According to expert estimates, the online B2B market will have reached a volume of 6,700 billion USD by 2020. At this time, the online B2B market will be more than twice the size of the online B2C market (USD 3,200 billion in 2020) (Frost & Sullivan, 2015). However, it’s not just the market volume that is highly attractive, but also the expected growth dynamics. Compared to an online share of approximately 12-15% in the B2C market, the online share in the B2B market is currently only around 2-3%. This promises a dynamic, persistent channel shift from offline to online, thus representing the first component of a “BIG SHIFT” in the B2B field.

Figure 1: Online B2B vs. B2C sales in 2020 (Frost & Sullivan, 2015)

Although online marketplaces are particularly well-established in the B2C environment, the entry of big e-commerce players means that the B2B segment is currently experiencing rapid growth. Since 6th December 2016, Amazon Business has been online at amazon.de/business and – true to its advertising slogan “Everything you love about Amazon. For work.” – provides buyers and sellers with the familiar comfort of the B2C platform. This advancement in online B2B marketplaces is resulting in the ever faster disruption of existing B2B business models. Propelled by their experience of the convenient, seamless B2C shopping experience, the demands of B2B buyers are also increasing. A timely or overdueB2B marketplace strategy can present different opportunities and risks for manufacturers and distributors depending on their industry.

In contrast to the B2C market, however, there are some specific B2B challenges to be mastered. The complexity of the B2B product and service range and the associated providers requires comprehensive yet easy-to-use solutions. Propelled by their B2C experience of private online shopping, more and more B2B buyers are now demanding a comparable business shopping experience. Overall, a growing digitalisation of the customer journey is observable throughout the industry, thereby increasing the relevance of online marketplaces. The extent of this progress must be examined more closely for each individual case – an essential hygiene practice within any systematic e-commerce strategy. In general, however, the relevance of online marketplaces can be classified broadly according to product category. If, in a more precise definition, we assume that”online marketplaces” are those where actual purchase transactions take place, we can conclude that they are currently best suited to standardised products in the lower price bracket – that is, to commodities and to products from the maintenance, repair and operating segment (MRO). Examples of online marketplaces in this area include Amazon Business and Mercateo. These transaction-driven online marketplaces are particularly relevant to producers and traders of commodities in the fields of automation, engineering, construction, chemical, electrical, industry, crafts and MRO.

Figure 2: Share of B2B e-commerce in the total sales of selected industries in Germany

 

Looking at the provider side, it is clear that the European B2B online market has so far been highly fragmented and consists largely of niche providers in addition to address lists and industry directories. In other words, dominant market leaders – especially those with a dynamic ecosystem – have so far been lacking. In general, actors in the B2B sector exhibit deficits in regard to digitalisation and often a lack systematic digitalisation strategies. Against this background, and taking into account the aforementioned market attractiveness and the need for a “consumerisation” of the B2B shopping experience, it is not surprising that experienced B2C players like Amazon (with Amazon Business) or eBay (with eBay Business Supply) are increasingly gaining a foothold in the B2B market. However, other players such as the global marketplace Alibaba.com, mercateo, WerLiefertWas and EuroPages are also playing an active role.

Figure 3: B2B online marketplace landscape in Germany

In both B2C and B2B, providers can gain access to this tried-and-tested infrastructure by listing their products, thereby also gaining access to the existing ecosystem, which includes a whole spectrum of service functions such as Fulfillment by Amazon (FBA) and Amazon Marketing Services (AMS). The listing comes with access to the high sales potential generated by a large international customer base; however, notwithstanding these substantial opportunities, a dedicated online marketplace strategy must be used to determine – in a differentiated fashion – the product categories for which the platform is truly suitable. It must also determine the conditions to be met and, most importantly, the associated risks. As seen in Figure 4, such a typically consists of the following core elements.

Figure 4: Core elements of an online marketplace strategy

The first five steps of an online marketplace strategy are incorporated into a business plan to which further details are to be added over the course of the project. It takes into account all relevant costs and benefits of distribution via selected online marketplaces.

The first step is market potential analysis, where an estimate of revenue potential is made based on data-driven market intelligence with actual transaction data. The development of a suitable strategy is only worthwhile where sufficient potential can be identified on the basis of numbers, data and facts, which is why the potential analysis always forms the initial step. The next steps consist of defining the right matching marketing mix strategy (the focus here is on the 5Ps), negotiating with selected marketplaces prices & terms and deciding on a dedicated organisational structure with appropriate monitoring principles.

Sustainable success can only be achieved if these strategic core elements are worked through in a systematic fashion. Our many years of experience have shown that the approach has a decisive influence on the level of success and the company’s relationship to Amazon and other players. Figure 3 illustrates the typical course experienced by manufacturers with and without an Amazon strategy:

 

Figure 5: Evolution of profits and margins in Amazon cooperation

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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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Markus Fost

Managing Partner
Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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