Should distributors launch their own B2B marketplaces to take on industry titans such as Amazon Business, or are they better off sticking with their traditional business model? That was the central question posed in the latest edition of the MasterB2B “unwebinar” series, which was hosted by Andy Hoar and Brian Beck.
The short answer? It depends.
As usual, Hoar, the CEO of Paradigm B2B, and Brian Beck, CEO of Beck Ecommerce, divided up onto opposing teams to debate whether B2B distributors and manufacturers should create and operate their own marketplaces. Beck was captain of “team shiny object,” which contended that company-owned marketplaces were more of a distraction when compared to traditional e-commerce platforms and general marketplaces such as Amazon. Joining Beck on that team were Chamfr CEO and Co-Founder Julie Schulte and Sean Donovan, digital channel manager at MSA Safety.
“Team game changer” was led by Hoar and included Partstown President Martin Rohde and Nick Ostergaard, senior manager, head of digital advanced services and Digital CX at Toyota Material Handling. Team game changer believed that company-operated marketplaces gave sellers a better tool for capturing new customer, according to Hoar.
To set the stage for the debate, Beck said marketplaces were projected to have $3.6 trillion in sales by 2024 and that Amazon Business had grown its own marketplace to the tune of $25 billion.
While there are various types of marketplaces, Hoar said there’s now insatiable demand by B2B buyers that’s fueling the growth of marketplaces. According to research by Oracle and Mirakl , 83% of B2B companies reported that B2B buyers were actively asking them for a broader selection and that number was expected to reach 87% by 2023.
Hoar said one of the questions he frequently gets asked is does a company-operated marketplace increase channel conflict?
“A lot of people out there say that it’s actually good for reducing channel conflict,” Hoar said. “Other people say no, it just causes more problems in the channel. Here’s the question, probably the biggest question we get within the whole notion of channel conflict, it’s about pricing. Do these these company-operated marketplaces drive the price down to zero? Is it a race to the bottom because everybody’s prices are shown?”
Team game changer’s Ostergaard said pricing was initially the most hotly contested topic for Toyota Material Handling’s marketplace. For that reason, Toyota elected to standardize pricing on its platform.
“Then through the checkout process, the beauty of every e-commerce order is you have to have a ship-to-address. You know exactly where that product is going,” Ostergaard said. “Through that checkout process, we’re able to localize the order to the dealer that is servicing that address so that way only one dealer is getting that order, but all dealers are selling at the same price.”
By contrast, Partstown allows its partners to set their own prices to enable a free-floating equilibrium of pricing, Hoar said. Rohde said pricing wasn’t everything for Partstown’s marketplace.
“Availability beats price any time,” he said. “The other one is sometimes you need configurability for something that you need that is more custom to you. It’s all a matter of what you want to compete on and what do you want to feature. If you want to feature availability and configurability, then you basically demote price to a second tier.”
Chamfr’s Schulte, who built a third-party medical components marketplace, said price transparency was an expectation in this day and age as customers can easily Google prices.
“I think I agree with Martin (Rohde) to the extent that in niche marketplaces pricing is less of an issue because you do have more customization and configurability, and things like that,” Schulte said. “But at the end of the day, the buyer is going to want to go where they’ve got the most options in one place, and they can view everything together with the most efficient process. That’s third party versus first party for sure.”
Distributors can differentiate themselves against the likes of Amazon Business and Alibaba in various ways other than pricing, which includes localization of products that are closer to the customers.
“It’s about layering on additional value,” Beck explained.
According to a poll launched during the unwebinar, 59% of the attendees answered that a company operated marketplace didn’t increase channel conflict.
The second round focused on whether a company operated marketplace could compete with general marketplaces such as Amazon and Alibaba. Schulte said there was room for a company- operated marketplace if it’s in a niche that is currently not being served by the major players. Schulte said third-party marketplaces were becoming more common, and she cautioned against creating a first-party marketplace.
“If you’re going to invest in the first party marketplace, eventually you’re going to be up ended and ousted by a third party that emerges within your specific sector,” she said. “So, if you want to do that for a hobby for a few years and then refocus, that’s great, but third-party will emerge.”
Rhode, speaking for team game changer, said the B2B world tends to be more complex than the consumer world, and that there are many different niches that are highly specialized when compared to generalized marketplaces such as Amazon.
“I agree with the general conversation that if you can get the right traffic, you’re not going to compete with Amazon,” Ostergaard said. “But to build off what Martin was saying, you have to drive the right traffic to your site and make your site more of an exclusive offer for your products to compete with some of those third parties.”
B2B online marketplaces can offer things warranties for parts that are purchased on their websites versus knock-off parts that from a B2C site that voids a customer’s warranty.
Round two’s poll was a convincing win for team game changer as 82% of the attendees responded that there was a place for company-operated marketplaces when general marketplaces, such as Amazon, already exist.
The poll responses for round three were much closer than the previous round. When asked if a company-operated marketplace was a viable option for B2B sellers who are just entering the digital selling space, 51% responded “no.”
Beck noted there’s a lot of complexity around building a company-operated marketplace versus a traditional marketplace. B2B distributors and manufacturers that do want to take on that challenge should work with vendors who specialize in building those marketplaces and have the staff on hand to run them.
Because scale is such a big issue, Hoar said most B2B distributors would be limited in their ability to build out national infrastructures, but they could be successful on the local or regional levels.
“I think if you’re a small distributor, you’re more of a market taker on this than you are a market maker,” Hoar said. “But if you’re a large manufacturer, or a large distributor and scale is the game, I think you have to be doing this, but I would not do it on your own.”