Redefining B2B commerce: Opportunities and risks in the digital marketplace era

The COVID-19 pandemic significantly altered the purchasing behaviours of B2B customers, propelling the digitization of B2B commerce and payments within digital marketplaces at an unprecedented pace. This article explores the key opportunities and risks for B2B digital Marketplaces brought about by accelerating digitization.

B2B Marketplaces on the Rise

For years, B2C customers have enjoyed the convenience of purchasing virtually anything online through digital marketplaces such as Amazon, eBay, and Alibaba. In contrast, B2B customers have faced limited digital accessibility despite the B2B market significantly overshadowing the B2C market in size. 

This is particularly evident in sectors like wholesale and logistics, where many B2B companies operate predominantly offline, relying on outdated methods such as email, fax, and paper invoices for processing orders and payments. However, the tide is changing as B2B customer expectations continue to change, and the need to meet these expectations intensifies. 

The growth of B2B digital marketplaces has been notable worldwide for years, yet their expansion has accelerated dramatically since the onset of the COVID-19 pandemic. As lockdowns and social distancing became the norm, B2B customers increasingly turned to e-commerce to sustain their operations. While these marketplaces are still evolving, their potential to transform business transactions is clear and compelling. 

As such, we are on the cusp of a significant shift in B2B payments, marked by the increasing digitization of financial processes, with marketplaces taking on a central role. This shift brings several opportunities and risks.

Opportunities for B2B digital marketplaces

In principle, a B2B marketplace is nothing more than an online platform that brings B2B sellers and buyers together, enabling them to conduct transactions.

Rather than a seller running their own online store, marketplaces feature numerous sellers promoting both the products they sell as well as where they sell them. From the point of view of the marketplace operator, it’s important to offer merchants and customers outstanding usability so the platform can comprehensively scale over time. In the best case scenario, this momentum generates enough free, organic traffic to make it sustainable in the long run.

Sellers on B2B Marketplaces benefit from:

• Greater reach
• Expanded target groups, given that marketplaces represent a new point of contact for customers and markets
• Increased sales as a result of higher traffic and conversion rates

Buyers on B2B Marketplaces benefit from a:

• Large assortment of products that offers a clear overview of the market
• High level of price transparency
• Simple, reliable, professionally-operated platform

For businesses struggling with supply shortages, B2B marketplaces can also help solve supply chain issues and maintain continuity. By giving business customers access to a wide range of suppliers, they reduce their dependence on a smaller group of suppliers.

However, these benefits also come with some risks that B2B marketplace operators should be aware of.

Challenges and Risks

The complexity of B2B transactions is a major challenge for operators of B2B marketplaces, especially since the experience can’t be directly copied from B2C. It requires an understanding of all phases of the transaction flow and the processes behind them. Implementing the complex transaction process on a platform and perfecting the user interface requires sophisticated technology.

It’s therefore essential that certain risk factors are adequately addressed:

• Vendor risk. Incomplete, incorrect product information – as well as orders that are not delivered correctly or on time – can harm the B2B marketplace. To minimise these risks, there needs to be clear guidelines and standards for all vendors. If customers have difficulties with a vendor, they need to receive proper support.

• Data risk. Online marketplaces store the personal data of thousands of customers which provide information about spending habits. While this information helps the marketplace sell more efficiently, the General Data Protection Regulation (GDPR) dictates that it can only be used with the express consent of the customer and must be stored securely. If this information is leaked as a result of a data breach, it can irreparably tarnish the marketplace’s reputation.

• Compliance risk. Anyone running a B2B marketplace – especially on a global scale – needs to be aware of any evolving local tax and banking regulations and how they may impact sales. Minimising compliance risk requires the right tax expertise and software.

• Default risk. The high average order values of B2B transactions represent a greater risk for marketplaces and require a reliable platform to control and manage the risk of default. The prerequisite for this is a technical infrastructure that can handle complex tasks including offering flexible payment terms, factoring, credit checks, and fraud prevention as part of the checkout process.

Two Demands that B2B Marketplaces Must Fulfil

The success of B2B marketplaces depends largely on whether operators can succeed in fulfilling two key demands of vendors and buyers on their platform:

1. Make the complexity of transactions invisible, therefore guaranteeing a simple shopping experience for the business customer and producing higher conversion rates for the vendor. In the B2B space in particular, numerous elaborate operational processes run in the background of transactions and can burden a company’s resources. When done right, seamless payment processing can significantly boost the appeal of a B2B marketplace.

2. Implement the preferred payment methods of buyers. 95% of companies want invoice payment as an option when shopping online, but only 84% of B2B online shops offer at least one deferred payment option, according to ibi research. Just 45% offer deferred payment to all types of customers, both new and existing. This gap presents a huge opportunity for B2B marketplaces to innovate and be successful.

With this in mind, B2B marketplace operators can help make payments more convenient by offering Buy Now, Pay Later as an option. This requires a payment solution that’s specifically designed to meet the unique needs of B2B e-commerce, easily integrate, and run automatically in the background of the online checkout.

Buy Now, Pay Later from Mondu

This is where Mondu comes in. With Mondu’s Buy Now, Pay Later solution, B2B marketplaces can easily offer their customers invoice payment, the most popular payment method in the sector.

Mondu seamlessly integrates the credit check process – which is key for risk management – into the online checkout. This happens in a matter of seconds with just the customer’s name and address. Mondu pays the vendor in advance and collects the payment directly from the business customer; collection and dunning are also handled on behalf of the vendor. As a result, Mondu completely covers the default risk.

The solution is flexible and customisable, allowing marketplaces to offer customers the payment methods and terms that best suit them.

This enables B2B marketplaces to benefit from higher basket sizes and conversion rates. In the long run, Buy Now, Pay Later improves customer satisfaction and loyalty, while lowering acquisition costs.

Marketplace Operators: On your mark, get set, go!

If you want to start building a B2B marketplace, now is the time to do it. As more B2B marketplaces emerge in different niches, attracting high-quality vendors and setting your marketplace apart will become increasingly difficult. If you succeed in launching a state-of-the-art B2B marketplace before your competitors and avoid the stumbling blocks mentioned above, you’ll be well-positioned for the future.

Have questions about this topic or want to know how Mondu can support your marketplace? We’re here for you – you can contact us here.