The biggest threats to B2B legacy businesses and supply chains are Amazon Business and Alibaba

Amazon launched Amazon Business in 2015, a marketplace where sellers and buyers trade more than 100 million products annually: much more than on the Amazon consumer site. “Amazon Business zoomed from $1 billion in annual sales one year after launch to an astounding $10 billion just three years later” (Christa Hart, Theophila Lee by digitalcommerce360).

This is an undeniably interesting transition for businesses. According to Suchit Bachalli, CEO of e-commerce provider Unilog which conducted a survey last year on 244 small and large manufacturers, distributors and wholesalers, Amazon Business is considered the biggest threat by distributors and wholesalers, 52% don’t have yet a strategy to counteract its disrupting power, and 43% of manufacturers surveyed said they sell direct on Amazon Business, often bypassing their traditional distribution channel. Furthermore, nearly 80% of distributors reported their eCommerce channel sales have grown over the past 24 months, 44% of respondents confirm that 20% or more of their revenue comes from online sales and 37% of distributors are focused on converting traditional buyers to online customers.

B2B e-commerce has reached significant scale.  Alibaba in Asia and Amazon in North America both are very successful despite having quite different business models and their impact within any industry cannot be ignored, not even the Medical and dental supply one. Read more on upheaval happening in the Medical and Dental supply industry in the Reaction Data survey of over 150 hospital CEOs and executives - 62% indicate they support Amazon’s arrival, given its lower costs and fast delivery.

Should your B2B business counteract the power of Amazon and Alibaba marketplaces? And how?

Amazon’s and Alibaba’s power and reach are hard for small to medium size businesses to compete with but if you keep your focus on the things that can’t be reached with such a big-scale business, you will attract customers and succeed.  The key question is: what specific value can you add to your industry audience that they can’t?

For example, take a look at CONEXPO Connect, which was launched by the Association of Equipment Manufacturers in 2018: the online platform is quickly becoming the leading digital B2B marketplace for construction equipment manufacturers, dealers and contractors. It provides unrivaled access to product information, expertise and industry connections – giving brands, contractors, fleet owners and operators a platform where they can discover products, network and share best practices as an industry.

The ShopToys365 example is interesting too: the B2B e-marketplace was successfully launched in 2014 and is today the largest online marketplace serving the B2B toy industry only, with over 30,000 retailers and manufacturers  worldwide. The Toy Association did not concede their industry to these large technology organizations.  Instead they brought their expertise, content and dedication to creating market opportunities to their own B2B e-commerce marketplace and have become a leading innovator in the industry and a global reference in the toy industry.

B2B marketplaces and 4 launch strategies:

Industry specific B2B marketplaces, owned and operated by organizations with a long history of serving that industry are launching everywhere and claiming their position alongside the B2B e-commerce giants, and this undeniably is the moment to seize this opportunity for many similar businesses.

According to Roland Berger consultancy, there are 4 different possible strategies for marketplaces to be initiated:

1. ONE–STOP SHOP

Offer additional and complimentary products and services to your core business extending product categories. The Marketplace creates a win-win situation for marketplace operators and manufacturers, offering access to new buyers and increasing so their exposure. Position as a specialist in the industry expanding your product range, quantity and quality. In general, focus more energy on curated content around the product - product descriptions and specs are key in the B2B business and do not forget to personalize the online experiences for buyers and reduce complexity for them.

2. DISTRIBUTION CHANNEL EXTENSION

Develop new and complimentary distribution channels. The Marketplace allows the integration of existing manufacturers and distributors into a single digital platform. In order to position the platform to manufacturers and distributors, you will need to rely on a strong brand. In the long term, you will improve client and business intelligence by providing access to additional data.

3. PROCUREMENT NETWORK

Marketplaces offer attractive pricing as well as a selective product portfolio. This is a closed business: only members, like subsidiaries or members of a purchasing group, have access. The marketplace is a strategic service which you will offer. Value-adding payment services are also key, as they increase the probability that all transactions will be carried out through the platform.

4. BUSINESS MODEL TRANSFORMATION

Fight the threat of disintermediation and be the first to disrupt your industry. You will employ this strategy to determine if your business at risk or evolving due to strong changes in your ecosystem’s dynamics. By transforming the business model, you will create value-added solutions for both clients and vendors and build a sustainable position in the long term. You will play a significant role in this transformation process by providing an infrastructure platform which will add new functionalities to enhance client and vendor experience.

Why should you invest your time and energy in counteracting the “global giants”?

When launching your own marketplace, you will focus on positioning your product or service and focusing on specific-added value based on your company’s particular knowledge of your industry dynamics and your relationships, which you will deliver to your own audience. A single industry marketplace gains value if the B2B buying process, from sourcing to purchasing, is simplified and reduces the complexity of a growing global demand.  Digital marketplaces include multiple product categories, shared content, promote dialogue, collaboration and innovation and as they grow to become the place to go for product and supplier discovery and B2B purchasing in an industry-relevant, content-rich environment.

Time to market and onboarding are both crucial

B2B technologies like search and machine learning are advancing and user experiences are increasingly mirroring the best B2C experiences, making it easier to onboard customers. Launching your specific marketplace will allow you to think through a tailored-onboarding strategy for your specific users and making sure that you deliver a valuable and successful community. According to Venture, a customer is considered “onboarded” if he experienced “initial success” with your product, and if he judges the relationship with you as promising and potentially profitable. This is only possible if you are able to create a personalized experience which is missing on big marketplaces like Amazon or Alibaba with standardized procedures and not tailored to your specific industry audience.

“B2B Marketplace development, carried by start-ups or B2B legacy players, is currently bringing disruption and opportunities in a winner takes- all model where time to market will be critical” says Roland Berger Consultancy.