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For a comprehensive review of the subject, which we’ve started in our earlier piece on B2B vertical marketplaces, we’ll continue the conversation about business verticals and related terms here while structuring the information discussed previously.
In this article, you’ll learn:
A business vertical (aka a vertical marketplace) is a niche marketplace where suppliers serve a specific business audience within a particular industry.
Vertical describes a market where companies offer goods and services specific to a trade, profession, industry, or sector.
When you hear people talk of vertical economies, they typically refer to an economic strategy of vertical integration that aims to achieve lower operating costs by owning all components of production rather than relying on external contractors.
In this article, however, we’ll be talking about business verticals as marketplaces that serve one specific industry.
Vertical business-to-business companies are those that provide goods and services within one industry. An example of a very narrow B2B vertical is AirbusWorld, a collaborative customer portal and marketplace for better collaboration with operators of Airbus Helicopters' global network.
If business verticals serve a niche audience with a specific set of needs, horizontal marketplaces, by contrast, serve a wide range of buyers across various industries.
Virtually any business can trade either horizontally or vertically. For example, a bookstore can trade horizontally to anyone willing to spend a dollar on a new book or vertically to parents and children.
Another example can be a stationery business that typically trades horizontally – many industries require pens and paper. On the contrary, a company that develops patient-scheduling software trades vertically because it caters to a specific clientele, such as healthcare.
To put it simply, vertical businesses trade in specialized products and specialized services, whereas horizontal businesses do not specialize in any particular product or service.
The difference between vertical and horizontal markets lies in their specialization or lack thereof. Thus, verticals cater to a specific audience and specialize in a particular industry. Horizontals do not target any particular markets but rather trade in different products and services across various industries.
Want to build your own marketplace? Virto Marketplace can help.
As mentioned above, vertical markets focus on a particular niche, say, heavy machinery or renewable energy. Such focus allows for higher profits through a narrower customer base and more cost-effective marketing campaigns. By trading within a vertical, businesses gain expertise within their industries and increase their competitive capacity.
Specialization, however, comes at a cost – vertical marketplaces have significantly higher entry barriers for new entrants.
Let’s look at some advantages and disadvantages of business verticals.
Below is a quick overview of the main advantages of business verticals:
Below is a quick rundown of the disadvantages of vertical markets and factors to consider before entering one:
In contrast to business verticals, horizontal markets maximize their market outreach by catering to more customers across a wide spectrum of industries. Since they do not specialize in any particular sector and cater to a large range of buyers, horizontal marketplaces are considered more basic than vertical.
Let’s look at the advantages of operating in a horizontal market:
Despite its many pros, horizontal marketplaces also come with disadvantages:
Although companies within a business vertical sell alongside competitors, vertical markets provide more opportunities for closer partnerships and mutually beneficial cooperation with competition. So, when developing a marketing strategy for a business vertical, think of both customers and competitors and build strategic partnerships for both.
Since content is one of the cheapest and easiest ways to market your business, you might want to start with your content strategy first. So, develop a message that would resonate with your industry and attract both partners and buyers. That message needs to show your audience that 1) you’re an expert when it comes to your industry, 2) you understand your audience’s pain points and know how to solve them, and 3) other companies which are similar to your audience are already using your product.
Some paid advertising and industry events will certainly help spread brand awareness and attract new clients, who, in turn, will help spread the word about your vertical.
You also might want to try affiliate marketing when you give a discount (or any other perk) to any client who brings a new business to your marketplace.
Business verticals are rife with opportunities, so it’s important to recognize them and employ strategies to the company’s advantage.
Such opportunities include:
Taking advantage of the marketplace’s platform with enhanced and intuitive user experience, different payment methods, and embedded finance options.
Business owners who wish to enter a vertical market should pay attention to the difficulties and potential downsides of B2B verticals that we’ve briefly discussed earlier, such as a smaller customer base, potential revenue limitations, and the dangers of the condensed market.
Companies should at the very least take the following steps when searching for suitable verticals:
Whether you want to build a single or multi vendor vertical marketplace, Virto Marketplace can help. Virto Marketplace is a full-fledged standalone solution that can handle business scenarios of any complexity and connect to any existing platform without replatforming. Interested? Talk to us!
Generic examples of business verticals include the aerospace industry, agriculture, chemical manufacturing, defense industry, energy production and distribution, healthcare, real estate, and transportation. Each of these sectors can be further narrowed down to a distinct vertical, such as nuclear energy in the energy sector and pharmaceuticals in chemical manufacturing. If you’re looking for specific examples of vertical B2B marketplaces, please refer to our previous piece on the topic, namely The Vertical B2B Marketplaces: The Sky’s the Limit, where we named a few examples across multiple industries.
If you’re looking for more examples of vertical B2B marketplaces, please refer to our previous piece on the topic, The Vertical B2B Marketplaces: The Sky’s the Limit, where we named a few examples across multiple industries.
In this simple little guide, we’ve tried to explain the difference between vertical and horizontal markets and give you a better idea about business verticals in general. If you’re looking to build a business vertical of your own or connect to an existing vertical marketplace, Virto Marketplace can help!