Even before the pandemic, B2B marketplaces were expected to generate $3.6 trillion in sales by 2024, up from an estimated $680 billion in 2018, according to payments research firm iBe TSD. They were already growing more quickly than most B2C marketplaces that predated them, and when COVID shutdowns hit, many companies scrambled to shift all purchasing online. A survey of business buyers conducted by Digital Commerce 360 found that 20% of purchasing managers spent more on marketplaces, and 22% spent significantly more, during the pandemic.
For many entrepreneurs running B2B marketplaces, the pandemic created new demand for their platforms. Yet to convince businesses to make a permanent shift to online purchasing, B2B marketplaces cannot simply remain stagnant, serving as simple transactional platforms. Those that innovate now to introduce adjacent services will emerge as winners in the next few years, with some inevitably becoming billion-dollar companies.
The predominant revenue model of B2C marketplaces, the gross merchandise value (GMV) take rate, or percentage of each transaction, doesn’t always translate well in the B2B world. Instead, B2B marketplaces are discovering creative new ways to monetize their networks, ensuring their approach is tailored to the complex and nuanced world of B2B e-commerce.
What makes B2B transactions unique? Before discussing how B2B marketplaces can deploy new business models, it’s important to think about how B2B transactions typically work.
Payment methods: There are four main ways to make a B2B payment: paper check, ACH transfer, electronic fund transfer (wires), and credit/debit cards. Nearly half of B2B payments are still made by paper check, but digital payment solutions are quickly gaining.
Financing: It is customary in B2B transactions to pay “with terms,” such as net 30 or net 60, effectively giving a line of credit to the business buyer that enables them to send payment after delivery of the good or service. Supply-chain financing and dynamic discounting are two mechanisms business buyers use to settle invoices with suppliers on preferred timelines.
Bulk discounts: Business buyers often expect and receive discounts in return for placing high-volume orders. While not a concept unique to B2B, negotiated or custom volume discounts can complicate the checkout process.
Contractual pricing: Businesses often enter into enterprise-level pricing agreements with their suppliers. In some B2B verticals, such as the veterinary supplies market, there is little consistency and transparency regarding the market price of any given item; instead, each buyer pays a bespoke price tied to contractual agreements. This dynamic typically benefits suppliers, which can price discriminate based on buyers’ ability and willingness to pay.
Delivery method and timing: Unlike consumers, businesses may place orders for goods but delay delivery for weeks or months. This is particularly common in the commodities market, where futures contracts specify a commodity to be delivered on a certain date in the future. B2B transactions typically include a negotiation on delivery method and timing.
Insurance: Business buyers frequently purchase insurance as part of their transactions, particularly in high-value verticals such as jewelry. Insurance is designed to protect against damage to the goods in transit or theft.
Compliance: In some verticals, particularly those related to healthcare and chemicals, there is a heavy compliance burden to ensure goods are properly sourced and transported. Is the seller legally registered to sell and transport sensitive goods such as medical equipment or pharmaceuticals?
The good news for B2B marketplace founders is that, based on the parameters above, there are many creative ways to extract value from transactions that go beyond the GMV take rate. Let’s explore some of the creative ways to monetize a B2B marketplace.