What do vertical marketplaces mean for B2B vendor go-to-market strategy?

  • 23 Mar 2021

In our recent eGuide, The Power of Verticals, we highlighted the growing importance of vertical specialisation as a way to differentiate and protect margins. The IT channel is at the forefront of this trend. Over half of MSPs now specialise their services for specific industries, with healthcare, finance and legal being the most popular.(1) In this article we look at what is driving this shift and why it’s essential that vendors get aligned.

Vertical B2B marketplaces are having a significant impact across many industries, no longer just confined to low value, commodity purchases, but increasingly used for complex, high value sales. This raises new questions for tech vendors. In this article, we look at how B2B marketplaces are evolving and what vendors need to do in response.

An interesting impact demands a response

There is no doubt that digital marketplaces are shaking up traditional go-to-market models, particularly in B2C and low complexity/high volume B2B sales. However, to date there has been some scepticism over whether this model is really appropriate for highly complex or technical B2B procurement, where huge investments have been made in established global supply chains dependent on paper processes and personal relationships.

However, the fear of disrupting the status quo seems to be lifting, and we are seeing more and more highly complex B2B industries establishing vertical marketplaces of their own. As these B2B vertical marketplaces become a more compelling proposition for customers, B2B vendors need to make sure they are not side-lined by this new approach.

So, what is a B2B marketplace?

A B2B marketplace brings together buyers and sellers on a digital platform to research, shortlist, negotiate and buy online. Marketplace operators do not hold or own inventory, they facilitate the sale of products and services offered by independent vendors.

This replaces the traditional “one-to-many” model with a “many-to-many” model.

B2B marketplaces are nothing new

B2B marketplaces have been around for a while, especially the broader Horizontal B2B marketplace platforms such as Amazon Business and Alibaba. And they are being very successful – the size of the global online B2B market has more than doubled since 2013, valued at US$12.2 trillion, which is over six times the size of the B2C eCommerce market[1].

Marketplaces are also well established for B2B services that are easily consumed digitally, for example cloud based software/apps that are available for download direct from a marketplace such as AWS, Google Cloud or Microsoft Azure.

However, early forays into Vertical B2B marketplaces were much less successful. These industries are much more complex than the average purchase on Alibaba, and they need technical expertise and regulatory understanding to ensure products are fit for a very specific purpose. A well sited example is the Dell B2B exchange which shut down just 4 months after opening in 2000 when only 3 suppliers signed up to participate[2].

But perhaps the time just wasn’t right…

So, what has changed?

Quite a lot actually!

– Technology has moved on: we now have better ecommerce tools, increased customisation, better monitoring and improved integration with purchasing systems – Buyer behaviour has evolved: consumers are more digitally mature. We are used to using marketplaces for everyday purchases with price transparency and easy comparisons – Employees prefer digital: millennials and generation Z are making up an increasing proportion of the workforce and are more “digitally-driven purchasing managers”[3] . – Digital transformation has accelerated: COVID-19 has necessitated the need for digital interactions to keep supply chains operating with a remote workforce – Need for speed: there is an increasing desire to remove friction in the supply chain and improve customer experience in order to remain competitive

The time seems to be right…

Vertical B2B marketplaces are springing up everywhere, from aerospace (GoDirect Trade) to chemicals (CheMondis), iron & steel (FastMetals) to food & drink (TetraPak)[4]. Some large manufacturing companies are establishing their own B2B marketplaces, including Airbus Helicopters[5], Thales aerospace and defence (IVEN)[6], and Siemens trains (MoBase)[7].

In fact, according to Digital Commerce 360, there are over 70 B2B marketplaces today across more than 13 industries.[8]

Venture capitalists have noticed the opportunity that vertical B2B marketplaces present in solving productivity gaps. Companies investing now are doing so to gain first mover advantage and to be a central presence to aggregate across their ecosystem.

So, what does this mean for vendors?

Consideration 1: To enter a marketplace or not?

The obvious question is “Why would a vendor want to take part in a marketplace that is likely to commoditise its products?”. This is particularly relevant if you have a high-value product, or one that relies on an extensive service wrap-around. But the reality is, that if your customers – or your competitors – are already there, this isn’t really a choice. The important thing is to keep abreast of what is happening in your own industry, evolve to be where your buyers are, and enable them to self-serve through the channel of their choice. If your customers span a number of verticals, that may mean a presence on several different industry marketplaces.

However, it shouldn’t just be seen as a necessary evil, as there are definite advantages to being part of a dynamic vertical marketplace. The first benefit is lower selling costs i.e., being able to reach the end-customer with very little effort or resource required on your part. The second is increased reach. An established marketplace is likely to connect you to customers and markets that are beyond your traditional boundaries, again at very little cost to you. The third benefit is that being part of a marketplace with which buyers are familiar is a fast-track to gaining the trust and confidence of new customers.

Consideration 2: How to enter?

There are a few different options to explore depending on the maturity of marketplaces in your particular industry:

1. Use your own e-store capability – this gets things started but you could end up being side-lined if an external marketplace gains traction in your vertical(s). 2. Work with partners – see if anyone further down the supply chain can support you in getting your products online or onto existing marketplaces 3. Participate directly in an existing vertical or horizontal marketplace – if there are marketplaces appropriate for your industry this will make sure you remain visible to customers 4. Launch your own marketplace – if there is no existing marketplace then you could launch your own to bring together your supply chain/partner ecosystem and gain first mover advantage

Consideration 3: What does this mean for your channel mix?

Whilst B2B marketplaces may reshape the supply chain, this does not mean it is the end of the distributor or reseller model. Vendors can use a digital platform to bring channel partners closer together and offer increased options to end customers i.e. complement your own products with those from other partners in your ecosystem to solve customer problems. OneGTM clients AWS and Equinix are both examples of B2B tech companies using marketplaces to successfully bring together partner solutions alongside their own offerings.

Wholesalers / distributors can also stay involved as a marketplace can allow buyers to see which wholesaler is offering a product – this is how the Toyota Material Handling Group for Forklifts operates[9].

Consideration 4: What does this mean for your go-to-market strategy?

Selling direct to end customers in a marketplace is very different to selling via traditional B2B channels. You will need to build your brand and educate the market directly rather than supporting distributors/resellers who know all about you.

It also opens you up to more direct competition, requiring clear product differentiation as well as compelling and succinct messaging. Pricing has to be market driven and transparent rather than behind-the-scenes negotiation, and sales cycles are significantly shorter.

There will also be new marketplace rules to abide by and new technology to integrate with for seamless order processing and fulfilment.

Ignore at your peril

This level of change will undoubtedly be daunting for many vendors – and in some industries it may take a while to come to fruition. However, the long-term benefits are exciting in terms of the ability for vendors to reach new customers and to work in a much more efficient way. What is certain is that vertical B2B marketplaces should not be ignored, but should be explored as an increasingly important part of your channel mix.

At OneGTM, we specialize in building successful vertical GTM programs. If you’d like to discuss how OneGTM could help, contact us here.

[1]https://www.statista.com/study/44442/statista-report-b2b-e-commerce/ [2]https://www.computerworld.com/article/2590131/update–dell-closes-online-marketplace-after-just-four-months.html [3]Digital Commerce 360 B2B https://www.digitalcommerce360.com/2020/02/26/more-vertical-marketplaces-are-dotting-the-b2b-landscape/ [4]https://www.tetrapak.com/about/newsarchive/virtual-marketplace-food-and-beverage-manufacturers [5]https://www.airbus.com/newsroom/press-releases/en/2020/01/airbus-helicopters-launches-new-collaborative-customer-portal-and-online-marketplace.html [6]https://www.thalesgroup.com/en/markets/defence-and-security/mission-critical-communications/industrial-marketplace [7]https://www.mymobase.com/esm [8]Digital Commerce 360 B2B https://www.digitalcommerce360.com/2020/02/26/more-vertical-marketplaces-are-dotting-the-b2b-landscape/ [9]http://www.global-toyotaforklifts.com/ http://emag.directindustry.com/manufacturers-go-to-market-with-vertical-b2b-marketplaces/

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