Growing B2B Marketplace streamlining its ecommerce payments offering

What they’re building: A B2B Marketplace positioned for growth is ready to streamline their ecommerce payments offering

Our newest series, “What they're building”, spotlights the diverse organizations building out their B2B ecommerce platforms and marketplace offerings, and how their growth can be accelerated by adopting a B2B-first payments partner.

As B2B organizations establish and grow their ecommerce platform’s presence, the manual processes that once suited a mostly offline business world no longer fit well with the increasingly demanding and complex needs of an online channel.

And with the proliferation of technology partners that can solve every pain point of bringing B2B payments online, from extending terms and evaluating risk, offering payment methods and a strong checkout experience, to automating the collections process, businesses are equipped more than ever to transform the payments experience for both their finance teams and their b2b buyers.

Even more so, the rise of end-to-end payment platforms which address each step in the B2B purchasing cycle enables businesses to manage all aspects of the journey in one central place.

Today, we will explore the journey of a leading distributor of wireless communications products as they aim to prepare to scale and grow in the future.  We’ll discuss where they are in their digital journey, where they want to go and how they can reach their goals with the help of a payments platform.

Company Profile

Our subject is a prominent distributor of electronic products operating as a B2B marketplace. Let’s call them EProducts. 

Some facts about the EProducts online channel: 

• The EProducts marketplace sells hundreds of different products from third-party manufacturers, and they also have one private EProduct label.
• Historically, transactions for the marketplace have been predominantly offline, facilitated through sales representatives. However, they have observed a steady increase in online transactions, accounting for 35% of EProducts’ total volume and 12% of the company’s overall revenue. 
• With an annual online revenue of $55,000,000, EProducts’ customers’ average online order value (AOV) stands at $1900.

Where are they in their digital journey? 

This past year, EProducts underwent a significant digital transformation project, upgrading their enterprise resource planning (ERP) system, enabling them to enhance their backend operations. This upgraded infrastructure lays the foundation for future digitization efforts, empowering EProducts to streamline processes and improve their customer experience. 

And they have a lot to digitize. At the present moment, the underwriting process is orchestrated by the EProducts finance team, which manually vets approximately 40 customers every week for financed transactions. The team currently uses a few systems for the process, but they are not integrated and they do not significantly reduce the time spent. 

Where do they want to go?

With their updated infrastructure, EProducts is well-positioned to continue their digital transformation journey. 

EProducts’ main goal this year is to prepare their ecommerce channel to scale and grow in the future. As such, they’re prioritizing the following three areas:

1. Automating as much as possible
2. Mitigating risk, and
3. Enhancing the overall customer experience

How can they get there?

In the B2B world, many of the barriers to scale reside within companies’ payments offerings. Whether that means figuring out how to effectively vet new customers for financing, provide a consolidated checkout experience across different customer segments, or offer digital invoicing, it’s important for an organization that wants to scale to look at how to enhance the payments experience, both on the front and the back-end.  

For that reason, EProducts should begin by removing those roadblocks and improving the following three areas of their payments offering:

• Optimizing the net terms experience
• Underwriting the long-tail
• Providing a high-quality checkout experience
  
  

Now, imagine a platform that offers all of this. Let’s call them Bpay.

Optimizing the net terms experience

It’s no simple task to verify whether buyers will pay on time or at all, especially when manually underwriting each new buyer. While manually underwriting 40 customers a week is plausible now, it will be increasingly difficult to continue this process manually as the EProducts ecommerce channel scales. 

Fortunately, Bpay takes several data sources into account and can verify large volumes of EProducts buyers and offer terms in a matter of minutes. ‍

According to McKinsey, by enhancing risk models and making decisions in a more consistent way, risk of nonperforming loans can be reduced up to 25%. 

By using the Bpay platform for automatic underwriting, EProducts buyers can apply for terms and make their first purchase within minutes. What’s more, with Bpay, buyers are not redirected to a third-party website and remain within the checkout as they complete a simple application process, ensuring a more seamless and positive experience. 

In turn, EProducts will approve more customers, faster while being relieved of the laborious task of risk evaluation. And, no matter how quickly the EProducts ecommerce channel scales, they’ll be equipped with an underwriting stack that can scale right alongside them. 

Underwriting the long-tail

At present, EProducts has three options to offer terms to their customers. The first is by reaching into their own capital, which means that EProducts must swallow large costs upfront and this in turn heavily restricts the cash flow to other areas of their business.

The second route EProducts can take is by applying for a loan from the bank, which is often hard to secure, with difficult qualifications to meet and long waiting times. Further, since the bank isn't familiar with EProducts’s buyers, they aren’t approved for the loan. They apply for a loan at two more banks and are approved for one a few months later.

The approval rate for bank loans is lower than a financing partner, with a rate hovering somewhere around 14-20% for banks and 26% for financing partners. 

In both scenarios, EProducts is alone in bearing the weight of the risk of late or non-payment, which is a less-than-ideal situation for a company looking to offer this at scale.

This makes it especially challenging for EProducts to support their long-tail customers, who typically purchase through the online checkout and have smaller AOVs (ranging in the thousands and not tens of thousands of dollars). While traditional trade credit tends to be reserved for the largest buyers, it means that a ready pool of customers is not getting the payment terms that they deserve.

The issue is that EProducts has found that offering terms to their smaller business customers often takes more resources than reward. For instance, the underwriting tools they’ve used in the past can’t account for the data to accurately and safely underwrite small businesses, leaving the team with more uncertainty and risk than they are comfortable with. However, EProducts recognizes that extending terms to these customers is the key to scaling and growing the online channel, so they need to find a solution that can both mitigate risk on their end and offer terms to their customers.

According to Shopify, only 48% of small businesses reported that their lending needs were met. And only 20% of small businesses qualified for the full financing they requested. 

The third route EProducts can take is by leveraging Bpay for financing. By working with a financing partner to provide a line of credit, a majority of the risk is inherently outsourced. Customers can pay using net terms and EProducts bears much less of the risk as they get paid most of the funds immediately at their customers’ point of transaction. And perhaps most importantly, the capital that EProducts would have put towards financing their customers can instead be invested back into their business. ‍

Merchants that have implemented embedded financing report average revenue increases of 40%.‍

Merchants who work with a financing partner to extend terms report that customers increase their purchase frequency by at least 20% and their AOV typically experiences an uplift of 25%.

EProducts is ready to scale, and needs a solution to match. Bpay will de-risk the EProduct balance sheet while ensuring a reliable and consistent revenue stream. The financing partner will handle the end-to-end process, including underwriting, invoicing, and collections, providing a comprehensive solution to protect against nonpayment.

Providing a high-quality B2B checkout experience

If EProducts wants to enhance the customer experience, the best place they can do it is in their checkout process. The B2B checkout is an essential touchpoint on the customer journey, a place where the trust that EProducts has established can be made stronger or weaker.

And, when that trust is reaffirmed in a positive, optimized experience with improved functionality, the results can be significant:

According to McKinsey, 98% of surveyed business buyers are willing to spend at least $50,000 in a digital, self-service model.

The message, then, is loud and clear. By partnering with Bpay to provide a consumer-grade, self-service checkout that offers b2b customers all the payment methods they’re used to offline (ACH, card payments, wire and, of course, net terms at checkout), EProducts will not only enhance their customer experience by a landslide, but they’ll also begin seeing other business outcomes: lower churn rate, higher AOVs, repeat orders, and they’ll be able to support all of this at scale.

Bpay doesn’t stop after the checkout and payment solutions, either: with automation reconciling all online payments in the background, the finance team can save hours each month on labor associated with accounts receivable.

With all financial activity in one place on the Bpay platform, EProducts can access up-to-date financial reports without bouncing between different tools and systems. They also don’t have to worry about a failed payment or late invoices. Bpay is TalkProduct’s one-stop shop to run their whole business.

Building for the future 

With B2B ecommerce and financing platforms—like Bpay—merchants can solve core business problems and create a better overall experience. 

With Bpay, EProducts could address and integrate all of the B2B ecommerce payments cycle in one place, from new customer onboarding and underwriting, to offering net terms, payments processing and finally the collections process. 

Balance, like Bpay, can do just that, automating their business processes, mitigating risk and providing an exceptional customer experience with a trusted payments partner. All with an API-first approach to make sure that everything is tailored to the specific needs of businesses and their B2B customers. 

Ready to take your B2B ecommerce payments experience to new heights? Learn more or connect with an expert.