Validating the Marketplace Model: 3-Step Guide for Distributors

As a distributor, if you’re not thinking about launching a digital marketplace, you’re already behind. 

But, digitizing your entire business is a heavy lift. Especially given the current order of operations in the distribution industry. How do you make a digital transformation approachable, while also validating quickly, and mitigating risk? 

The key is not trying to do too much from the outset. With a phased approach, you can begin your marketplace digitization efforts in a way that’s approachable for the whole team. That’s why at Nautical, we use the crawl, walk, run approach to get our customers off the ground as quickly as possible. 

This article dives into:

• Three steps for launching a marketplace as a distributor
• The people requirements
• Measuring success

3 Steps for launching a marketplace as a distributor

Step 0: Assess the current business 

Before beginning the crawl, walk, run steps — it’s essential to take stock of your current business. Successful marketplaces depend on three things:

1. Technology: A robust B2B marketplace software that can handle the demands of a marketplace, including commerce, fintech, and logistics functions. 
2. Process: An effective and efficient flow of information that takes you from the start to the end of a sale.
3. People: The right team to spearhead efforts and adapt to the changing landscape. 

None of the three aforementioned factors can change overnight, and you need to take them all into account — not just your technology. If you’re not realistic about current capabilities, you’ll end up with a lift that’s too heavy and a team that’s not bought into the changes. 

That’s why before even getting started with the first step you need to understand your current business model and gaps. Ask questions like:

• What’s the current process for an order and how do they get fulfilled? 
• What are the greatest efficiency challenges? 
• What's the ideal purchasing journey for my customers?
• What are the tech capabilities of your current staff? 
• Do you need to hire new team members? 

All of these factors will play into what the “crawl” phase looks like for you so you can define the scope of each step. 

Step 1: Crawl

Once you’ve assessed your current capabilities, you’ll have a better sense of where to go next.

If this is your first foray into digitization, start small with a minimum viable product (MVP), and focus on the buyer experience. That could mean simply digitizing your order. Even from an efficiency standpoint, digitizing orders means getting back to customers with quotes faster. This is a huge win and leg up on the existing phone tag approach. 

The first step is establishing yourself as the inaugural seller. This means uploading your existing catalog before trying to expand. By starting small but quickly, you’ll learn what’s working for existing buyers and what’s not so you can adjust from there. 

Step 2: Walk

The next step is the pilot phase. 

After you’ve started selling your own products online, select two to three marquee suppliers who are in demand and introduce them to the site slowly. 

The success of your marketplace depends partly on the seller experience. Vetting your vendors, and creating a positive experience for them from onboarding to selling will be vital. In this stage, you can iron out the wrinkles in the seller experience with a few select suppliers. 

We recommend being picky about what you decide to publish on your site. Distributors know more than anyone that while you’re selling third-party products, you still have a reputation to uphold as an operator.  Ask suppliers to upload their catalogs, and you can go through and curate which ones you want to go live. 

Step 3: Run

At this stage, you should have the new digital platform up and running, and a good understanding of what select customers are looking for online. Now it’s time to start creating demand and thinking about long terms goals and how you’ll achieve them. How do you bring your marketplace the final stretch? 

Are there any ways in which you can adjust your marketplace or process to be more tailored to your specific business needs? Where are you tracking against the initial goals you set for your digital transformation? 

Take all your learnings from the previous 2 phases and identify how you’ll use them to perfect and expand. 

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People requirements for a distribution marketplace

The team in place to run your marketplace is a third of the equation. Having the right people on your team to lead digitization and marketplace efforts will make or break your ability to validate the marketplace business model quickly and get things up and running. 

Traditionally, as marketplaces ramp up, so does headcount. But, the specific team members you need in place for each stage is highly dependent on the technology you opt for to help build your marketplace. 

For example, with a platform like Nautical, a lot of the challenging manual work that would typically require people, is automated. This includes:

• Payment orchestration
• Catalog approvals
• Product information management

Regardless though, you will need at least a foundational team of people to lead and support marketplace efforts. Below we dive into people considerations at each stage of the crawl, walk, run process.

Note: This is by no means a comprehensive list, but it will help give you a sense of the skills and organizational structure required. 

The crawl team

In this phase of implementation, you need a small team that’s dedicated to marketplace implementation. The people on the team should be comfortable wearing many hats, as their main purpose is to get the marketplace off the ground. A couple of examples of roles you should consider appointing include:

• Marketplace manager: This is someone you can count on to lead the charge, ensuring all the pieces are fitting together and the transformation is happening smoothly. 
• Software development: Whether you build your own marketplace, or use a pre-built platform, you need a team of software developers. Of course, the team doesn’t need to be as robust when you’re using a pre-build. Nevertheless, you need some development talent on your team to help launch the first phase of your marketplace and support the expansion in the following phases. 

The walk team

At this stage, you want to consider growing the team slightly to support the new vendors you’re onboarding to the platform. The more automation you can apply through your marketplace platform, like product information management and catalog approvals, the less headcount you need to bring on at this stage. Roles that can help with walking include:

• Technical support:  At this stage, there will be a lot of wrinkles to iron out. As select new vendors and customers use the marketplace, it’s critical to have a team in place to answer questions about things like API integration, test, and production, help troubleshoot problems and generally be a support for more technical issues. ‍
• Account managers: Account managers act as the conduit between technical support and the customers and vendors. They are support for stakeholders and an ear to the ground so you can move to the next phase more seamlessly.

The run team

This stage is all about expansion and growth, and you need a team to help support that. Enter: Marketing. A marketing hire will help develop a traffic acquisition strategy for the website and handle marketing more broadly across various channels to help attract new sellers and vendors. 

At this phase, you’ll likely also want to expand your development and tech support teams to continue to optimize for the best possible vendor and customer experiences. 

Measuring success

At the end of the day, a marketplace should help you do one of three things, that aren’t mutually exclusive:

1. Save money
2. Make money
3. Improve efficiency 

Here’s the kicker: Not all ROI is easily traceable through the marketplace shopping cart. Your business is still heavily reliant on relationships, and it always will be. But that doesn’t mean your online presence isn’t assisting in the sale. 

Meaning, another sales channel — like a phone call or in-person meeting, might make the actual slam dunk. But, your website made an assist. 

To gain a complete picture of performance, make sure to take into account:

• All digital channel profits
• Orders generated by the website but place through other channels
• Customer lifecycle (like improvements in new customers, retention, and wallet share)

These marketplace KPIs can be more difficult to track. Below is an ROI calculator, courtesy of Distribution Strategy Group (DSG), to help determine the value of your marketplace beyond the shopping cart. It’s not exact, but it’ll give you a better sense of how your marketplace is impacting business performance outside of shopping cart transactions alone. 

What’s next

Now’s the time to move your distribution business to an online marketplace model. Quick wins over perfect. 

By following a crawl, walk, run approach to launching your marketplace, and taking into account your technology, people, and process along the way, you’ll be well on your way to staying relevant in a rapidly evolving buying environment. 

To learn more about implementing a crawl, walk, run approach, book a free call with a Nautical Marketplace Expert today. 

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