The B2B Marketplaces Goldrush: How Your Business Can Profit
Jayson Humphrey is the Global Commercial Lead for B2B Marketplaces at Tradeshift. When we last spoke to him, he told us why he believed the future of business commerce will be built around networks of specialist marketplaces.
For this next installment, Jayson explained why large organizations should be skeptical about using sites like Amazon for business purchasing, and why savvy procurement leaders should be turning their skills into a revenue generator by becoming specialist B2B marketplace operators. Watch the video and read the full version of our Q&A below.
What’s wrong with the current e-procurement tools available, and how are the likes of Amazon and others disrupting that space?
Traditional e-procurement tools were purpose-built for their time and built with excellence. That served us well for 20 years, but it’s a sledgehammer approach. The inflexibility and complex user experience of these systems are driving users away from traditional e-procurement processes and tools.
Now compare this to what the likes of Amazon Business and its peers are offering; an abundance of supply and a user experience that is frankly delightful. Is it any wonder that employees are flocking to these sites to make purchases for work? It’s easy.
Have procurement teams lost control?
Users are flocking to these tools because it’s easy – and that isn’t always a problem. Some procurement teams are catching on, and they’re even working with the Amazon businesses of this world. But there’s still a great need for more control and a reduction in the number of employees using those marketplaces so much of the time. Because it increases cost overall.
I like the saying that it’s the least worst option because I think that’s the reality. And the problem is that until now, at least, there have not been any other equally great alternatives. And until there is, and that’s broadly adopted, it’s going to remain the least worst option.
If users are getting what they want from sites like Amazon, then what’s the downside?
If you’re a small business with relatively simple procurement needs, then it may not be worth the effort to try an alternative. But if you’re a procurement leader in a larger business with a $1 billion-plus revenue, thousands of employees, and diverse procurement needs, then it’s a problem. A big problem.
Sites like Amazon are retailers. That means they measure their own performance on the amount they sell, and their motivation comes from getting you to buy more from them. In practice, that means a raft of targeted ads and recommendations designed to incentivize more frequent and larger purchases. We all know how easy it is to click one more thing and add it to the cart. It’s not in Amazon’s best interests to stop that behavior.
Meanwhile, the CPO or anyone who works in finance and procurement at a large organization has a completely different objective. Their goal is savings and operational efficiency. This clash of interests makes the move towards B2C retail e-commerce sites such a problem for large organizations.
But surely every marketplace is designed to generate sales. How else would they do this other than encouraging users to buy more from them?
It’s the rules, the philosophy, and the DNA of the marketplace operator that set the difference. We believe the intent of any good B2B marketplace should be to facilitate higher quality supply, better savings opportunities, better engagement with your suppliers from a relationship perspective, and access to diverse supplier groups tailored to your specific requirements.
The way that B2B marketplaces offer buyers the ability to control what they see or do not see can make it a symbiotic relationship. A good B2B marketplace makes money by adding more value to its buyers.
Value can take a number of different forms. On one level, that can be helping buyers control and manage their spend properly from a B2B procurement perspective. Value can also be based around service or quality guarantees. Oftentimes it’s all of these things.
It sounds like there’s a gap in the B2B e-commerce market. What’s the opportunity?
It’s like a gold rush. The total value of the B2B e-commerce market sits at around $7 trillion today, rising to $20+ trillion in the next five years.
If you’re already a category leader (you’re an expert in a particular supply category, country, or region) and you’re not already making moves to offer a marketplace capability to your network of buyers and sellers, then Amazon will eventually. The writing is on the wall.
We’ve created a set of tools to enable and empower those leaders that are already experts in their niche to innovate now and offer their own marketplace capability to buyers. They’re looking for that user experience, they’re looking for more control. And they’re looking for your supply. While you have a corner on your market, our recommendation is to add a marketplace technology layer on top of that infrastructure and please those customers, and keep them for the long term.
For businesses that meet the criteria to become a B2B marketplace operator, where do you see the leadership coming from to drive these initiatives forward?
It starts in procurement, where many of the skill sets and qualities required to become a successful marketplace operator are already on the show today. Purchasing and sourcing are already doing the job for their internal customers, they just haven’t traditionally focused on generating cost savings and efficiencies for someone outside of their organization. It’s not a great leap for them to get there, however, and it’s an opportunity to transform procurement into a genuine profit center.
If you combine these core skills in procurement with expertise on the buy side of the equation – someone more sales orientated who has relationships with the procurement departments at other large organizations and can lead on commercializing the marketplace – then you already have many of the key ingredients needed to become a successful B2B marketplace operator.
Not every business will want to become a public marketplace operator. Are there alternatives they might want to consider?
Procurement organizations can build their own private marketplaces and create their own walled garden that still has the advantages of marketplace technology, such as a great user experience and control. This works beautifully for franchise organizations or large organizations with complex procurement needs.
If you’re part of a procurement team in a large buying organization and you want to take advantage of marketplace technologies without necessarily earning net new revenues, then our guidance is to find the right technology and become a private marketplace. If you’re using the right technology, you can still retain control while being able to access and buy from other marketplaces then that’s a smart move. We work with a lot of businesses in this way, and it’s very successful.
And for businesses that do see B2B marketplaces as a potential revenue-generating opportunity, what should they be thinking about?
Be accessible. Be part of a network.
B2B buying is complex, and buyers are sourcing through a myriad of different sources, whether that’s supplier websites or different marketplaces. Or they’re punching out to different marketplaces from their procurement systems. It’s not a satisfying experience.
Now compare this with something like online content streaming, where you can subscribe to any number of different specialist services through a single hub. We’re offering that Apple TV unified experience where hundreds of B2B marketplaces are accessible from a single starting point.
It’s seamless for the buyer in terms of experience, access, and control. And for the operator, they get to benefit from growth that is happening across the entire network of marketplaces.
Sourcing suppliers becomes easier – simply invite new supplies from different marketplaces to join yours – and sourcing buyers is as easy as sticking a sign outside the front door. It’s like Hulu saying, ‘we’ve got Game of Thrones, who wants to watch.’ Buyers from the network will actively subscribe to your marketplace as the need arises.
Thanks so much, Jayson. What’s one piece of advice you’d like to leave us with?
Now is an exciting time to be a specialist. Our recommendation is don’t be a specialist under a rock. Be a specialist out in the public. Do it in a way that you can be found, with companies that can help you get found. Do it in a way that’s connected.
We see the energy of B2B e-commerce moving in that direction. We’re here to remove that friction and connect companies – creating more opportunities for everyone on the network.