B2B Marketplaces

Once upon a time, I built a B2B marketplace

Team Balance
July 27, 2023
Table of contents

The catalyst: Friction in the chemical supply chain

Looking back, Tyler Ellison’s career gave him all the right experience to start ChemDirect – a B2B marketplace for chemical goods.

Tyler came from a background in logistics, focusing specifically on the role of software and technology. He then jumped in another direction – running a chemical company. And while the logistics and chemical industries might seem disconnected, they shared similarities.

“The market characteristics are very similar,” described Ellison. “Fragmented, large markets, with slow digital adoption.” He immediately realized that the chemical industry was suffering from major inefficiencies, but nobody seemed to be doing anything about it. 

This perspective allowed him to start to see the opportunity for change.

I wasn’t trapped by industry convention. The time to market, lack of bidirectional data, and all the implications that come with that were the catalysts that made me realize something had to be done.

He recalled thinking, “this value chain can and should be digitized.” 

As CEO of Nova, a chemical manufacturing company, Ellison felt the friction first-hand. At the time, they were using old distribution channels, with no forecasting, no tools to build a brand, slow time-to-market, and significant price variation.

But the problem wasn’t limited to that. Ellison would ask the sales team what were the applications and use of the chemicals they were selling? What were the companion products that customers wanted? Nobody knew.

Ellison thought: If we can connect the seller and the buyer, with products that can help them do their job better, everybody wins.

Ellison had worked directly with manufacturers, but he could sense that on the buyer side, they were just as frustrated.

Great expectations: Meeting complex buyer demands

“Gen Zs and Millennials are now major stakeholders in procurement roles and their standards of data, of comparing data, are fundamentally different than generations prior. The experience they’re demanding – traditional distribution greatly underserves.” ChemDirect was built around that generational shift.

In the chemical industry, Ellison explains that product discovery is especially critical. 

This makes sense – when you’re running time-sensitive experiments at a lab bench, you need product data, quickly and all in one place, to make an informed decision. Drug discovery is a perfect example of why. Drug discovery is all based on speed and managing variability.

Traditional distribution serves the big buyer well. But scientists are doing experiments that if they fail this week, will mean they’ll need completely different chemicals next week. They don't need one bulk order once every few months – they need quick deliveries for rapid drug discovery. 

To understand the complexity of on-demand chemicals – Ellison explained that for every chemical SKU, there are roughly 200 associated data points. So a prerequisite for ChemDirect was: accurate data.

“You have to remember that trust is everything. We aren’t selling sweaters or shoes. If a scientist sees a hyphen in the product name that is not supposed to be there, that doesn’t engender trust. That’s why the whole onboarding process of manufacturers is done with white gloves.” 

For a chemical marketplace, these are the table stakes. Products need to be spelled correctly and standardized across the platform, spec sheets and certificates of analysis need to be digitized, and only then will a customer be ready and willing to add to cart.

“Just to give you an example of the trust component – if a buyer stumbles on the payment process, you lose everything that you’ve gained in the transaction thus far,” says Ellison.

The experience factor: Designing your marketplace

Chemical products are complex in nature. Quality is the name of the game and chemical manufacturers' single-minded focus has always been centered around creating great chemistry.

Within reason, they’ve underinvested in technology and online channels for their products. Now, the question is what will they do to change that? Ellison describes that most are clear on the need for a marketplace model in their digital strategy. But from ideation to execution, there is a lot to consider. 

Building a B2B marketplace from scratch can be a massive digital transformation project to take on - especially in an age where customer expectations are higher than ever.

For ChemDirect, Ellison wanted to create a B2C experience in a B2B market.

“Nobody checks their habits from home to work. If your habits have been formed by the Amazon’s and Walmart’s of the world, it's silly to try and break those habits and introduce new ones,” says Ellison.

So the ChemDirect team came up with a handful of B2C website experiences that they wanted to emulate in a B2B setting.

Ellison asked, “If we’ve all been conditioned to a certain experience, why not incorporate that into the design?”

Fulfillment was another big focus for ChemDirect. A lot of that was due to Ellison’s time working in logistics. He explained that “from the beginning, we knew that whatever we built had to be 50% on the experience-end and 50% on the shipping end. In B2C, you’re conditioned to have your goods delivered in 2-3 days. We didn’t want to compromise on that.”

And while Ellison was clear on the experience he wanted for his customers, what works for one marketplace or industry, might not work for another. There is no playbook. So how do you know what will be right for you? “It comes down to one thing,” says Ellison.

“What problem is your B2B marketplace trying to solve? For ChemDirect, it was bringing transparency to a traditionally opaque industry. So we knew we weren’t going to hide prices or shade logos. Our customers didn’t want to email sales for a quote. They wanted to know who the supplier was.”

These nuances are critical to know in order to set up your marketplace for success. Unlike in traditional e-commerce, marketplaces won’t see significant adoption if both the supply and demand side don’t see the value there is to gain. 

The B2B marketplace picture

It can be hard to intuitively understand why a B2B marketplace is so important for the economy. It's hard because all we know is buying Nikes online – that’s e-commerce for us. So when we talk about building marketplaces, how do you grasp the magnitude of what that means?

For ChemDirect, the impact is clear. If buyers can’t get the chemicals they need, and manufacturers can’t get products to market efficiently – that immediately strains the supply chain. In the context of drugs and medical supplies, that’s huge. For Ellison, that was too critical a disruption to ignore.

To learn more about ChemDirect, visit chemdirect.com.

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