Situation: where are you in your B2B journey?
At Virto Commerce, we have been observing two distinct situations:
- A wholesaler (with an established ecommerce business) creates a marketplace where it buys the products from its suppliers and stores them at its own warehouse. Thus assuming all the risks related to procurement, storage, and shipment of inventory. In this case, the wholesaler cashes on the profit margin from reselling.
- A wholesaler does not purchase the products; instead, the business delegates some of the risks to its suppliers while retaining control over the customer experience. This way, the company benefits from the developed infrastructure, which enables its suppliers to sell the products directly to customers.
Since organic growth is the most natural growth, situation number two is the most sensible approach to building marketplaces.
To enter the marketplace business, your company must have a mature digital solution, without which it would be almost impossible to develop a sustainable business model that will attract both suppliers and customers.
Since we advocate a reasonable approach to business expansion, we will talk about organic growth in this article.
By connecting multiple suppliers to your platform, you assume the following controls and responsibilities:
You develop the sound infrastructure for all concerned parties to operate efficiently;
You control the customer experience (develop and look after the customer journey, check the reliability and quality of suppliers’ products, and the solvency of your customers wherever applicable).
At the very beginning, you need to develop a sustainable business model and decide how much freedom you want to give your suppliers: the fewer responsibilities you delegate to your suppliers, the more expenses you incur. One such responsibility (that can be delegated) concerns catalog management, which can include multiple degrees of control:
You might choose not to allow your suppliers to change the product names or categories but to add their products themselves;
You might ask your suppliers to register specific product properties by marking mandatory fields with an asterisk.
For example, to make it easier for customers to compare cell phones in the UX, you might allow your suppliers to skip an optional description but fill out a mandatory form of 20 required properties.
The permissions and controls will undoubtedly depend on market characteristics, business context, and your relationship with suppliers.
A few other questions that you will have to address before beginning your marketplace journey:
- Pricing: How will you charge your suppliers? Will you opt for fixed or flexible fees per transaction or sales volume? Will you introduce subscription-based pricing? Your financial relationship with suppliers will determine the pricing model of your marketplace.
- Customer data: Will you restrict access to customer data? What customer data will you disclose to your suppliers?
- Payments: Who will control the payments and take responsibility for bouncing checks?
- Logistics: Who and how will take care of the logistics process?