Steven Zhou, Co-Founder and CEO, Moov.
According to a report by market research firm Research & Markets, global B2B e-commerce sales will reach $9.2 trillion in 2023 and balloon to $33.3 trillion by 2030. If self-reported purchase habits are any indication, over half of these sales could be through digital marketplaces. According to McKinsey, 60% of business buyers indicate they are open to purchasing on digital marketplaces. Their top decision-driver? According to Merkle’s 2023 B2B Superpowers Index, it’s trust.
While B2B marketplaces are not new, we have reached the golden era of digital marketplaces for business buyers. According to a report by Adevinta Ventures and Dealroom.co, 40% of B2B marketplace unicorns have been created since 2021. What has spurred their growth? Given the timing and location of B2B marketplace unicorns (60% are headquartered in the U.S. or China), the answer seems obvious. Supply chain disruptions of pandemic years coupled with geopolitical trade tensions have created a forcing function for enterprises to change their procurement strategies.
Even what venture capital firm Bessemer Partners calls “high-friction marketplaces”—those dealing in complex transactions with less standard SKUs—have seen their share of unicorns recently. For example, India-based Zetwerk, a B2B marketplace for component manufacturing, achieved unicorn status in 2021. So did Singapore-based Moglix, a B2B marketplace for business supplies and industrials, U.S.-based G2 for B2B software, German logistics marketplace Forto and the list goes on.
Even high-price assets, like 6-figure high-tech manufacturing equipment, are being transacted online. (Disclaimer: I am the CEO of Moov, a marketplace for used semiconductor manufacturing equipment.) According to a survey by McKinsey, 42% of business buyers indicate they would be willing to spend over $50,000 on a B2B e-commerce channel, and 35% would be willing to spend over $500,000.
This leads us to an interesting question: Have business buyers become more trusting of B2B e-commerce or less trusting of traditional procurement channels? I am a realist, so my answer is this: It’s likely a bit of both. As traditional procurement strategies have become less reliable, B2B marketplaces have seized this opportunity to prove that the nature of their business models and technology positions them to better solve procurement and supply chain risks than traditional channels.
For example, Moglix Business offers a contract management solution that not only helps procurement officers streamline contract management to reduce the risk of errors but also allows buyers to leverage “AI-driven contract analytics” to “uncover comprehensive insights into supply chain disruptions and risks.” Addressing the risk associated with just-in-time procurement, Zetwerk offers an inventory management solution that monitors stock levels in a customer’s warehouse and uses this data, combined with Zetwerk’s marketplace data on logistics and supplier availability, to forecast component need and proactively replace stock before it runs out.
My company operates in a long nascent market—the resale market for semiconductor manufacturing equipment. Historically, the secondhand equipment space has been fragmented—6-figure transactions have occurred largely offline, with little data, and even fewer guarantees—that is, if they occurred at all.
In the past, the resale market for this type of high-tech manufacturing equipment has been estimated to be around 5%-10% of the primary market; however, this number largely underestimates the supply and demand that could be transacted if there was a secure, efficient way of doing so. In a 2022 survey conducted by my company, 57% of respondents indicated they would be willing to sell equipment no longer in use to another fab, and 43% indicated they would likely increase the procurement budget allocated to pre-owned equipment in the future. In another poll we conducted, a whopping 81% of industry respondents agreed that reliability is a top barrier to buying secondhand semiconductor equipment (agnostic to channel).
For our niche in the supply chain, building trust is not about shifting dollars from traditional channels to a B2B digital marketplace; rather, it’s about leveraging the innate advantages of a B2B marketplace to realize immense value—potential supply and demand—to grow a global market where only fragmented transactions existed in the past.
When the stakes are high, it’s critical to develop mechanisms for gaining the trust of your customers. Here are several we’ve developed that we believe would be effective for e-commerce businesses across verticals. For example, secure transactions, comparative pricing data and even end-to-end real-time logistics tracking.
It’s also important to remember to develop mechanisms that meet the unique needs of your particular industry. For us, we came up with remote digital inspection via photographic verification, which leverages a 15-point fraud check on photograph metadata to ensure image authenticity to validate equipment being sold on our marketplace.
Some mechanisms are not technological in nature at all but are uniquely possible by being a global marketplace. For example, our rigorous protocols for compliance, our process for validating sellers, our ecosystem of aftermarket partners offering everything from refurbishment to logistics, installation, and commissioning, etc.
In our industry, there is immense value in international transactions. A fabrication center in one part of the world may no longer have use for a specific tool that a fabrication center across the globe is looking to acquire. However, smaller manufacturers are at a disadvantage when it comes to global transactions because they do not have the resources to vet and contract companies globally. For any industry with international supply chains, B2B marketplaces can level the playing field by enabling all sizes of companies to benefit from secure and reliable global commerce.
Above all, the most important mechanism you can deploy to gain trust as a global digital B2B marketplace is one of the oldest plays in the book: Put your money where your mouth is by offering a money-back guarantee. This is what we did because of our scale and our confidence in the quality of our suppliers, inventory and aftermarket experience. By shifting the risk away from buyers, you’re fundamentally improving the value of assets in your marketplace.
I believe that if B2B marketplaces can take these steps to build trust, then their opportunity to attract business buyers is limitless.
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