The internet in the contemporary scene is replicating everything from the offline market to the online market. Of course, with the increase of the needs, there are many business models for providing better services and gaining maximum profit. From products, services, rentals, and food delivery, to on-demand beauticians, there is nothing that eCommerce can’t offer today.
B2B selling is one such a domain. It maintains the supply chain of offline as well as the eCommerce market. With bulk orders, trade rules, and different marketing standards, B2B businesses are more complicated and broader. According to Statista, it’s a market worth over 7.6 trillion dollars. Not just the commerce is complicated but also the revenue models for B2B businesses are multifaceted in the B2B arena.
Concept of B2B commerce and marketplaces
When we talk about an online B2B marketplace, we point at a platform that connects different businesses with each for supply chain replenishment. Let’s take an example. Say, you own a store for electronics. You need products to sell, so you get in terms with different suppliers and manufacturers who replenish your stock with bulk orders. They run a business, and you are a business too. The commerce happening between you and the supplier is B2B commerce.
If the same commerce happens on an online platform-
- Which holds many such suppliers and manufacturers
- Where you place an online order for your stock replenishment
- Which accepts online and offline payments for your orders and
- Who delivers the order to you or your customers directly
We call such platforms online B2B marketplaces. An online platform where different businesses connect and sell to each other. It is the same as a B2C marketplace like Amazon, except the customers are not the consumers but the businesses who sell to the consumers, and sellers are not the retailers but the suppliers and manufacturers.
In simple terms, B2B marketplace involves the electronic commerce between businesses at the level of manufacturers, wholesalers, and retailers, as opposed to general eCommerce, which occurs between companies/brands/sellers and the general public or consumers.
Common examples of most popular B2B marketplaces are as follows-
- Amazon (Both B2B and B2C)
- Alibaba (Both B2B and B2C)
- Global Sources
Types of B2B marketplaces- based on business type
Depending on the products and services sold, a B2B marketplace is of two types-
- Vertical B2B Marketplace
Marketplaces which allow buying and selling of products in only one particular segment. Such B2B marketplaces allow commerce between all the segments of a particular industry only. For example, automotive, Pharma, Chemicals, Electronics, Constructions, etc. Say you are into construction business then such marketplaces can help you connect with all the businesses who can supply you the construction-related products and services.
- Horizontal B2B Marketplace
In contrast to Vertical marketplaces, Horizontal B2B marketplaces sell products and services from different industries and segments. They connect the businesses across different segments. For example, say your business belongs to the construction industry. Besides construction supplies and services, such marketplaces can also let you connect with the businesses who can supply bulk furniture for your new office setup.
Types of B2B marketplaces- based on the business model
Depending on the business model, we further classify B2B marketplaces into three types-
- B2B Product Marketplace
Marketplaces which connect different businesses for product supply fulfillment. For example, a construction company and an equipment supplier.
- B2B Service Marketplace
Marketplaces which connect businesses that can offer services to each other. For example, a construction company and a human resource supplier for engineers, labors, technicians etc. Same is also true for a construction company and a finance company.
- Hybrid Marketplace
A hybrid marketplace is a complex network that involves both B2B and B2C relations. Moreover, it also involves products, services, B2B, and B2C elements. For example, Urban Clap is a B2C service marketplace, but FreeLancer is a B2B service marketplace. Similarly, Amazon and Alibaba are both B2B and B2C product marketplaces. Contrastingly, eBay is a combination of B2B, B2C, as well as C2C product-based business model. Any marketplace offering more than one type of business model is a hybrid marketplace, irrespective of it is B2B, B2C or C2C.
Here is a quick comparison between different business models to give a detailed comprehension-
Key aspects of a B2B business model
Before comprehending the business models, let’s get familiar with the key aspects that influence the business architecture and revenue generation for any B2B marketplace. These key entities contain seven major aspects-
- Key Partners
The ‘key partners’ are the major stakeholders on your marketplace platform. For a B2B marketplace, the key stakeholders are the businesses that place bulk orders for their supply chain replenishment, and the manufacturers and suppliers who accept and fulfill those orders.
- Key Resources
Resources define the key information that is supplied to the key partners for making choices and better decisions. The resources for a B2B marketplace could be the list of suppliers for the customers that help businesses to see the choices they have to place an order. Options like access to suppliers profile, ratings, reviews, contact information, shipping options, etc. also come in the same class. The same also applies to suppliers who get access to set up their profiles and list their products.
- Value Proposition
As a value proposition or unique selling point, the B2B platform can guarantee as many connections, sellers, suppliers, and customers to each stakeholder. It aims at delivering the best to each side of the business.
- Customer Relationship
Customer relationship involves a healthy flow of information in a secure environment on the platform. The platform must ensure a safeguard to all the data concerned with the key stakeholders. This includes the privacy, safety, and security of user account data or payment information on both sides.
- Customer Segments
An algorithm is set to manage the segmentation and classification of all the customers in the marketplace. It must classify a customer on the grounds like order volume, the location of the shipment, type of products etc. For sellers, the platform must follow a similar approach where it should categorize the sellers based on products they offer, shipment reachability, reviews, and ratings, etc.
- Cost Structure
Cost structure manages the payment models and billing of the orders placed on the B2B marketplace. It must allow the flexibility to choose from different payment packages like a special discount on bulk orders, separate pricing for individual orders, custom discount management, etc.
- Revenue Streams
Revenue streams are responsible for the flow of money in and out of the platform. It actively involves the customers to admin payments and admin to seller payments. The flow can be different depending on the business model. For example-
The payments for the orders will directly go to admin, and admin will conduct regular payouts to the sellers after deducting the platform charges. There are many more options for this. We will discuss in the subsequent sections of the article.
Common business models in B2B marketplaces
If you intend on starting a B2B marketplace, choosing the right business model is of utmost priority. Many startups fail only because they choose a wrong website development technology or eCommerce platform. In later stages, they struggle to adapt to the new business models and perish sooner.
Hence, for any of the business models you venture on, always select a web technology, a B2B marketplace script or a service marketplace script that allows enough customizations with changing needs and requirements. As a B2B marketplace of products, services, or as a hybrid model, consider implementing one, more than one, or all of the following business revenue models.
- Commission Model
This is the most popular revenue model common in B2B as well as B2C marketplaces. We can also call it is as a transactional model as the marketplace owner earns from every transaction happening on the site. Marketplaces charge a commission from sellers on every sale they make through the platform. Depending on the business plan and the B2B marketplace script they use, the admin can charge either of the percentage-based or the fixed amount commissions.
The reason for the popularity of this business model is its investment-less approach. The sellers of the marketplace do not have to pay anything to the marketplace until they make a sale. Examples of the marketplaces who use this model are Amazon, Airbnb, Etsy, Uber, and eBay. If you choose this model, you need to offer the best value to the sellers so they can get a sale and you can get your share from it. It is one of the most lucrative models for a B2B marketplace as the transactions are huge here, and you get some handsome commission outs of those massive sales.
- Subscription Model
This model applies to both sellers and customers of a B2B marketplace. While some businesses ask the sellers for a monthly subscription fee to list their products on the site, there are marketplaces which ask a subscription fee from the customers.
Marketplaces offer subscription plans that involve different services and value-added propositions. For example, the sellers would get assistance in finding new customers. While the customers might get exclusive services like speedier delivery, access to bigger discounts, and lightning deals.
Bottom line is, the marketplaces have to do a lot more than offering a listing space to earn from this revenue model. If you intend on adopting this model, provide enough value-added propositions to gain customer loyalty, which entices them to subscribe to your plans. For example, Lynda is an online training platform that charges a recurring monthly fee from the learners to let them access its tutorial videos and online courses.
Listing Fee Model
Listing fee model remains somewhere between commission and subscription model. Instead of charging a subscription fee, the marketplace charges for every listing the sellers want to upload. Moreover, the revenue model is also accompanied by the commission system for some marketplaces where they charge both per-list and per-sale commission. Depending on the business strategy, a marketplace can follow one or either of the two ways.
The major challenge in this model is convincing the sellers to pay the fee. Any seller would want to invest in listing fee only when he/she feels the listing will be placed in front of a huge customer base. This model works best to entice the sellers of expensive products as every sale involves a huge transaction. For example, Mascus is a B2B marketplace for heavy machinery. Sellers on the platform prefer per-listing plans in contrast to recurring monthly charges.
- Lead Fee Model
Lead fee model lies between the listing fee and commission model. Instead of paying for a product listing, the sellers pay to the marketplace when they make a sale or get a lead. Such marketplaces allow customers to post requirements and sellers to bid on it.
This model is not popular in C2C but highly popular in B2B and B2C marketplaces. It involves both product and services. Typically, a lead fee model works best when every lead possesses a big transaction or a long-lasting relationship building with the customers.
For example, Thumbtack is based on B2C lead generation model where service seekers place a job requirement and service providers get to bid their gigs on it. The Service marketplace script behind the Thumbtack runs an algorithm that gives leads to the service providers and let them bid for the task. The customers pay commissions to the marketplace, the service providers pay a lead fee.
- Featured List Model
It’s more like an Ad-based model where the marketplace charges from the sellers and help them get better leads and sales with a featured listing. Such platforms run on b2b marketplace scripts that offer dedicated space on the homepage to list some highlighted sellers or products besides the regular organic listing. These featured listings are like Ads on the platform, which get a promoted viewership than organic listings.
This model works in combination with other models, or platforms working purely as classified Ad sites use this model. For example, yellow page sites let businesses list themselves for free or paid subscriptions but also offer additional promotions with an extra fee. It’s not entirely related but Google Shopping is also a perfect example. You can post your Google Shopping Ads, which emerge as a product listing on the SERPs. It features these listings beside the organic Google search results.
- Freemium Model
The best suitable model for B2B marketplace start-ups is the Freemium model. Offer something for free and then ask users to pay for a more sophisticated option. We have seen businesses from all models thriving with this revenue stream.
The main motive of following this model is offering free access to all and paid access to selected businesses for further advancement with value-added propositions. Take amazon’s B2C model for example. A regular customer can buy from Amazon as everyone does. However, a Prime customer can enjoy additional benefits like Speedier delivery, access to Prime Video and Amazon Music.
This model is actually a hybrid of many other models. Besides value-added propositions, a marketplace can let
- Regular customers shop normally
- Subscribed customers shop sophistically
- Regular sellers pay regular commissions
- Prime sellers pay less commission
- Regular sellers get an organic listing
- Prime sellers get featured-listing and much more.
Bottom line is, offer something for free and encourage key partners to pay extra for extra benefits. For example, Etsy balances its free-listing, commission, and listing fee model with paid upgrades like direct checkout, Ads promotion, and shipping labels to power sellers, etc.
B2B marketplace offers a broader arena for marketplace owners to experiment with different revenue models. While most of the business models are not solely enough to let you compete with the rivals, a combination of them would prove to be more effective. You cannot expect the commission model alone to let you thrive like Alibaba and Amazon, you need a solid revenue stream balance at the level of Amazon Prime or Alibaba’s featured listing plans. Only a hybrid of the best prospects is competent to make you a great name in the B2B arena. So whatever B2B marketplace script you choose for your venture, make sure it is flexible to accommodate all the listed-above streams. You don’t want to miss out even a single opportunity to direct your revenue stream inwards.