Insights

Business Model, Not Channel: Marketplaces for B2B Manufacturers

The Legacy Channel Model for B2B Manufacturers

Traditionally, B2B manufacturers have sold in channels segmented by revenue, product lines, location, and other factors resulting from solving inefficiencies in the value chain. Manufacturers could not easily deploy field sales to serve buyers separated by great distances, so local distributors became a complementary sales channel to the manufacturer’s field sales team. When a manufacturer acquired a new product line to address gaps in their product portfolio, the acquired sales team frequently was treated as a new and separate channel.

Channels formed to serve locations with large addressable markets, with the manufacturer’s inside sales channel providing the value of made-to-order pricing and the outside sales channel of the distributor providing access to real-time inventory for stock orders. Channel marketing measured success by the number of catalogs returned or more recently by the health of the email list. Channel sales teams measured success solely in the channel, frequently missing significant opportunity to add value by collaborating with other channel managers to sell an expanded portfolio.

Despite each channel addressing narrow value propositions, B2B manufacturing executives empowered each channel to exert an outsized influence on the customer experience and customer relationship.

The Emergence of Marketplaces in B2B Manufacturing

In the US, Amazon has proven that a digital marketplace – and several underlying direct and indirect distribution models – can provide incredible value propositions for consumers and B2B buyers. Internationally, Alibaba is a dominant marketplace provider in high-growth Asia Pacific markets. Many manufacturers have created marketplace channel teams to serve the emerging opportunity, responding with a legacy channel approach to a radically new opportunity that calls for unconventional thinking.

Marketplaces enable all participants to access additional benefits that individual participants cannot provide alone. The less obvious opportunity is that B2B manufacturers can create a marketplace with an Amazon-like business model while appearing nothing like Amazon.

B2B buyer value propositions include:

  • The simplicity and transparency of using a single site provided by a trusted manufacturer rather than multiple sites from the manufacturer and distributors
  • Access to the manufacturer’s catalog and full or partial catalogs from distributors paired with localized pricing, inventory, and delivery options
  • The purchase process can appear to be a single transaction that effectively masks the complex order management processes of many participating distributors

B2B manufacturers benefit from:

  • Controlling the brand experience by controlling the core catalog
  • Enforcing quality standards for extended catalogs from distributors and dealers.
  • Providing tailored buying journeys serving complex needs of B2B including merchandised rebuying with fewer out-of-stocks, and site search across many inventory sources
  • Access to more customers in adjacent industries and new geographies
  • Access to distributors and/or dealers with inventory

Channel conflict is reduced – and in some cases eliminated – as manufacturers invest in digital solutions that require distributor participation for the model to be successful.

Marketplaces also provide distributors with opportunities to compete on value propositions other than price and to deliver unique value with access to inventory, access to complementary products, and in some marketplaces access to services for installation.

Technology powers the new marketplace model for manufacturers

Technology unlocked massive economies of scale – based on the efficiency of volume – in factory production throughout the 20th century. However, economies of scale have limitations and diminishing returns that leading manufacturers address with innovation.

Innovative use of ecommerce technology will unlock the economies of scope – based on the efficiency of variety – in the emerging marketplace economy.

Rather than use technology to increase production or reduce unit costs, marketplace technology connects buyers with a variety of sellers and suppliers. That’s why Gorilla partners with leading technology providers such as Mirakl to unlock the value of the marketplace economy by creating practical strategies and tailored B2B marketplace experiences on new or existing storefronts and portals. To get started, contact Gorilla Group or Mirakl to learn more.