming back to the marketplace.
On the payments side, making it easy for sellers to receive payments is also crucial. This can include providing instant payouts, reconciliation, and robust payment capabilities to enable sophisticated payments, with little to no effort. By providing a comprehensive set of tools and services for sellers, including easy payment options, it becomes possible to create a thriving marketplace that benefits everyone involved.
Lesson 3: B2B marketplaces cannot operate without the most important ingredient: trust.
Trust is the primary offering of B2B marketplaces: Buyers must have confidence in suppliers to fulfill orders and suppliers must trust buyers to pay on time.
When starting a marketplace project, it is important to consider the role of trust in the buyer-seller relationship. Bar suggests that the first question B2B businesses should ask themselves is "who am I in the relationship?"
Ryan emphasizes the importance of collaboration in B2B marketplace communication. "Buyers have a relationship with you, not the seller. But there may be instances where you need to connect the buyer and seller. For example, let’s say a buyer wants to ask the seller about specifications. If the supplier can't answer, it escalates to the operator,” Ryan said.
This whole escalation flow and communication wizardry don't organically exist in most systems, but it's critically important in running a B2B marketplace.
In order to build trust in payments, it's essential to create an experience that is easy for the buyer, transparent, and built to serve their needs. This can be achieved by making the transition to ecommerce as seamless as possible. If B2B marketplace payments can be as easy as buying on Amazon, there is no reason why merchants wouldn't be excited about taking their offline selling and purchasing online.
So, remember: trust is crucial in a B2B marketplace and it starts with understanding the role of trust in the buyer-seller relationship. Your brand should be the one that is known for the dependable relationships it provides.
Lesson 4: Work smarter, not harder with a pre-existing marketplace platform.
A common question that businesses face is whether to purchase a pre-existing marketplace platform or to develop a custom solution from scratch. This decision can have a significant impact on a company's success and requires careful consideration.
When you look at the technical components involved in building a marketplace, the importance of how you tackle each one cannot be overstated.
One example of this is the difference between Sears and Amazon. Sears chose to build its own commerce system, which required a significant investment of resources in technology maintenance. This left little room for innovation and product development. On the other hand, Amazon took a product-focused approach by leveraging its infrastructure to monetize its storefront, resulting in high margins and success.
Ryan and Bar both agreed that going the build route often leads to a costly and time-consuming project with a significant financial investment. Additionally, any deficiencies in the system may require additional staff to bridge the gap, further increasing costs. Instead, it is recommended to let the experts handle the technology.
No buyer goes to a marketplace and says, 'I love this marketplace because they did it themselves,' The buyer loves it because you're delivering a product they love.
With the advancements in technology and infrastructure, B2B marketplaces have the potential to thrive. Bar stated, "Soon enough we will unlock digital growth for B2B trade that only existed offline and that can change the cost of living for everyone.” Therefore, businesses should carefully weigh the pros and cons of both options before making a decision.
The steel marketplace as a use case
Let's apply our knowledge to a real-world scenario. Purchasing steel online is a complex process that requires more attention than a typical B2C transaction. Marketplaces can be a perfect solution to facilitate and improve the complexity of this sector. Even so, factors such as shipping and receiving hours, truck capacity, and an extensive amount of data must be taken into account. As the buying cycle is more complex, the online customer experience becomes even more crucial.
Both buyers and sellers face challenges that can hinder online transactions. Buyers may struggle to find what they need and face checkout obstacles, while sellers encounter hurdles related to financing and managing post-transaction risks.
To overcome these challenges, it's crucial to authenticate and verify buyers and offer payment terms to approved buyers. At the same time, upfront payments provide sellers with peace of mind. By addressing these challenges through the right payment tools and technology, both supply and demand can thrive. In this way, payments serve as a crucial layer to facilitating transactions and creating a beneficial transaction for all parties involved.
When it comes to building a successful marketplace, there are a few key things to keep in mind. First, remember that technology should be used to enhance the relationship with your customers, not replace it. The digital transformation process becomes a lot more approachable when considering this as the mindset. When it comes to what success looks like on the other end, trust is also a huge factor for customers, so make sure you're prioritizing that at every step of the experience. And don't forget to invest in both the buyer and seller experience - you can't win with one and not the other.
Another important aspect is choosing the right technology providers to help you run your marketplace smoothly and efficiently. Building from scratch is nothing short of a marathon.
Learn more how Balance is helping B2B marketplaces level up by taking out the headache of payments—for good.