May 21, 2017
One could definitely lay the blame on market conditions; overfunded and burning their cash at insane rates, the first generation of B2B marketplaces were doomed to fail. But a curious reader might take a closer look at the intrinsic reasons of this bloodbath. Most marketplaces at the time relied on the reverse auction model, i.e. a buyer sends out a public request for proposal, and sellers bid on this contract. The lowest bidder gets to sale its product. This triggered a war on price between suppliers that turned out to be disastrous for their margins, and detrimental in terms of quality of service for buyers. Competing on price is not the right approach in a B2B market, where purchase decisions are made in a holistic way. Buyers factor price, as well as quality (product and servicing capabilities…). Since few of the first generations marketplaces integrated effective review systems or social capabilities, it became difficult for buyers to appraise the “quality” component of their orders.
Another problem that arose was the neutrality problem, several marketplaces were operated by a company… that also featured as a buyer or a seller on the marketplace. It is difficult in that situation to onboard new suppliers/buyers on the platform for basic neutrality reasons. In fact, who would want to join a marketplace owned by a competitor that charges you a commission every time you use it?
To wrap it up, a large number of B2B marketplaces failed in the aftermaths of the dotcom bubble for three main reasons.
The first obvious one being macro; investments were withdrawn from those firms, hence dooming those cash hungry businesses to failure.
The second reason lies in the feature of the products, that did not offer enough warranties to buyer as to the quality of the product they bought. Lack of social integration condemned those marketplaces to price competition.
The third problem, correlative to this one, was a problem of trust. Trust between buyers and sellers, but trust between marketplace actors and marketplace operators in some cases. Those shortcomings will be fixed, to a certain extent, by the second generation of B2B marketplaces.
After the burst of the dotcom bubble, the B2B marketplace landscape suffered a period of sluggish growth, further exacerbated by the 2008 crisis. As global trade levels plunged, so did B2B exchanges, hence negatively impacting other stakeholders in the ecosystem. Alibaba, however, managed to stay afloat thanks to a very diversified customer base and solid market shares on the Chinese market.
Yet, at the turn of year 2009, 3 new, innovative players emerged, in the fashion industry mostly. In 2009 was created le New Black, followed by Joor the year after and NuOrder in 2011. A new gold rush had started, and fashion was the name of the game.
Fashion is indeed an interesting use case for B2B marketplaces. Business is basically evenly spread throughout the year with very specific windows for product showcase and product launch (Winter and Spring Summer plus additional “ad hoc” collections featuring famous designers). Collections are rolled out progressively throughout various distribution channels, not to overload the supply chain and to sustain the interest of buyers. The end of the season is usually followed by sales, where brands have the opportunity to empty their stocks at a fairly competitive price. Note however that the more upscale the brand is, the less likely it is to empty its stock during sales. Luxury and some premium brands would rather burn their stock than lowering the prices, hereby harming brand equity. In addition to this seasonality and very packed schedule, the emergence of fast fashion puts additional pressure on the brands. Retailers demand shorter product replacement cycles to match the desires of consumers. This trend, pioneered by large fashion players (HM, Inditex), using proprietary procurement softwares, puts pressure on brands’ supply chain by requiring ever shorter time to market.
Correlatively to the rise of fast fashion, a global taste has emerged, helped by the increase in purchasing power in developing countries, that makes for a more sophisticated and educated customer base. This represents a huge opportunity for brands , provided they have the adequate tools and partners to help them down the road to internationalization. Those trends contribute to shaping an ecosystem where speed, diversity and geographic reach are key drivers of profits. The online marketplace system is well suited to accommodate those needs.
Core customers of those solutions include independent premium brands, not large enough to operate their own distribution channels as well as large conglomerates, willing to streamline their internal sales process. It all comes down to our previously drawn distinction between independently owned marketplaces and consortia marketplace.
However, if we take a closer look at those marketplaces, slight differences appear. in terms of sheer size notably, with Joor and NuOrder being really dominating the market. In terms of features as well, Joor has developed an app that allows retailers to manage comprehensively their purchases, whether they order to Joor enabled sellers or not.
The rise of those fashion marketplaces marked the resurgence of B2B marketplaces. Several new platforms arose in the aftermath of the 2008 crisis. Those marketplaces did not repeat the mistakes of the past. They went after a specific market, on a specific location. Being very focused is both a requirement and an advantage for B2B marketplaces. It allows them to match specifically their customers needs. Even though there are common features you find across every decent marketplace in the industry, expectations vary wildly depending on business types and location. Were it not for the word trade, food trade would have nothing to do with metal trade, even more so in a B2B context. The list of those marketplaces is long, but major players include
Every year, thousands of trade shows and professional events around the world welcome visitors curious to discover the world of brands. As key players in the exchange of international products and services, trade shows pave the way to a new channel of communication.
January 10, 2021
As the B2B e-commerce industry grows, it becomes vital to get involved. Managing these online stores can be new but does not pose any difficulties if it is an obstacle that holds your back.Therefore, it’s time for you to harness the potential of a B2B e-commerce site to offer your customers the best and stay up to date.
December 23, 2020
The digital economy us disrupting the world as we know it. The rise of retail e-commerce between businesses and consumers is upsetting industries. Now, the impact extends beyond Amazon and eBay to reach B2B companies around the world.
November 1, 2020
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