Experts agree – Gartner projects that of B2B procurement spending will happen via online marketplaces by 2023. In addition, Forrester’s Jay McBain predicted earlier this year that upward of of the US$3.5 trillion that businesses and governments spend on technology may go through marketplaces. So, what does this mean for traditional wholesale distribution models and how can you plan for the future? It starts with an understanding of which marketplace model is right for your business.

What Is a B2B Marketplace?

A is a type of e-commerce platform that brings together buyers and sellers and enables them to conduct business in one place. Within a , a wholesale distributor invites preferred vendors to offer their products and services for sale directly online as part of their expanded inventory. “A marketplace business model allows distributors to expand their product portfolio with minimal risk and create a great buyer experience, improve customer loyalty, and gain a larger share of their wallet,� says , senior director, Product Marketing, Global B2B, Mirakl.

New and Old Market Entrants

Traditional B2C marketplaces like Amazon Business, Alibaba, and eBay are the new disruptors increasing the competitive landscape for the wholesale distribution industry. These born-in-the-cloud marketplaces bring superior digital capabilities and can scale exponentially. “They [Amazon Business, Alibaba, and eBay] are the clear and present danger to wholesale distributors’ business since they can easily differentiate themselves from the traditional ‘buy and hold’ status quo,â€� says , vice president and global head of the Wholesale Distribution Business Unit at Â鶹ԭ´´.

Marketplaces as a Growth Vehicle

Distributors need to avoid the mindset that e-commerce is simply enabling online ordering and instead turn this industry disruption into a springboard for growth. Today’s B2B buyers continue to demand consumer-like experiences that minimize purchasing complexities. They want search results that show products that meet their specific needs the moment they need them. In addition, B2B buyers want the ability to efficiently search and navigate a catalog with transparent pricing to support purchasing decisions.

The marketplace model can be a key driver of growth for a distributor’s business. In addition to providing a new option for B2B customers that prefer to buy online, marketplace platforms can serve as a new revenue stream. Distributors can sell products and services that differ from what’s available in a typical single-threaded commerce channel while driving revenue with new customers and marketing to new target audiences. But the real value is that a marketplace provides distributors the ability to differentiate from the competition. Per Gartner, by 2023, organizations that have operated enterprise marketplaces for more than one year will see a increase in net digital revenue.

However, creating a marketplace requires a level of expertise in e-commerce digital marketing, as well as the ability to manage a strong, reliable ecosystem of sellers, technology partners, and buyers. If you don’t have the in-house expertise, marketplace platforms can help. “ offers a state-of-the-art, plug-and-play marketplace platform for any distributor looking to create their own,â€� says Krupa Singampalli, Â鶹ԭ´´ product strategy leader.

Examples of Successful Marketplace Business Models

, a billion-dollar distributor of original equipment manufacturer (OEM) parts for commercial kitchens, knows that minutes of downtime in the kitchen because of broken or missing parts in cooking equipment can take a significant toll on restaurant businesses. As such, Parts Town is constantly seeking out new and innovative ways to expedite the delivery of parts and service to commercial kitchens.  “We’re a distribution company, but we’re really more of a digital technology company that has distribution,� says Parts Town’s Senior Vice President of Growth and Innovation, . Technologies like and have enabled the distributor to provide more than 100 customized microsites for many of its large customers and fuel the evolution required to meet a revenue target of $3 billion in the next few years.

Another example of a marketplace business model is , the number-one selling brand of forklifts in North America. Before adopting a marketplace model, there was no way to purchase Toyota Material Handling OEM parts online. Recognizing that business buyers’ habits were changing and more were buying online, TMH implemented to help develop an online marketplace that would allow the company to meet the growing demand for service parts online. Now, with the MyToyota Store, Toyota Material Handling is offering the only online source for real Toyota Genuine Forklift parts, offering customers quick access to more than 600,000 parts. “Using an online store, the company has seen parts sales increase by year-over-year,� says Nicolas Posada, senior customer success consultant, Mirakl.

Want to find out how to create or join a B2B marketplace? Meier, Troccoli, Posada, and Singampalli have a lot of advice for distributors. to learn the key challenges facing distributors today along with practical guidance to help you create your own marketplace.

John McDonnell is industry value advisor for Wholesale Distribution.

Â鶹ԭ´´ is sponsoring a research project regarding the state of e-commerce and marketplaces to understand how these market trends are evolving for the distribution industry online.

This research will provide Â鶹ԭ´´ and partner Mirakl the opportunity to gain further insights into wholesale distribution trends and expose opportunities for improvement from an industry perspective.

Market Trends Impacting Commerce for Distributors

To understand the current state of commerce, we must analyze the market conditions that are having a ripple effect in the industry and creating challenges for wholesale distributors.

First, competition is driving distributors to find new revenue sources, such as value-added services. Some examples provided to customers include light manufacturing, kitting, product training, and product management.

Customers are looking to distributors to collaborate and provide complete solutions for specific business needs, such as providing materials for every phase of a stadium renovation.  Meanwhile, customers are also looking for distributors to carry a wider range of products with more flexible delivery options.

To add value to the business and meet growing customer expectations, new talent is looking for roles where they can make a positive impact and leverage new technologies.

Lastly, the requirement for business resilience in the face of health, environmental, and trade challenges has moved from addressing tactical issues of continuity towards strategic decisions driving overall longevity.

Why Participate in the State of E-Commerce Research?

The research initiative provides wholesale distributors the ability to share insights related to their company’s e-commerce and marketplace ambitions in a confidential way.

Within the survey, MDM asks distributors to report on each organization’s current commerce landscape, including key capabilities or customer needs that they are looking to support in the coming years.

Example questions include:

• What is your greatest concern or reservation about the value, effectiveness, or risks of e-commerce within your organization?
• What initiatives are you undertaking to broaden and deepen your catalog?
• Have you considered launching or operating an online marketplace, where third-party sellers provide the stock and fulfill orders?

Any wholesale distributor employee who is located within the United States or Canada can participate in this survey. As a thank you for your participation, you will be entered to win a $250 gift card. This brief survey should take no longer than 10 minutes to complete.

To impact the future of wholesale distribution commerce, please take the today!

John McDonnell is industry advisor for Wholesale Distribution at Â鶹ԭ´´.

To discuss the topic of technology adoption in wholesale distribution, I sat down with Scott Knote, chief information technology officer at Powell Electronics, to discuss the journey to become an intelligent enterprise.

During the session, Knote shared, “Â鶹ԭ´´ S/4HANA helped us stop driving in reverse; we can now look forward, plan, and execute on the plan.â€�

New Market Disruptions Drive New Business Models for Distributors

Even before COVID-19 took hold, the wholesale distribution industry has continuously been a vital part of the economy.  The last year has further elevated the stature of wholesale distributors, as they played a vital role in the distribution of essential goods throughout the pandemic.

Considering its place in the supply chain, wholesale distributors have always been faced with a high amount of competitors.  This has prompted forward-thinking distributors to rethink the way they deliver value to their customers through value-added services and logistics and information service products.  These offerings allow companies to avoid disintermediation by offering something that manufacturers or traditional competitors cannot, aiding customer loyalty.

Another way distributors can add value is through offering tighter collaboration with customers through project-based services.  As the business world becomes more complex, customers are looking to consolidate their supplier base with a smaller set of strategic partners that they can trust to meet their various needs.

These trends and market disruptions are accelerating the industry transformation and thereby forcing distributors to rethink the business systems, platforms, and applications that can help them stay agile and change with the times.

Further accelerating these industry trends, COVID-19 has had a on each of the sub-segments:

• Food & Beverage: This subsegment was the most impacted, as restaurants and other food service companies have been limited seating capacity amid social distancing measures
• Industrial: As many industrial investment projects were delayed and manufacturers decreased production due to softening demand, this subsegment experienced a downturn.
• High Tech: This subsegment was well positioned to ride out the pandemic, as the influx of employees working from home and the need for infrastructure to support this shift increased
• Healthcare: The global supply chain of pharmaceuticals was greatly impacted by manufacturing hubs such as China and India, but this subsegment proved crucial to distribute personal protective equipment (PPE) and coronavirus treatment-related medication

To take a proactive approach to addressing industry trends, leading distributors like Powell Electronics are expanding beyond traditional industry boundaries to become proactive, insight-driven companies.

How Powell Electronics Transformed with a Cloud-First Approach

Since 1946, Powell Electronics Inc. has followed an unbroken record of growth to become one of the world’s largest authorized distributors of electronic components and value-added services. Contributing to that growth is the company’s ability to anticipate its customers’ technology, service, and product needs.

Most recently, Powell sought to provide a better e-commerce experience for customers and suppliers. Due to a massive amount of system customizations, Powell knew its existing enterprise resource planning (ERP) system was not up to the task.

Knote shared that Powell Electronics “realized that the paradigm is shifting; that both the customer and buyer sides of our business are becoming increasingly complex.  We wanted to minimize the training requirements while increasing the speed to market for onboarding new manufacturers and technologies.  We wanted to position ourselves to pivot should something an external market demand cause changes to our overall business.�

So, the company sought a digital transformation that could support its assemble-to-order operations, which use configurable product permutations for more than 250,000 unique end items within a catalog of 8 million SKUs.  Powell hoped happier customers and a better technology infrastructure would prepare the company for worldwide expansion.

“Â鶹ԭ´´ S/4HANA helped Powell tune key business success levers and increase its speed of relevance for an increasingly complex market,â€� Knote said.

Watch the on-demand webinar to learn more about to becoming an intelligent enterprise.

John McDonnell is industry advisor for Wholesale Distribution at Â鶹ԭ´´