Marketplaces—the fastest-growing B2B digital sales channel

B2B marketplaces are red hot and getting hotter. Although marketplaces have been in existence for more than 20 years, the commercial and vertical marketplace platforms that bring together groups of buyers and sellers in a digital sales channel have played only a minor role in ecommerce—until now.

As the global COVID-19 pandemic marches into its third year and continues to produce major supply chain hiccups for many manufacturers, distributors, and others, more organizations are latching on to marketplaces to buy and sell goods and services.

Today, B2B marketplaces—driven by the dominating presence of Amazon Business and the proliferation of scores of marketplaces springing up to serve numerous vertical markets from healthcare and automotive to chemicals and agriculture—are part of the mainstream of ecommerce.

B2B marketplaces also are the fastest-growing digital sales channel. For 2021, Digital Commerce 360 projects that the collective sales on B2B marketplaces grew 130% and totaled $56.0 billion, compared with a projected $24.34 billion in 2020.

Last year, B2B marketplaces sales grew 7.3 times faster than total B2B ecommerce sales, which increased 17.8% year over year and totaled $1.63 trillion, and 8.5 times faster than total manufacturer and distributor sales. In 2021, total online and offline B2B sales increased 15.2% year over year to $13.09 trillion.

Amazon Business remains the dominant force in driving B2B marketplace sales higher and is moving quickly to become a more dominant company in B2B ecommerce, according to an April 2021 research brief from Bank of America Securities internet analyst Justin Post. He predicts that Amazon Business could generate $31 billion in gross merchandise volume this year, a figure that could accelerate to as high as $83 billion as soon as 2025. Today, Amazon Business accounts for about 1.9% of U.S. B2B ecommerce sales and could account for as much as 10% by 2025, Post says.

Last year, the gross merchandise volume on Amazon Business represented 55.4% of all B2B marketplace sales of $56.0 billion.

But even with the big shadow cast by Amazon Business, vertical marketplaces continue to proliferate—and attract serious money from Wall Street investors. Some vertical marketplaces such as Xometry—which raised more than $300 million in an initial public offering of stock in July 2021—is ready for mammoth growth by acquiring for $300 million the B2B marketplace company Thomas, which operates with more than 1.3 million registered users. Thomas’s client base includes such organizations as manufacturers General Electric Co., Johnson & Johnson, Lockheed Martin, and Eaton Corp.; distributor W.W. Grainger Inc.; the National Aeronautics and Space Administration; and the U.S. departments of defense, transportation, and homeland security. Thomasnet hosts more than 500,000 commercial and industrial sellers.

“Xometry and Thomas share a common mission of championing the digital transformation of the manufacturing industry, one of the largest sectors of the global economy and the foundation for innovation everywhere,” says Randy Altschuler, CEO of Xometry. “Thomas brings strong brand equity, trusted and extensive relationships, proprietary data and advanced full-funnel marketing services, assets that perfectly complement our digital marketplace.” Altschuler adds that Thomas will help Xometry “introduce new services, cross-sell to our combined base and expand our suite of products, particularly in fintech and digital marketing.”

Thomas’s industrial capabilities cover such areas as tube fabrication, metal stampings and rubber moldings, which complement Xometry’s capabilities in injection molding, 3D printing and die casting, for a combined total addressable market of $2.4 trillion, the two companies said in a presentation when they announced the acquisition on Dec. 8.

Other companies also are looking to be first to market with a vertical industry marketplace. A case in point is Bay Supply, an industrial distributor based in Farmingdale, New York, which has been selling a wide array of fasteners to big and small companies since 1961. The company is rolling out a new marketplace on to bring together buyers and sellers in what CEO Clifford Bernard calls a disparate industry.

“The fastener industry is fragmented and outdated—the industry needs a better way to leverage technology to streamline quote-and-order processes,” Bernard says. “Sourcing fasteners requires an incredible amount of time and research online, and the current process just doesn’t make sense for anyone in the supply chain anymore.”

To attract digital buyers and sellers, Bay Supply is offering free registration to distributors that sell fastening products, with plans to offer digital buyers more than 2,000 types of rivets, bolts, threaded inserts and related fastener products and tools.

Bay Supply will also work with other distributors to add new categories to better position their product offerings, Bay says. Digital tools available to multiple users on the marketplace include automated workflows and dashboards..

“Fastening manufacturers are building their digital catalogs for their brands on their corporate websites, but they’re only reaching a small percentage of the buyer community with limited exposure,” Bernard says. “Manufacturers need to present their brands and the unique value their products bring to an application, and they need to do this where their competition is.”

Bay Supply spent two years developing the platform, which currently has about 60 distributors signed up as sellers, says chief operating officer Michael Eichinger.

The marketplace was designed and launched in conjunction with McFadyen Digital, an ecommerce and marketplace consulting firm. The marketplace was a new extension of Bay Supply’s Magento ecommerce platform.

Fastening-product sellers complete a three-stage registration process culminating in signing up payments processing. Bay Supply will collect 9% of each completed transaction on the marketplace, the company says.

The timing is right to launch a B2B marketplace for fastener products “and we were uniquely positioned to do so,” Eichinger says.

Sign up for a complimentary subscription to Digital Commerce 360 B2B News, published 4x/week, covering technology and business trends in the growing B2B ecommerce industry. Contact Mark Brohan, vice president of B2B and Market Research Development, at [email protected] and follow him on Twitter @markbrohan.

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