High Friction Marketplaces: B2B

Periklis Vasileiadis
6 min readJul 24, 2024

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Created by Dall-E

In recent years, the world of B2B (business-to-business) e-commerce has undergone a significant transformation. According to a report by Research & Markets, global B2B e-commerce sales reached a staggering $9.2 trillion in 2023, with projections indicating a rise to $33.3 trillion by 2030. A considerable portion of these transactions is expected to occur through digital marketplaces, reshaping how businesses procure goods and services.

B2B marketplaces aren’t a novel concept, but their prominence has surged, especially in the post-pandemic world. The Adevinta Ventures and Dealroom.co report highlights that 40% of B2B marketplace unicorns have emerged since 2021. This rapid growth can be attributed to the supply chain disruptions caused by the pandemic and geopolitical trade tensions, compelling businesses to rethink their procurement strategies.

Trust is paramount in B2B transactions, more so than in B2C (business-to-consumer) scenarios. According to Merkle’s 2023 B2B Superpowers Index, trust is the top decision driver for business buyers when choosing digital marketplaces. This trust is built through reliable service, transparent processes, and consistent performance, making it easier for businesses to transition to and rely on digital platforms for their needs.

Why is it happening now?

Before the rise of modern B2B marketplaces, several pre-2010 e-procurement solutions made significant strides in digitizing business procurement processes. However, despite some early successes, most of the legacy vendors failed to capture the majority of B2B spending, which remains offline. Here’s why:

1.Horizontal Focus

Procure-to-pay vendors such as Ariba and Coupa created horizontal solutions aimed at handling indirect spending for enterprise procurement departments. While effective in their niche, these solutions didn’t cater to the specific workflows of various verticals. Consequently, they never truly captured the more substantial direct spend categories that are crucial to many industries.

2.High Costs and Complexity

Legacy e-procurement platforms often came with hefty price tags and complex usability issues. These vendors typically monetized through direct SaaS or transaction fees, requiring extensive setup, integration, and onboarding processes. This complexity and cost meant that small and medium-sized businesses (SMBs) found these solutions impractical and out of reach.

3.Lack of Integrated Payments and Lending

Even when these legacy platforms automated or facilitated digital B2B orders, the associated payments were rarely triggered automatically. This gap created inefficiencies and added steps to the procurement process, which modern B2B marketplaces aim to eliminate by integrating seamless payment and lending solutions.

4.Limited Facilitation of Trust

Many e-procurement 1.0 platforms focused on digitizing existing buyer-seller relationships rather than fostering new connections. Trust is a critical factor in B2B transactions, and these platforms did little to build it. Without mechanisms to enhance trust between new business partners, these solutions were limited in their ability to expand their user base and market reach.

What’s changed?

While some startup trends emerge rapidly, others, like B2B marketplaces, develop more gradually. The rise of B2B marketplaces is driven by several key factors that are reshaping the landscape and creating new opportunities:

Millennials Driving Change in Legacy Industries: Millennials are increasingly taking leadership roles in traditional industries, bringing with them a disdain for outdated, offline workflows. Frustrated by clunky systems, many millennials are leaving their industries to start software companies that address these inefficiencies. Their tech-savvy approach and preference for digital solutions are pushing the adoption of B2B marketplaces.

Integrated Payments and Lending: The integration of payments and lending into B2B marketplaces is transforming business models and enhancing user experiences. These marketplaces can now offer core workflow and ordering applications for free, using “indirect” business models like invoice factoring to drive adoption. This approach not only reduces barriers to entry but also streamlines financial processes for users.

API-Driven Architecture: The maturation of API-driven architecture is a game-changer for B2B marketplaces. Open architectures facilitate seamless communication between applications across value chains, allowing marketplaces to create real-time, multi-vendor product catalogs with accurate SKU and pricing information. This interoperability enhances the efficiency and accuracy of procurement processes.

Easier, Cheaper, and Faster Software Development: Advancements in software development have made it easier, cheaper, and faster to bring new ideas to life. This accessibility is enabling a broader range of founders to launch innovative B2B marketplaces. The lowered barriers to entry are fostering a diverse ecosystem of solutions tailored to various industries and needs.

B2B Marketplaces in vertical industries

One obvious way to segment opportunities for B2B marketplace founders is by industry vertical. Here’s the good news: these are massive pools of offline B2B spending! But one size does not fit all. While all of the industries in the graphic below are massive and largely offline, they have very different value chain dynamics and thus require very different approaches.

Image: Bessemer Venture Partners

The B2B Omni-channel opportunity

In recent years, most B2B companies have rapidly transitioned the majority of their business to digital self-serve and remote sales channels. This shift was not just a necessity but quickly became the preferred model for both businesses and their customers. The key to thriving in this new landscape lies in mastering the three pillars of omnichannel success: speed, transparency, and expertise.

Speed: Instant Access and Convenience

Speed is crucial in the digital sales world. Customers expect instant access to information and services, tailored to their needs and available at their convenience. This includes:

  • Always-On Availability: Offering video and live chat options throughout the customer journey ensures support is always within reach.
  • Convenience and Simplicity: Features like one-click purchases and streamlined processes for repeat orders make transactions quick and hassle-free.

By providing fast and easy access to information and purchasing options, businesses can significantly enhance the customer experience and drive higher satisfaction and loyalty.

Transparency: Clear and Comprehensive Information

Transparency involves providing clear, detailed information about products and services, and helping customers make informed decisions. This can include:

  • Product Comparison Tools: Allowing customers to compare different products online to find the best fit for their needs.
  • Detailed Descriptions: Offering extensive information about parts, supplies, or solutions, including costs and benefits.

Transparency builds trust and helps customers understand the full value of a solution, leading to more confident purchasing decisions.

Expertise: Knowledge and Guidance

Expertise means leveraging knowledge to guide customers through their purchasing journey. This involves:

  • Informative Content: Providing expert insights, guides, and resources to help customers understand their options and the benefits of different solutions.
  • Personalized Assistance: Using data and customer insights to offer tailored recommendations and support, ensuring customers receive the most relevant and useful information.

Who’s going to make it?

→ Empowering farmers through education and direct sales access: Wikifarmer

Wikifarmer is an ecosystem of content and agricultural products that promote a fairer, more transparent, and sustainable value chain + in the food industry. With Wikifarmer, farmers can sell their output to multiple buyers, achieve a better price, monitor fair market prices, and access international markets. The startup also offers instant payments to farmers and helps them with logistics and financing, allowing them to increase their profitability on the Wikifarmer marketplace. At the same time, it provides them with a wide collection of agricultural best practices and how-to guides, which have been translated into 16 languages and are freely accessible on the Wikifarmer Library. Wikifarmer has raised more than $6M from investors like Point Nine, Metavallon VC and others.

→ Providing a dynamic online platform for marine buyers and suppliers: Procureship

Procureship is a leading e-procurement platform providing innovative solutions for the maritime industry. Thousands of companies worldwide are efficiently connected within our marketplace thanks to our platform’s integration with shipping companies, third-party systems, and suppliers. Procureship’s features optimize key parts of the procurement process: complete purchase flow automation (>97%), vendor management, suppliers recommendation engine, service providers marketplace, IHM maintenance, e-Invoicing, and freight forwarding optimization.

Tips & Tricks

Launching a B2B vertical marketplace can offer substantial benefits, but it requires careful planning and execution. By aligning the marketplace with your business strategy, fostering collaboration between sellers and buyers, and thoroughly evaluating investment and ROI, you can build a platform that delivers significant value to all stakeholders. This includes offering sellers a way to expand their reach and reduce costs while providing buyers with a wide range of products and transparent pricing. Detailed discussions about the expected return on investment, initial and ongoing costs, and revenue streams are essential. Monitoring the efficiency of your marketplace and making data-driven adjustments will help ensure it meets financial and strategic goals. Staying adaptable and responsive to market needs is key to long-term success.

The initial thought behind this blog was to empower everyday readers to understand and stay informed about the technology shaping our world. In Discovery Series, my main priority is to demystify complex technology concepts and showcase the creativity and innovation happening in the startup world.

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