Online business-to-business marketplaces are growing in number, and many are thriving. According to a recent report published by market research company Forrester, the value of B2B e-commerce in the US alone will reach $1.8 trillion by 2023, up from $1.1 trillion in 2018.
The report does not specify how many new marketplaces have emerged, but even a brief online search reveals a lengthening list of platforms. These will no doubt have been encouraged by the report’s observation that 70% of business customers now prefer to buy from a website rather than from a salesperson. This growing preference for a self-service model accessible around the clock is a strong driver for B2B marketplace growth.
Established platforms such as Thomas and Amazon Business are being joined by newcomers such as HUBX, Dropee and BaloTrade.
Ademola Balogun, CEO of BaloTrade, says that the advantages of conducting B2B transactions online through a platform like his are the quicker sourcing of goods and a lower cost of finding suitable partners.
“In addition, we screen market participants daily and remove bad suppliers through our verification process, which can be a time-consuming process for traders who deal directly with suppliers,” he says.
BaloTrade uses an escrow payment system – a financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction – with the buyer having to authorize the escrow value before it is released to the supplier within the agreed terms and timeframe.
According to Lennise Ng, co-founder of Dropee, another factor driving growth in B2B marketplaces is the fragmentation of the B2B supply chain – especially in southeast Asia, where many businesses lack the connectivity to establish collaborations that could help to grow the supply chain ecosystem.
“For example, brand owners don’t have real-time information on sales and inventory movements of their existing distributors in each territory, which makes it difficult for them to accurately predict and allocate trade promotions to help push more sales of specific stock-keeping units,” she explains.
While sellers can use the platform to keep track of sales and inventory movements by their business partners across the supply chain and manage their offline and online sales from a single dashboard, buyers can use Dropee to speed up order placements and also to access finance.
“We work with partners who provide buyers with the option of applying for microfinancing loans to ease cash-flow issues,” says Ng. “Traditionally, these buyers have faced difficulties obtaining finance due to a lack of supporting documents, for example.”
In terms of delivery, the main problems in traditional supply chain operations are delayed or failed delivery and goods being returned, so the platform has created notification triggers for buyers to report such incidents to their suppliers. Dropee reduces the level of risk in B2B transactions through rating systems and processes coded into its systems.
Similar to other B2B marketplaces, when a buyer places an order on Dropee the amount is held in an escrow account and released only when the buyer confirms they have received the complete order. “Regarding credit terms, suppliers can approve respective buyers based on their past purchasing behaviour,” adds Ng.
One of the most interesting platforms is HUBX, which has determined that anonymizing communication between buyers and sellers is crucial to the long-term viability of B2B marketplaces.
According to founder and CEO Derek Wall, the biggest problem with B2B e-commerce transactions is that sellers and buyers are exposed. “For example, a seller on Amazon Business or Alibaba has x amount of goods for sale,” he says. “The seller is instantly identifiable to everyone, leaving an open door for the transaction to happen offline. Why would the seller pay a transaction fee to Amazon or Alibaba if they could go direct?”
However, ensuring that the transaction remains digital is not just about maintaining the viability of the B2B marketplace business model. “Every customer and vendor on the platform is vetted and removing awareness between both parties eliminates fraud since HUBX controls the transaction from start to finish,” adds Wall.
Sellers are provided with a single daily purchase order for all transactions and HUBX can also provide customers with payment terms. In addition, the platform does not permit returns, eliminating the possibility of chargebacks, which are estimated to cost businesses $31 billion in lost revenues globally.
Wall is confident that communicating via a third party does not undermine relationships between trading partners. “In the next few weeks HUBX will be launching a feature that will allow buyers and sellers to communicate over the platform while maintaining anonymity,” he adds.
Ng suggests that the B2B marketplace enables sales reps and sellers to gain greater insight into existing and potential customers.
“There are many businesses that still rely heavily on sales reps to place orders on their behalf, which is why we give reps the functionality to track and analyse customers’ previous orders,” she concludes. “The marketplace is smart enough to generate recommended products to upsell and showcase top purchases on the sales rep dashboard.”