B2B Marketplace: Everything You Need To Know

What is a B2B marketplace? 

A business-to-business (B2B) marketplace is a platform that connects business buyers with many sellers of services or products. Ultimately, a B2B marketplace enables buyers to purchase from multiple sellers in a single transaction, streamlining procurement. 

While B2B transactions traditionally relied on the elbow grease of sales staff, this is changing quickly. As decision-makers get younger, online transactions becoming a preference for many buyers.  

B2B marketplaces are attractive to users because they digitize the purchasing process, offer a new level of convenience, and streamline business operations.

B2B vs. B2C marketplaces 

The difference between B2B online marketplaces and business-to-customer (B2C) marketplaces is rooted in who they serve. As their names suggest, B2B marketplaces are for businesses, while B2C marketplaces are geared towards personal purchases.  

Different audiences mean different business structures and expectations. As a result, B2B marketplaces often require capabilities that B2C marketplaces don’t. Below are examples of some of the features that make B2B marketplaces unique. 

• Complex pricing structures, like bulk pricing discounts, tiered pricing
• Negotiation tools, like RFQs and bidding
• Complex delivery requirements, like freight or air transportation
• Unique payment requirements, like invoicing, large payment processing, net terms, credit checks, multi-currency support, and flexible payment terms
• Advanced vendor management, like performance tracking and compliance checks
• Systems integration with PIMs, ERPs, and CRMs

Why are B2B marketplaces growing?

McKinsey & Company finds that 79% of suppliers have built, are building, or are planning to build a marketplace. The marketplace model represents the next era of innovation for B2B. So, what’s driving this industry transformation?

B2B buyer expectations

B2B’s digital transformation is primarily driven by evolving consumer expectations. Millennials make up 65% of the global workforce and are involved in 73% of all B2B purchasing decisions. As digital natives who grew up with the internet and the likes of Amazon, millennials are not just accustomed to online purchasing; they expect it. 75% of B2B enterprises claim customers demand online purchasing options, and an additional 70% want suppliers to provide an “Amazon-like” experience.

Launching a B2B online marketplace is a surefire way to give B2B buyers the online shopping experience they crave. 

Operational simplicities and efficiencies 

Marketplaces offer B2B businesses a path to scale by enabling them to run asset-light. By bringing on third-party sellers, merchants can offer a wide range of products without the complexity of owning inventory, managing pricing, or fulfilling orders. 

Leveraging the marketplace model also allows you to eliminate a lot of the leg work required to make sales, process payments, and arrange shipments. 

Investment in B2B marketplaces is on the rise

Many indicators show that B2B ecommerce is where the market is moving. Gartner research estimates that:

• 80% of B2B sales will be generated digitally by the end of 2025 
• 83% of B2B buyers prefer to self-service their accounts and purchasing 

It’s no wonder VC investment in B2B marketplaces has grown 4.5X and reached $6.4B from 2017 H1 to 2022 H1. 

Marketplaces fit the existing B2B business model

For B2B companies that have yet to go online, marketplace technology offers a better fit than traditional ecommerce technology. Why? Because the marketplace model mirrors many B2B business models. 

Take the distribution industry, for example. In a nutshell, a distributor’s job is to connect buyers and suppliers. Distributors have three sides and sit in the middle of the transaction. 

Mirroring distribution, marketplaces are built to support three sides of ecommerce: operators, buyers, and sellers. A marketplace operator’s job is also to connect buyers and sellers. Ultimately, distribution companies are undigitized marketplaces. Thus, marketplace technology offers B2B businesses a path to digitization that perfectly fits the business model.

What are the main features of a B2B marketplace?

B2B marketplaces must have technological features that support operators, suppliers, and buyers. Depending on your industry, certain features will be more important than others. But, generally, these are features B2B marketplaces need to support.

Advanced search and filtering

Every B2B marketplace aims to connect buyers with relevant product listings. Search functionality is critical to this mission. B2B marketplaces can host thousands of products, services, and sellers. To help buyers quickly find relevant items, it's important to offer robust search and filtering that narrow down listings. Some examples of filter options include product specs, price, and category. 

In Nick Pinkston’s episode of Operation Marketplace, he described the level of detail his industrial parts marketplace required: “A socket head screw, for example, can have many thread sizes. And each thread size can have five thousand combinations.” This level of detail is important to his customers, so Nick ensures his search engine speaks directly to their needs.

Bulk pricing and custom quotes 

Volume-based structures and negotiation are core to many B2B pricing strategies. B2B marketplaces augment the negotiation involved. While human intervention may still be necessary to execute an agreement, B2B marketplaces provide baseline automation to support creating and delivering requests for quotes (RFQs), bidding, and bulk purchases. 

Multi-vendor management 

B2B marketplaces can have tens, hundreds, or even thousands of vendors—service providers, manufacturers, or suppliers—each needing to be onboarded, add listings, get order notifications, and get paid. B2B marketplaces facilitate the operator’s interactions with vendors, including SLAs, sales notifications, and payouts. They also give vendors the control to manage listings, add products or services, and adjust availability/inventory. 

Payment optionality 

Credit cards typically suffice as a payment option for B2C marketplaces. But, they're a less popular option for B2B because of the high transaction fees and increased risk of fraud.That's why it's critical for B2B marketplaces to offer standard offline payment process online. For example, many B2B companies accept cheques, ACH transfers, invoicing, installments, etc. 

There's a lot to consider when assessing the features of your B2B marketplace. Learn more about the most important B2B marketplace features.

Advantages of launching a B2B marketplace

B2B marketplaces create a win-win-win scenario for buyers, suppliers, and operators alike. They make B2B buying, selling, and logistics more convenient for everyone involved.

Advantages of a B2B marketplace for buyers

Access to more sellers

B2B marketplaces have the potential to become a one-stop shop for their industry. Instead of searching across different websites, they let buyers compare suppliers’ price, quality, and shipping times in one place.

Cost savings

Since B2B marketplaces consolidate competition, buyers benefit from the ability to compare multiple listings. This can also result in cost savings for buyers if sellers are incentivized to lower prices to remain competitive.

Streamlined procurement 

Marketplaces streamline procurement by allowing buyers to purchase from multiple suppliers in one transaction. B2B buyers can procure more items in a Bill of Materials (BOM) in a single swoop. That’s extremely valuable in terms of time savings and supply chain management for a buyer on the hunt for hundreds of parts.

Advantages of a B2B marketplace for sellers

Access to more customers

By selling on a B2B marketplace, sellers gain access to a broad range of buyers across different industries, regions, and needs. Due to their wide product selection, marketplaces attract high levels of organic SEO traffic, exposing sellers to customers who may be searching for complementary products.

Lower customer acquisition costs

Customer acquisition costs include all expenses related to attracting new customers. Research suggests that acquiring customers through a marketplace can be up to 24% cheaper than other methods. This is because B2B marketplaces handle costs like advertising and web hosting, which reduces sellers’ overall cost per customer.

Marketing

Marketplaces expose sellers to a pool of buyers they wouldn’t otherwise have access to. Many marketplaces advertise supplier listings on social media sites, search engines, and digital publications. Many marketplaces also incorporate marketing opportunities into the ecommerce experience via features like “Suggested listings” and “Customer also viewed.”

Advantages of a B2B marketplace for operators 

Network effects

The network effect is at work when a product or service becomes more valuable as more people use it. A B2B marketplace’s value increases for all users when more sellers and buyers join, creating a self-perpetuating growth cycle. The net result of network effects? A thicker bottom line for marketplace operators. 

Low inventory risk

Many B2B marketplaces don’t hold the inventory they sell. They run asset-light, leaving it to sellers to warehouse and ship products. As a result, asset-light marketplaces eliminate overstock expenses and can expand endlessly without taking on more risk. 

On the other hand, marketplaces don’t miss opportunities when a supplier has a stockout. Since marketplaces can host competitive sellers, buyers always have alternatives and never have to go elsewhere to complete a purchase. 

Market insights 

The aforementioned low inventory risk allows operators to easily expand their product depth and assortment without changing business directions. This flexibility enables them to test the market and collect data and insights on market trends. Not only is this data invaluable to the marketplace itself, but it can also pose a new revenue stream. 

Key challenges of launching a B2B marketplace 

Like all businesses, there are challenges that future marketplace operators need to be aware of from the outset. The more you know, the better decisions you can make. 

Building trust

Many B2B industries rely heavily on relationships, making trust an essential piece of the equation. Building B2B marketplace trust is challenging because marketplaces must do so on multiple fronts. Users need to trust that:

• The marketplace is an expert in the industry
• It’s selling from legitimate suppliers
• They won’t be scammed
• Products or services are good quality 
• Products or services match the product descriptions
  

What’s more, B2B buyers and sellers are more likely to have an inherent distrust of digitization. They’re used to picking up the phone to make deals and seek out long-term business relationships. Marketplaces seek to maintain this level of intimacy and commitment while digitizing as much as possible—a tricky balance to establish. 

Balancing demand and supply

Like all businesses, marketplaces must balance supply and demand. However, this dance is more complicated for B2B marketplaces because an imbalance can quickly snowball into a catastrophic issue. 

• Without sales, sellers leave. 
• Without sellers, there’s less product availability. 
• With less product availability, there are fewer buyers. 
• Without buyers, there are no sales. 
• And so the cycle continues.

Maintaining balance is mission-critical for marketplaces, and operators should constantly monitor marketplace KPIs like seller churn, average order value, and lost leads (more on this later) to monitor supply and demand balance.

Vendor onboarding 

Digitization is new to many B2B industries. If vendors are not used to selling online, operators will likely need to provide white glove service to help onboard them. 

That could mean walking them through:

• How to add products to the platform
• Best practices for responding to reviews
• Selecting product images 
• Writing product descriptions

It could also mean managing these aspects for vendors until they become comfortable with the system. Of course, the right technology can make this process easier.

Create the best onboarding experience possible for your vendors. Learn more about how to create a marketplace onboarding process.

Data integration

How do you make product information consistent when dealing with specs in different formats, units of measurement, and from different systems? B2B marketplaces have the monumental task of organizing product data so buyers can locate a listing using their preferred search terms — even if expressed differently from the original specifications. 

Nick Pinkston boiled down this predicament in his episode of Operation Marketplace when he said:

“One person calls it ‘motor power.’ Another calls it ‘horsepower.’ Or maybe you're in Europe, and they call it ‘kilowatts,’ and it's just the unit. [...] The result is a data explosion.”

What’s more, B2B marketplaces often need to integrate enterprise systems, like ERPs and CRMs, into their tech stack, while ensuring the security of their users’ information. This introduces a whole world of complexity into a company’s IT scope.  

Complex transactions

B2B transactions can involve far more requirements and logistics than B2C. Take, for example, bulk orders and cross-border transactions. Suppliers can’t put 5000 boxes of product in the mail and send them to the USA from Thailand. Marketplaces must provide shipping options, solutions for taxation, regulatory compliance, and logistics, which vary from region to region.

Even if a marketplace doesn’t handle the shipping, in many cases, marketplaces are still responsible for providing shipping choices to the customer. For cross-border transactions, sellers might require payouts in a different currency than the buyer purchased for. Needless to say, B2B transactions can quickly get complicated. 

How B2B marketplaces make money

Marketplaces can be highly lucrative. A 2023 Forrester study, commissioned by Nautical Commerce, found businesses that launched a marketplace experienced an average growth of 44% in customers, 42% in overall revenue, 38% in revenue per account/user, and 36% in average order value (AOV).

Before you can start to see growth, you must decide how your marketplace will make money. B2B marketplaces commonly use one of the following revenue models:

Commission-based B2B marketplaces

Commission-based B2B marketplaces charge a take rate or a transaction fee for every sale. Take rates are a percentage of the sale, whereas transaction fees are fixed.

Example: Amazon Business charges sellers a take rate of 5% to 45%, depending on the product category.

Subscription-based B2B marketplaces

Subscription-based B2B marketplaces charge a periodic recurring fee (monthly, yearly, etc.) to sellers and/or buyers to participate in the marketplace. 

Example: iStockphoto has a complex payment agreement for both sellers and buyers. Part of that pricing model includes a subscription for buyers to download images, videos, and audio.

Freemium B2B Marketplaces

Freemium B2B marketplaces allow buyers and sellers to participate in the marketplace for free but charge for access to premium functionality.

Example: Alibaba allows suppliers and buyers to create basic listings for free. Users can purchase premium memberships to enhance visibility, leads, and priority in search results.

Lead fees

Lead fee B2B marketplaces charge based on leads generated. This could manifest as cost per lead or cost per appointment. 

Example: Upwork's revenue model entails freelancers bidding on jobs using tokens called "Connects." Some Connects are sold in bundles and only occasionally given to freelancers at no cost.

List fees

B2B marketplaces that use list fees charge sellers to list their products or services. The fee is charged regardless of whether the listing sells, and the marketplace doesn’t take a commission from the sale.  

Example: Maker’s Row is like an Etsy for American manufacturers. Manufacturers pay for featured listings to increase visibility.  

There are pros, cons, and considerations for each revenue model. To get the whole picture, read the blog post, 7 Marketplace Business Models to Successfully Monetize.

Examples of successful B2B marketplaces 

What does a B2B marketplace look like in practice? We’ve rounded up some examples of B2B marketplaces — from big, global leaders to more niche marketplaces you may not have heard of before. 

Global leaders in B2B marketplaces

These B2B marketplaces are known internationally as leaders in their industries. 

Amazon Business: The king of B2C also reigns supreme in B2B. According to Digital Marketplace 360, Amazon Business claims $35 billion in annualized gross merchandise sales and could make as much as $80 billion in gross sales by 2030.

Alibaba: Alibaba is the world’s largest B2B marketplace. Based in China, it operates in over 200 countries worldwide. As a horizontal marketplace, it offers products from a wide range of wholesalers, retailers, and exporters, covering everything from electronics to home goods to auto parts.

ThomasNet: ThomasNet is a marketplace for industrial products and services. It has over 500,000 suppliers and 70,000 product categories. While ThomasNet focuses on North American markets and suppliers, it caters to international buyers.

Niche and vertical B2B marketplaces 

Marketplaces don’t have to be of Amazon proportions to be profitable. In the past couple of years, 72% of B2B businesses that launched a marketplace witnessed their market share grow.

Niche marketplaces have a unique opportunity to create tailored buying and selling experiences compared to large horizontal marketplaces that miss details when they become too big for their britches. 

Here are just a few successful niche marketplaces: 

Chamfr: Chamfr is a medical device component marketplace that makes ordering nitinol tubing as simple as ordering a book from Amazon. The medical device component industry is new to digitization, and the marketplace model has allowed Chamfr to lead the industry into a digital revolution. 

Volition: Volition is an industrial parts marketplace that successfully executed the challenge of connecting buyers with millions of granularly spec’d parts via the marketplace model. Before Volition, sourcing industrial parts was a notoriously laborious process of mining catalogs. Volition gets the right part into buyers’ hands from a catalog of millions of products via a digital marketplace.

10 metrics every B2B marketplace should track 

Once you’ve launched a marketplace, how do you know it’s on track to bang and not bust? Here are key performance indicators marketplace operators should consider tracking:

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1. Net revenue: Net revenue conveys a marketplace’s profitability and income. Net revenue subtracts direct costs (like the cost of goods sold, discounts, and returns) from gross revenue, which makes it a better indicator of a marketplace’s performance. It can help you determine if your pricing and sales strategies are successful — or whether you need to make changes. 

2. Average order value (AOV): AOV represents the average amount a customer spends per transaction. It can help you understand changes in buying behavior, such as seasonality and demand — and identify where to focus investment.
   
   
3. Monthly recurring revenue: Monthly recurring revenue predicts income from customers every month. It’s a marker of reliable income, so you can use it to forecast revenue trends, establish targets, and inform decisions around hiring and marketing. It’s especially important for subscription-based marketplaces, which allow for more reliable revenue predictions. 

4. Customer acquisition cost (CAC): CAC represents the cost of acquiring a new customer, including hard costs like ad campaigns and soft costs like headcount expenses. It can tell you how effective your sales and marketing strategies are and whether you need to beef up efforts or pivot your strategy. A lower CAC leads to higher profitability.

5. Seller acquisition cost (SAC): SAC is CAC — but for sellers. 

6. Customer retention rate: This growth and customer loyalty metric indicates your ability to generate recurring revenue from existing customers. You can use it to gauge customers' happiness with your marketplace and their willingness to return. According to Forrester, the average B2B retention rate is 76% to 81%. 

7. Lost leads: Lost leads represent the number of customers who are ready to buy but don’t. This could be for a number of reasons. For example, maybe they bounce because of a supply issue, like an out-of-stock product or lack of available service providers. In Nicole Smith’s episode of Operation Marketplace, she cited lost leads as a critical KPI for her travel photographer marketplace, Flytographer. Lost leads helped her understand when to increase photographers, her supply, or hold steady.

8. Seller churn: Seller churn refers to the rate at which sellers disengage with your marketplace. A high churn rate suggests issues with seller engagement or your platform’s value. Seller churn is an important metric for B2B marketplace merchants to monitor because it indicates if there's a risk of supply shortage. 

9. Conversion rate: A conversion rate is a marketing KPI that indicates the number of prospects who become buyers. Many things can impact a conversion rate, from the user experience to pricing.
   
   
10. Net promoter score: Net promoter score asks, “On a scale of 1 – 10, how likely are you to recommend our marketplace?” It is the gold standard of customer loyalty. 

Setting and monitoring KPIs serve as essential health checks for your B2B marketplace. For a deeper dive into the B2B marketplace metrics you should monitor, read Measuring Success: B2B Marketplace Metrics and KPIs.

How to create a B2B marketplace

A B2B marketplace initiative can open the doors to new customer segments and an endless aisle of products. But creating an effective marketplace can feel like being asked to swallow the moon. With so many moving parts, where do you even begin? 

The journey of launching a marketplace begins with these five steps.

Get clear on the vision for your marketplace

What problem are you solving? For who? And why should using this marketplace be a no-brainer for them? 

The answers to these questions make up your marketplace vision. Your vision will serve as the north star for every decision you make. Whether you’re vetting vendors, road mapping functionality, or choosing a marketplace software vendor, the vision you outline in your marketplace strategy will keep you on track to satisfy your customers. Plus, helps you avoid getting caught up with adding unnecessary bells and whistles. 

Conduct user research 

To launch a marketplace that will stick, you need to know your users. Not just high-level demographics, like age, sex, and location. But their values, pains, motivators, tech savviness, and where they get their information. Knowing your buyers and sellers will help you create a marketplace that speaks directly to their needs. 

When you know who you’re building for, you can make thoughtful decisions that save you time and money, improve the user experience, and set you apart from the competition. Our marketplace personas template can help you ask the right questions and document findings.

Determine your marketplace technology 

What’s your marketplace technology strategy? Are you going to build a marketplace from scratch? Are you going to modify an existing system? Or are you going to buy a marketplace platform? The answer depends on a few factors: your budget, timeline, and the tech stack your business requires to run.

There is a lot to flesh out here, but here are your options in a nutshell:

• Building allows you to customize your marketplace and gives you complete decision-making power. That said, great decision-making power comes with great responsibility—and it’s expensive! You and your development team will be responsible for discovery, maintenance, new features, upgrades, and all associated costs.

• Modifying an ecommerce system, like Magento or Shopify, might be desirable if you’re already online and don’t want to move away from your existing ecommerce solution. However, modifying comes with all the same pains as building: costs and maintenance. Ultimately, it’s like turning a rowboat into a motorboat. It can be done, but you’ll need quite a few Band-Aids to keep the engine running.

• Buying a purpose-built marketplace platform means you get the required infrastructure for your marketplace out of the box. Vendors build these platforms based on ample discovery, best practices, and features common to all marketplaces. They also take care of hosting, updates, and maintenance for you. Buying is the fastest and most economical way to launch a B2B marketplace quickly. 

The answer to the build vs. buy debate doesn’t have to exist in a binary. Read more about how to choose whether to buy vs. build your B2B marketplace platform. 

Start with an MVP

When you start creating your B2B marketplace, you’re not creating the end-all, be-all version. You’re creating version 0.1: your minimum viable product (MVP.) 

An MVP is a bare-bones version of your vision that contains essential core functionality. An MVP allows you to:

• Validate there’s a market for your marketplace
• Assess essential features — and avoid the cost of inessential features
• Go to market as fast as possible
• Pivot or change course with minimum sunk costs

It enables you to gather enough feedback to answer the question: can this marketplace be monetized?

Test and iterate 

Marketplace experts repeatedly say that the secret to their success is to test, fail, and pivot as fast as possible. 

Take these examples from our podcast, Operation Marketplace:

• The Goody marketplace began in B2C and ended up in B2B. 
• Matthew Holder’s marketplace Loop Golf began as a golf GPS app and became a golf course distribution channel. 
• Olivia Mihalievic’s marketplace LIVD started in B2C beauty and ended in B2B benefits. 

You never know where your testing will take you. The important thing is that you take action if you receive data indicating you need to change course.

A common ethos in software development is to launch using the crawl, walk, run methodology. This approach is helpful to launch because it ensures your marketplace is sufficiently tested to hit the market running. It’s also useful to apply when introducing new functionality or expanding your marketplace. 

Remember: A marketplace is never “done.” Look at Amazon. What started as an online bookstore became the Everything Store and then turned to cloud infrastructure, B2B, and streaming. Your marketplace will be a work in progress. 

B2B marketplace resources

Thankfully, you’re not the first entrepreneur to build a marketplace. We’ve created a library of resources to guide you along your B2B marketplace journey.

Operation Marketplace Podcast: Nautical co-founder and CEO Niklas Halusa interviews marketplace operators to discuss challenges, motivators, and stories of success and failure.

Marketplace Bootcamp: Access video classes and get step-by-step practical guidance from marketplace entrepreneurs. Topics include everything from creating user personas to marketplace funding.  

Library of marketplace templates:  Launching a marketplace requires planning — lots of planning. Support your marketplace strategy development with our downloadable worksheets for everything from creating an MVP roadmap to SEO. 

Nautical’s B2B marketplace platform: We’ve created the wheel so you don’t have to. Nautical’s B2B marketplace platform contains the infrastructure to manage vendors, elevate the buying experience, and streamline order management. By choosing our one-stop shop to launch your B2B marketplace, you can focus on growth and innovation —not tech.