The Ultimate Strategy Guide to B2B eCommerce And Online Marketplaces

July 22, 2021 · 16 min read · Paolo Timoni
Image by macrovector
Image by macrovector

The coronavirus pandemic has permanently accelerated the pace of B2B eCommerce, widening the gap between digital winners and digital losers across many B2B industries. As a result, for most manufacturers and distributors, selling even more online - or offering eCommerce for the first time - is rapidly becoming a strategic priority. This article reviews three basic eCommerce strategies, five critical business requirements for their successful implementation, and five technology best practices.

US B2B eCommerce

Amazon Business Gross Merchandise Volume (GMV) grew from $1 billion in 2016 to $25 billion in 2020. According to BofA Global Research analyst Justin Post's estimates, Amazon Business's share of U.S. B2B eCommerce sales will be about 10% in 2021, and by 2025 its global GMV will be $83 billion. The global addressable market for B2B eCommerce by the same year, according to his estimates, will be $5.7 trillion.

This article is for you if:

  • You have not yet finalized your B2B eCommerce strategy.
  • You need to identify the critical business requirements to drive eCommerce buyers' adoption and sales growth.
  • You want to understand high-level technology best practices better.

After reading this article, you'll walk away with a better knowledge of:

  • Five critical business requirements every B2B company embracing eCommerce should consider to accelerate customers' adoption and sales growth.
  • Three basic strategic options B2B manufacturing and distribution companies should explore when considering how to leverage eCommerce to develop a competitive advantage and accelerate organic growth.
  • Five technology best practices to help reduce expenses and increase operational agility when building and operating an eCommerce application.

Critical business requirements

In the next section, we'll review three basic strategies that B2B companies can leverage to accelerate sales through eCommerce (i.e., build a traditional eCommerce application, join a third-party online marketplace, or create an online marketplace). But first, in this section, let us discuss five critical business requirements that are essential to promote eCommerce adoption and increase sales from existing and new customers.

A common mistake that too many B2B companies still make is considering implementing an eCommerce strategy as a predominantly IT project.

While IT contribution will be significant, especially when building a traditional eCommerce application or an online marketplace, it is the related marketing and sales activities that will drive the difference between success and failure. Like for any other "product" or "service", the benefits provided by an eCommerce solution (i.e., faster and less time-consuming ordering, improvement in decision making or working capital, etc.) will need effective marketing and selling to produce a positive return on investment.

For most B2B companies, achieving significant customers' eCommerce usage will follow a typical technology adoption cycle. Using the framework and terminology originally introduced by Geoffrey Moore about 20 years ago, "crossing the chasm" - that is, moving from a few early adopters to a large majority of customers - will require proactive and persistent efforts to help customers understand and realize the benefits.

The following best practices apply to B2B companies that want to accelerate value creation through their eCommerce application or a third-party online marketplace.

Support specific B2B customers' requirements

B2B eCommerce's adoption will only increase when the online ordering process provides a superior customer experience relative to the offline ordering process.

When customers are forced into unnatural workflows or when the online ordering process misses essential features, most customers will stick to proven offline processes. When designing a new eCommerce application or selecting a third-party online marketplace, therefore, B2B companies should ensure that the chosen solution embraces the following proven best practices:

  • Manage specific order information to help customers properly track and account for orders (i.e., PO numbers, requesting department, etc.).
  • Allow customers to work simultaneously on multiple orders.
  • Enable custom automatic workflows to implement specific order routing and approval processes.
  • Ensure the application can manage business accounts, the individal users belonging to each account, and users' role.
  • Support multiple price lists and avoid shifting customers to offline processes to obtain better pricing terms.
  • Support multiple B2B payment methods.

B2B eCommerce applications that do not meet customers' specific requirements typically result in broken user's experiences, limited adoption, and poor data integrity (like, for example, when order summary statistics at the account level are not available because users from the same account are treated as separate individuals).

Facilitate self-service and assisted sales

Most B2B buyers usually appreciate the convenience and time savings provided by well-designed B2B eCommerce applications. However, while some of them will prefer a self-service ordering process, others will want to retain some of the benefits offered by assisted sales. Therefore, the best B2B eCommerce applications enable product discovery and ordering processes that accommodate both kinds of buyers.

For buyers who prefer a self-service experience, a superior product category taxonomy and advanced search functionality will increase adoption and revenue. For most middle-market companies, integrating their eCommerce application with a managed search service (like, for example, Algolia or elastic) will be the most cost-effective approach to offer state-of-the-art search functionalities.

For buyers who would instead opt for an assisted sales experience, to increase adoption and revenue, the eCommerce application should allow buyers to share an order brief with their account executive, enable account executives to create draft orders on behalf of buyers, and notify buyers when draft orders are ready for review and final approval. Virtual assisted shopping, that is getting on a video call with a sales representative while creating an order, is also a feature becoming more and more appreciated.

Implement usage behavior tracking and analytics

Understanding how customers interact or don't interact with your eCommerce application is essential to promote adoption and increase sales. This requires using a customer data platform to capture and process data like, for example, how frequently customers access the eCommerce application, which products they look at or ignore, what functionalities they use or do not use, and detailed information about customers' orders. That data is essential to generate insights on improving the eCommerce application design and creating personalized communications to help customers understand and learn how to realize the most benefits from using the eCommerce application.

B2B companies that have joined a third-party online marketplace will not be able to capture and process detailed data regarding customers' usage of that application. However, they should still implement a customer data platform tracking exposure to marketing and sales campaigns and detailed order flow data to generate insight into the most effective strategies to promote adoption and increase sales.

Develop awareness about the new eCommerce option(s)

After developing a well-designed eCommerce application or joining a leading third-party marketplace that offers further convenience relative to existing ordering processes, the first challenge most B2B companies encounter is how to drive awareness and interest among current and new customers. That requires dedicated efforts and investments that B2B companies often fail to anticipate.

Engaging existing customers first is usually the most logical and cost-effective approach for most B2B companies. Existing customers are known entities, already appreciate your product offering, and they only need to understand and develop an interest in the benefits provided by the new eCommerce offering. Sending a newsletter to all existing customers articulating the new eCommerce application's benefits is often an excellent way to start engaging a few early adopters.

However, developing interest among a large majority of customers will demand a more substantial and personalized approach (i.e., one leveraging customer data and marketing automation) to convey customized communications over a prolonged period with specific benefits, customer testimonials, and customer success stories in a scalable and cost-effective way.

To engage potential new customers, account-based outreach prospecting campaigns articulating specific benefits, customer testimonials, and customer success stories will often be the most cost-effective approach.

In both cases, the number of sign-ups in each period (i.e., newly created accounts) will be the key success metric for these essential top-of-the-funnel activities.

Help customers get value from eCommerce

The large majority of B2B buyers will only adopt a new eCommerce solution when its benefits are more significant than the cost of the required changes (i.e., learning to use the new application, modifying some internal processes, etc.).

Therefore, a key objective for any B2B eCommerce provider is to reduce the time-to-value for most buyers in a scalable and cost-effective way. Only then will they start placing more and more orders using the new sales channel, take advantage of the newly available functionalities and services, and become valuable and sticky repeat customers.

Using the sales team to promote the new eCommerce option or having marketing run training webinars usually does not produce the best results. Instead, a significantly more effective approach uses in-app real-time contextual help and usage-based marketing automation to provide customers with personalized sequences of small information and training bites to quickly turn them into valuable repeat buyers.

To quickly achieve those results cost-effectively, B2B companies can easily integrate their eCommerce application with a few existing and affordable SaaS tools:

  • A customer data platform to track who is using the eCommerce application and how (i.e., Segment).
  • An interactive product guidance tool to provide in-app step-by-step contextual help (i.e., chameleon).
  • A marketing automation platform with real-time usage-based customer segmentation to nudge users along their customer's journey (i.e., customer.io).
  • An analytics platform supporting embedded dashboards to provide customers with a few KPIs measuring the value they are receiving through the eCommerce application (i.e., Amazon Quicksight).

Strategic options

Historically, most B2B companies regarded eCommerce as an add-on sales channel only applicable to businesses characterized by simple products, straightforward pricing, low shipping costs, and a simple sales process suitable for a self-service approach.

More recently, however, several B2B companies are proving that eCommerce is an enabler of core business strategies aiming to develop a competitive advantage in various industries with complex products, sophisticated pricing, articulated supply chains, and high-touch sales processes.

For B2B manufacturing and distribution companies that have not yet finalized their eCommerce strategy, this section discusses three basic strategic options and a few reference examples to help facilitate senior management discussions.

Build an eCommerce application for your B2B customers

Building an eCommerce application can create uniquely desirable add-on services to enhance a business core value proposition. Therefore, it's an essential component of a go-to-market strategy for any B2B manufacturing and distribution company seeking a competitive advantage through differentiation.

Providing greater convenience to B2B customers and helping them reduce costs, improve decision-making, and achieve a higher speed to market, are just a few examples of business strategies that a well-designed eCommerce application can enable for B2B companies.

However, simply deploying an online product catalog with a basic cart functionality to enable online ordering is insufficient to achieve a competitive advantage. As a result, more and more companies across many B2B industries are developing creative eCommerce applications with sophisticated functionalities to execute articulated business strategies.

Following are just three examples illustrating the wide range of possibilities and several best practices in B2B eCommerce and digital transformation:

  • Tenaris, a global manufacturer of steel pipes for the oil-and-gas industry, has set itself apart as a clear leader in the digital transformation of the pipe business. Their strategy aims to develop and deploy digital tools to streamline processes for their customers and save them time, money, and resources while increasing safety, efficiency, and reliability through the supply chain. Currently, five digital applications enable their eCommerce strategy:

    • The Rig Direct Portal allowing customers to place orders for custom products, track shipments and deliveries, digitally acknowledge cargo receipts, and schedule rig returns.
    • The PipeTracker mobile app helping customers to track each pipe from the moment it leaves their production line until it arrives at the customer rig, accessing technical specifications and operating manuals, and supporting other operating functionalities.
    • The Digital Marketplace enabling customers to order directly from the company inventory of catalog products for standard applications.
    • The OCTG (oil country tubular goods) electronic datasheets helping customers to identify the product that will best meet their needs by application, pipe attributes, or drift.
    • APIs for integration facilitating the digital integration of Tenaris' systems with those of its customers and enabling seamless interaction and information exchange.
  • Emerson Electric, a Missouri-based manufacturer and distributor of industrial valves and instruments used in operating industrial and residential facilities, is another B2B company that has recently embraced digital transformation and eCommerce as a source of differentiation and competitive advantage. To enable its strategy, the company has so far developed:

    • MyEmerson, a digital portal providing customers with tools that enable engineers to configure products online and access other eCommerce functionalities (i.e., access personalized price lists, work on multiple orders simultaneously, place and track orders, schedule orders, etc.).
    • A portfolio of ten mobile applications providing many valuable services to its customers, including access to product information, access to IoT sensors and devices, and tools to estimate the cost for product replacements.
  • Protolabs, a long-time digital manufacturing pioneer producing commercial-grade plastic, metal, and liquid silicone rubber prototype and on-demand production parts, is another leader leveraging digital transformation to achieve a distinctive industry position. Operating in an industry with many competitors, the company differentiates itself as a manufacturing partner that can help accelerate the speed to market and strategically manage demand volatility across the entire product life cycle. To enable that strategy, the company has developed a digital quoting engine and eCommerce platform that helps companies accelerate product development, reduce costs, and take advantage of the latest in 3D printing.

Protolabs

For any B2B manufacturing and distribution company pursuing a differentiation strategy, developing a sophisticated eCommerce application is crucial for sustainable growth and profitability. Assembling a team with the required expertise and an aligned incentive system, developing the initial concept and investment case, and developing ad hoc marketing and sales programs to encourage customers to embrace the change required on their side, are often the critical challenges when executing the strategy.

Join a third-party B2B online marketplace

Joining a third-party B2B online marketplace is an option becoming available across a more significant number of B2B industries.

Customers often like online marketplaces because of the more substantial product assortment and price transparency they provide. For a B2B company, the rationale for joining a third-party online marketplace depends on its source of competitive advantage (i.e., cost leadership vs. differentiation).

For B2B companies pursuing a competitive advantage through cost leadership, when a third-party online marketplace exists for their industry vertical, joining a marketplace instead of building a proprietary eCommerce application is often the best strategy to develop an omnichannel presence while minimizing technology and marketing investments.

For B2B companies leveraging differentiation as a source of competitive advantage, developing a proprietary eCommerce application is usually a strategic imperative. However, in industries with a fragmented demand (i.e., a large number of potential customers), joining a third-party online marketplace as a complementary strategy can help accelerate sales growth while optimizing customer acquisition costs (in this case, the company will typically offer only a subset of its products on the third-party marketplace to gain awareness and initial interest among potential new customers, with the ultimate goal of switching at least a portion of the newly acquired customers to its eCommerce application for full assortment and differentiated services).

B2B companies joining a third-party online marketplace can reduce technology or marketing investments but give up control over creating a differentiated customer experience and their proprietary order flow data (i.e., the marketplace will have access to information about the products selling the most and the customers buying the most).

In addition to Amazon Business, several B2B online marketplaces have emerged in the last few years offering more specialized customer experiences across different industry verticals. Following are just a few selected examples:

  • ACV Auctions: a full-service, coast-to-coast, wholesale automotive marketplace where used-car dealers can buy and sell used cars and turn their inventory faster, optimize their cash flow, and make wholesale a profit center.
  • Faire: an online marketplace where retailers can shop for wholesale products from over 20,000 brands and pay 60 days later. Available product categories include apparel and accessories, beauty & wellness, footwear, home decor, jewelry, kids & baby, paper & novelty, and pets.
  • Grainger: a premier provider of industrial supplies and equipment with over 1.6 million products, that connect more than 4,500 suppliers with more than 3.5 million customers. As the biggest distributor of maintenance, repair, and operations (MRO) products, the company strategy is to use more digital tools and services and a high-touch model to develop deep relationships with its customers.
  • Gearflow: a marketplace that provides construction contractors what they need to run their business well by aggregating parts and equipment, sharing information on usage and services, and offering price transparency from a large number of top-quality industry suppliers. Not necessarely the lowest cost provider, Gearflow aims to provide the best value in terms of availability, shipment speed, quality, warranty and price.
  • Knowde: a marketplace connecting over 2,000 suppliers of chemicals, ingredients, and polymers with industrial buyers. Buyers can browse, search and filter the world's largest catalog of chemicals, ingredients and formulations, talk directly to suppliers' expert, order samples, request documents, and get quotes, and producers can market and sell their products more efficiently and provide customers with a modern online experience.
  • Xometry: a marketplace providing manufacturing services from over five thousands manufacturers and machine shops to companies that needs to prototype and produce their custom parts. The digital manufacturing marketplace provides a massive network capacity, instant quoting, guaranteed quality, and an industry-specific customer experience.

Build an online marketplace for you and your partners

In an increasing number of cases, some B2B companies have concluded that becoming the promoter of an online marketplace open to other businesses in their industry (i.e., other producers or their own distribution partners) is the best strategy to create a differentiated experience for their customers or distribution partners, retain control of their valuable order flow data, and generate a greater return on their technology and marketing investments. Following are just three examples:

  • GoDirect Trade (a unit of Honeywell Aerospace): a digital marketplace using blockchain technology to help eliminate paperwork and save time in listing certified aerospace parts for resale that brings buyers and sellers (i.e., Honeywell Aerospace and other vendors) in the Aerospace industry together.
  • FoodServiceDirect (a unit of Unilever Food Solutions): in 2018, Unilever decided to scrap its legacy eCommerce platform and acquire an existing marketplace to support its goal of increasing sales tenfold in three years and deliver the customized purchasing experiences B2B buyers want. The marketplace sells primarily to restaurants, hospitals, and schools a variety of products offered by Unilever and several other partners. More recently, the marketplace extended its offering to also cater to consumers that prefer to buy in bulk.
  • Hubs (a unit of Protolabs): leveraging Protolabs proprietary digital quoting and eCommerce technology, Hubs is a marketplace where customers from many industries can order custom parts in a broad range of materials using multiple manufacturing technologies with many secondary processes as well. The marketplace use machine learning to quote costs better than any machinist instantly and automates production through a global network of hundreds of specialized manufacturing partners to guarantee capacity and lead times 24/7, 365 days a year.

Think outside the box

Selected technology best practices

Nowadays, developing a well-designed and architected eCommerce application does not require advanced software engineering capabilities. Several specialized cloud-based platforms and managed services providing various backend functionalities can be easily integrated and customized to produce the desired eCommerce solution and, to develop the application's front-end, companies can leverage open-source software components to create the desired customer experience.

An essential factor for long-term success is to select an application architecture that will optimize the eCommerce application's total cost of ownership (TCO) over time, including updating expenses for both technology and content.

At a high level, the following are a few selected technology best practices:

  • Adopt a modern decoupled (i.e., with the application backend separate from the front-end), modular (i.e., using specialized APIs and microservices for different backend functionalities), and cloud-based eCommerce application architecture.
  • For the eCommerce and marketplace backend functionalities, adopt a leading API-based solution (i.e., Adobe/Magento, BigCommerce, commercetools, Shopify Plus, Mirakl, Vtex, etc.).
  • For the eCommerce application front-end, adopt a modern web development framework (i.e., React/NEXT or Vue/NUXT) and leverage the corresponding open-source eCommerce components as a starting point (i.e., ReactStorefront and Vue Storefront).
  • Adopt a headless CMS (i.e., Contentful, Prismic, Storyblok, etc.) to manage the application's content (i.e., product information, landing pages, blog articles, case studies, etc.).
  • Integrate additional SaaS tools (i.e., modules) to provide additional functionalities like, for example, a customer data platform (i.e., Segment), search and personalized recommendations (i.e., Algolia), automated ML-powered product ranking for category pages (i.e., Constructor.io), website personalization (i.e., uniform), in-app help and guidance (i.e., chameleon), and event-based transactional messaging (i.e., customer.io).

Augeo Partners is a group of senior leaders with a passion and significant track record in driving organic growth and operational productivity through strategy, change management, and digital technologies, dedicated to partnering with middle-market PE firms and portfolio companies to accelerate organic growth and value creation. The time for B2B manufacturers and distributors to leverage eCommerce to accelerate organic revenue growth is now, and Augeo Partners can help.