Home Virto Commerce blog Top Benefits and Limitations of a Multi-Vendor B2B Marketplace

Top Benefits and Limitations of a Multi-Vendor B2B Marketplace

Feb 15, 2021 • 5 min

Electronic sales accounted for 51.4% of all U.S. manufacturing and distributor/wholesaler sales in 2019.
— 2020 U.S. B2B Ecommerce Market Report

ЮMulti-vendor B2B marketplaces are quickly taking over the world as an efficient, convenient and fast digital ecommerce tool. They provide multiple opportunities for sellers and procurers, as well as for companies managing them; more and more of such marketplaces are opening every year, covering numerous industries, regions and horizontals.

This article covers certain advantages and restrictions that are native to multi-vendor B2B marketplaces and must be considered when deciding to either employ or start one. But first, let us recap: a multi-vendor B2B marketplace is a digital B2B ecommerce platform where multiple sellers offer their goods and/or services to multiple buyers. The 'multiple' part is important. Every deal is between a specific seller and a particular buyer, the marketplace acts as a matching platform (with possible additional services such as warehousing and logistics). This differs from single-vendor marketplaces and ecommerce sites, where the platform operator acts as a seller and accepts all corresponding responsibilities.

Experts at Virto Commerce – a headless B2B ecommerce platform, have collected major benefits and shortcomings of the multi-vendor B2B marketplaces.

What Are the Benefits of a B2B Marketplace?

Cost-effective entry into B2B ecommerce

A B2B marketplace helps minimize the cost of developing and deploying ecommerce because it already has all the necessary tools. This is especially important for small and medium-sized businesses but also for startups that may not have enough resources to produce their own ecommerce platform. A B2B marketplace is an excellent place to start sales, raise awareness, get in touch with customers and collect feedback.

Greater visibility

Marketplaces advertise and usually attract more customers than any single business can. Many procurers use marketplaces as industry knowledge bases and using one as a showcase means better visibility to prospective customers.

Presence in new markets

An established B2B marketplace will help a vendor connect with new customers who previously had no idea of its existence. Many B2B customers seek goods and services by their specifications and not by manufacturer or provider. A marketplace provides a search engine that seeks products based on specifications. A customer sees all products that match, even if produced by a recently opened and yet unknown company.

Transaction security

As B2B transactions usually use the “payment on delivery" (credit) model, a B2B marketplace ensures the credibility of its buyers. It provides specific security tools like a customer's rough transaction history, which allows the seller to evaluate potential risks associated with the sale. In most cases, it is safer to make a first transaction with a new customer on a B2B marketplace than directly.

Bridge to direct buying

A B2B marketplace helps find prospects who then can buy directly from the vendor. Once good relations are established, the buyer’s needs and abilities are known, and its credibility is proven. Such a move helps cut expenses on marketplace's margin.

Transaction security

Benefits for the buyers

Streamlined procurement from multiple providers

B2B customers, especially on vertical multi-vendor B2B marketplaces, often buy products from various sources in one go. For example, an electronics manufacturer's BOM (Bill of Materials) for a particular device may include hundreds or even thousands of positions from multiple vendors. A B2B marketplace allows to put all of this into one virtual 'basket', automatically generates all the needed quote requests, orders, invoices, etc., keeping all the documents related to this order in one folder in the buyer's account, and makes the procurement process as smooth as possible.

Finding the best price

Since a multi-vendor B2B marketplace has offers from multiple vendors, it is possible to compare the prices of equivalent products. Marketplaces also allow buyers to send quote requests to multiple sellers and select the best offer. The best marketplaces can track price changes, alert potential buyers when a price for a particular product hits a certain threshold, and more.

Procurement control

The previous point also means a business has more control over procurement processes on a B2B marketplace, as business owners can check whether the current supplier's prices are competitive. Marketplaces usually offer a more understandable product taxonomy allowing users to compare offers without specific professional or technical knowledge.

Marketplace as a knowledge base

As a marketplace accumulates offers from multiple vendors, it has a more significant product selection than most shops, wholesalers, or distributors. B2B marketplaces, being designed for professional use, also offer more detailed and correct information on their products. Their catalogs often include rare, obscure, and deprecated items. In fact, some B2B marketplaces specifically enrich their catalogs with deprecated products to help customers find the best suitable modern substitution. Since B2B marketplaces are the best place to ensure market visibility, they simultaneously offer new innovative products buyers might overlook on other resources. All this leads to B2B marketplaces serving as market encyclopedias, containing valuable information for professionals.

Why Choose Virto Commerce for your B2B marketplace?

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What Are the Pitfalls of a B2B Marketplace?

The benefits of using a multi-vendor B2B marketplace are numerous, but there are certain drawbacks as well. While indeed not critical, these drawbacks must be considered, and their negative effects on a business should be reduced.

Fees or commissions

Most B2B marketplaces profit from fees, commissions, or both. These fees vary considerably from marketplace to marketplace. Sometimes they reach values that make prolonged business questionable (this usually means the marketplace aims to connect buyer and seller, profiting from the first sale, enrich its catalog and urges its customers to migrate towards direct sales). Even small margin percentages can make a high-volume B2B deal unprofitable. However, this is often mitigated by flexible commission models that consider order volume, transaction history, and additional factors.

Pricing is more visible

While visible pricing is advantageous to buyers, it may be problematic for the seller that uses a complex flexible pricing model. Buyers who do not qualify for a discount may find out others do, while buyers who do may not see the price they should.

Products are easy to compare with competitive offers

Comparison tools are also great for the buyer (in most cases) but may damage some sellers' businesses. This is especially true for vendors offering high-quality products that have lower-quality cheap analogs with similar specifications.

Transactions may be visible to marketplace employees

Direct selling involves a limited number of buyer's and seller's employees who have access to the transaction information on a need-to-know basis. On a large B2B marketplace, an unknown number of marketplace managers can see the transaction details, which may lead to leaks, if these managers are bribed by the competition. A good B2B marketplace holds the security of its customers' data at its core. It is crucial to ensure a marketplace's trustworthiness before getting onboard.

The need to manage multiple catalogs

Most established B2B marketplaces follow a B2C marketplace's model where the seller must fill and support its own catalog on the marketplace's platform. With the growth of B2B marketplaces, it becomes increasingly difficult and expensive to support multiple seller accounts on different platforms. Thankfully, newer multi-vendor B2B marketplaces employ an API-based approach that allows automatic catalog filling and updating from the seller's back end database.

Minimal omnichannel support

B2B marketplaces are almost entirely digital; generally, human interaction between seller and buyer is severely limited and cumbersome. This may be due to technical reasons or to the fact that the marketplace does not want its customers to interact directly, cutting its commission. This means that sellers must provide full details on their products, and buyers must understand what they intend to buy.

Findability

If the manufacturer launches a new product, it may get lost on a marketplace, as prospective buyers simply do not know its existence. Thus, a traditional marketing approach with dedicated and/or landing pages is required. Still, these pages may lead to a marketplace of choice, as such a marketplace may provide additional credibility and make other manufacturers’ offers more visible.

24/7 Customer management

Unlike the common single-vendor B2B showcase, a multi-vendor B2B marketplace must provide 24/7 customer support. While beneficial for the clients, it is cumbersome and expensive for the marketplace itself, and must be considered if a business decides to upgrade from a single-vendor model to a multi-vendor one.

Conclusion

The multi-vendor B2B marketplace model provides sellers, buyers and marketplace operators multiple benefits, but also presents some challenges. A business that decides to open a B2B marketplace should take all these points into account and plan accordingly, to increase the benefits and overcome the challenges.

These tasks are business-related and should not be hindered by technical limitations. To make sure the marketplace operator is working on the marketplace unique features and new opportunities for its customers, and not on solving technical issues, a trusted B2B software platform tailored for multi-vendor B2B marketplace tasks should be employed. One such platform is Virto Commerce; make sure to check out the all benefits (spoiler: it is .net ecommerce) and reserve a demo.

We will cover the features that distinguish a B2B marketplace from a B2C one in a future article. Stay tuned!