Are B2B marketplaces a winner-takes-all space?

In June we hosted a panel of experts at VC firm Northzone’s offices to talk about the current boom and exciting future for B2B marketplaces. Our speakers included Sam Freedman from Curate Beauty, Jina Kwon from Ankorstore and Erez Mathan from Rooser.

We’re exploring their answers in a series of blogs to dig deeper into the B2B marketplace ecosystem. So far we’re spoken about tricks to scaling and control over the supply chain, so check those out if you’re interested.

In today’s blog we explore whether the B2B marketplace landscape is similar to the B2C one, where one big player will win a significant amount of market share. In other words – are B2B marketplaces winner-takes-all?

The kings of B2C e-commerce

The consumer e-commerce market is dominated by two largest players – Amazon and Alibaba. With the former having a 52% market share in the U.S. and the latter accounting for 30% of the market worldwide.

Even in segments with more niche products there’s often a clear winner that takes up a significant share of the market. However, with the B2B e-commerce market being over 5 times the size of B2C, is there space for a more even distribution in the market? Our speakers shared their perspectives on competition in B2B marketplaces and reflected on whether it’s a winner-takes-all space.

An industry agnostic perspective

Ankorstore is an interesting marketplace as they’ve decided to take an industry-agnostic approach. They launched only two years ago but are already present in 33 countries across Europe, partnering with more than 250,000 retailers, florists, coffee-shops and other concept-stores. Their mission is to be an alternative to Amazon,offering more authentic, independent brands.

This is why their UK Country Manager, Jina Kwon’s, perspective was particularly interesting when it came to competition in the category as a whole. Here’s what Jina had to say about the B2B marketplace landscape:

“I'm very used to being in super competitive, winner-take-all environments, like Groupon, and lots of colleagues of mine have gone on to the Deliveroos of the world. And these are all, you know, you make one dinner order a night — it's winner-takes-all. What I find in retail wholesale is not as winner-takes-all, or this is not the dynamic that I feel with retailers and wholesalers. I think it's a plus for us to have other participants in the market because we are disrupting something old and archaic. And to have other companies that are doing the same thing and doing the education piece for us – we don't think it’s a bad thing.”

As Jina pointed out, being a disruptor is hard and requires a lot of education work before the market is convinced. Some challenges you’re likely to face are lack of trust and understanding. Potential customers won’t be as likely to be familiar with the e-commerce model and might’ve never made purchases online in this form before. You might also come up against industry animosity as established players might not be willing to embrace the change. I would add something about coming up against industry animosity

So having other marketplaces doing the education and building trust in the concept can be highly beneficial. As CEO and Founder of the beauty marketplace Curate Beauty, Sam Freedman, said “marketplaces such as Faire helped set up the concept of wholesale marketplaces in the UK. They established what B2B marketplaces are and that helped us. I think that having different niches within B2B marketplaces will be the future.”

Customers want options

Multisourcing i.e. using multiple suppliers, is a popular option with many wholesale buyers. This approach helps stabilise the supply chain, ensure high quality and gives more negotiating power to the buyer. And most importantly it gives them a competitive edge with their own customers. After all, as Sam pointed out shoppers want choice:

“People want choices and options when shopping. And they don't just go, as they traditionally would, with maybe one distributor to look after them. They want all different options and there's no reason why they can't have lots and lots of suppliers to bring in more.”

E-commerce made wholesale purchases are more of an ‘à la carte’ model where buyers can pick and choose which products they’re interested in. This can be a good thing for your marketplace as you can differentiate yourself with a unique product or go broad and try to provide a wide range of choices. It’s important you listen to your customers and ensure the quality of the buyers and sellers you invite on the platform. As we’ve seen throughout this series, trust is the key to a successful marketplace.

So, is there space?

It seems so. The B2B e-commerce space is significantly larger than B2C and it operates on different principles. B2B marketplaces are often disrupting the long-standing traditions of how business is done in their niche. This can be challenging and put a lot of pressure on you to do the education and trust building. Which is why other entrants in the market are great and can raise the profile of the category as a whole.

Hear it from the speakers

Check out the clip below to hear the full answers to this question:

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