Brian Beck, Co-founder of Master B2B and Managing Partner at Enceiba, talked to us for Navigating Commerce about whether multi-vendor marketplaces are worth the investment for distributors and manufacturers.
In Brian’s 20+ years in ecommerce, he’s spent the majority of his career working as an operator. At Enceiba, Brian now uses his expertise to help manufacturers, distributors, and other B2B companies transform their businesses by managing their marketplace presence on Amazon and Amazon Business.
He also co-founded the thought leadership series Master B2B and created a community around the advancement of B2B business.
We recently sat down with Brian to discuss how B2B companies should think about ecommerce and the marketplace model.
First and foremost, you need humility amongst the executive ranks. B2B executives need to understand that ecommerce is something they don't necessarily know how to do, and they need to buy into it. Without leadership buy-in, you won’t get the budget and investment to succeed as a digital change-agent in a company.
Next, you need leadership in the digital function. Because digital transformation touches every aspect of a business, leadership is critical for success. At Master B2B, we asked companies that have succeeded how they structured their teams, and the common response was adopting chief digital officer or similar senior-level roles. It’s key to ensure that digital sophistication exists in the C-Suite.
Finally, you need to think about ROI the right way. All too often, B2B companies are focused on how much incremental revenue ecommerce will drive. Instead, think of ROI as an existential issue, not an incremental one. If you don't evolve, your business will become irrelevant to your buyers. Nearly two-thirds of B2B buyers are Gen Z and millennials who grew up with Amazon. They're digital natives. You have to address this audience.
Amazon sells three billion products and did $35 billion in B2B ecommerce revenue in 2022. As a very large horizontal marketplace, Amazon can create features and functionalities that meet common needs across industries, but it's difficult for a company of that magnitude to create bespoke experiences for specific categories of buyers.
As vertical marketplaces, distributors and manufacturers can deliver tailored experiences to their buyers. In B2B, there are many situations where buyers have very specific needs. For example, a buyer purchasing concrete, metal, or chemicals will have precise technical specifications and may require consultation through the purchasing experience. Amazon has a hard time delivering that.
In and of itself, Amazon is not a complete ecommerce strategy. Nor is launching a company-owned marketplace. Nor is traditional ecommerce. Instead, B2B companies need to understand their ultimate buyer and how that buyer wants to interact. Where are they looking for products? Do they want a marketplace experience or a direct ecommerce experience? The most successful companies figure out where their customers are and make an effort to be well-represented there.
In my opinion, the business case to launch a marketplace is especially strong for distributors. Marketplaces enable a capital-light model that allows distributors to expand inventory availability and product assortment to buyers, which, frankly, is the core of distributors’ business promise.
Still, when you say the word marketplace — whether it’s creating your own or selling on one— there's an instant reaction that it's going to generate channel conflict. But at the end of the day, the smartest companies recognize that you can't control buyers or where they go to look for products. You need to embrace their preferences and get in front of these customers. Because if you don’t, your competitors will.
I think businesses need to recognize two things: the return on investment(ROI) generated by launching a marketplace can be substantial — but is also requires a considerable upfront capital and resource outlay.
Most companies spend over three million dollars launching a marketplace. That's not chump change, so you have to be convinced that there's real ROI. Fortunately, there is. A recent Forrester Consulting study showed marketplaces result in a 44% increase in customers, 42% growth in revenue, and a 38% increase in revenue per user — those are real numbers.
Once you’ve launched a marketplace, it’s a super capital-efficient model. Just look at Amazon. Over 60% of the volume on Amazon is from the marketplace model, not from owning products. The reason marketplaces are so profitable is because they don’t own the inventory. You're not taking inventory risk.
That said, companies have to understand the investment a marketplace requires, and I’m not just talking about cost, time, and technology. It's investing in the human resources to manage it. It’s investing in supplier buy-in, which is actually a sales effort akin to selling to customers. And you have to make sure that your customers are ready for it or that there's a new customer segment you can capture with it. At the end of the day, it all comes back to giving your customers what they want.
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