The Great B2B (Train) Robbery

By Søren Handlos. Margin stealing in broad daylight within B2B is on the rise and must be taken seriously.

In this McKinsey report from 2019, marketplaces, in particular Amazon, were seen as a disruptor in B2B commerce. Two years later, it appears that this disruption may be forcing some companies to reconsider, as they realize the impact of marketplaces on their business model. This recent report from DigitalCommerce360 shows one company who figured out the negative impact of a marketplace on their digital business strategy.

It is becoming increasingly clear that global marketplaces are an opportunity – with quite a few drawbacks. Margin squeezing, counterfeit products and copyright infringements. 

Within B2C we are seeing the effects of all of the above – damaging several industries like fashion and apparel, pharmaceuticals, consumer electronics, furniture and more. Let’s not copy that trend in a B2B context. 

Moreover, we are seeing a growing number of other third party intermediate platforms where ordering and transactions are handled outside of your commerce solution. These might not imply the same number of obvious risks as we see with marketplaces, but they are operating from the notion that ordering and transaction processes are black-boxed and managed by a middleman outside your digital commerce channel as a supplier (manufacturer or wholesaler). Not to mention, multiple points of truths with regards to your product catalog and customer data, has quite a few drawbacks with regards to order errors created by price changes, stock availability, or changes in product information. 

Agreeably marketplaces and distributed transaction players are undoubtedly an opportunity as a sales channel for several B2B manufacturers and wholesalers as a short term solution. Marketplaces have critical mass – millions of potential purchasers – but at what cost are they available and are you willing to pay that price in the long run? 

Marketplaces are all driven by the same basic principles; Utilizing their massive ‘potential customer’ muscle, their aim is to get hold of manufacturers and wholesaler’s digital product catalogues and – slowly but surely – start leveraging on that by squeezing their margins by discount wrestling or by increasing overall transaction costs. 

A manufacturer within the furniture industry was simply unaware that an increasing part of their assortment was being sold on a global marketplace. They are now facing a rather unpleasant discussion with the marketplace in question, with the demand for discounting their wholesale prices in order to continue selling their products in the specific marketplace.      

There is a need for manufacturers and wholesalers to be aware of – and to take care of – their strategically most important assets – their product catalog and their purchaser relationships. 

Your product catalog is way too strategically important to let loose in different third-party contexts. It all comes down to being in control of your product catalogue, your purchaser relations and in the end securing your bargaining power in the long term. 

Agreed it can be very tempting to focus on short term and generating fast revenues by speeding up on “the marketplace- and distributed commerce highway”. Just be aware – there is a price to pay a bit further ahead. 

It might be stating the obvious – but apart from controlling your product catalogue you need to focus on strengthening your customer relations digitally. Digital vertical integration with your customers in a communication, personalization and transactional context is a highly important barrier to build for you to protect your margins in the long run.

As B2B buyers switch more of how they purchase from paper, fax and phone to ecommerce, the distributors that make the quickest transition to selling online stand to gain more sales and generate more market share, McKinsey says.

Furthermore, utilizing your investments in your content management and commerce stack is key in our present B2B business environment. Using all integrations and built-in logic within your digital solutions should be your starting point. 

Fortunately, we are slowly but surely seeing more and more industries and businesses within B2B who are acting. This by investing in their e-commerce solutions. By adapting their own marketplace mindset. By bridging the gap between transactional commerce and purchase experiences. By vertically digitally integrating with their purchasers ordering processes. And with the amount of good commerce vendors and platforms being greater than ever, it is more a question of choosing the right CMS/Commerce tech stack to fit your business objectives, than a question of if there is a CMS/Commerce tech stack that fits your business objectives.     

Industrial distributors need to think long and hard about embracing—or accelerating—ecommerce because the traditional ways B2B buyers are purchasing products is changing, McKinsey says. 

So, take charge – add features natively in your digital stack and make it the hub for your relations and transactions. Protect your digital assets, your digital customer relations and preserve your margins.

The healthy blood stream of our societies – locally and globally – is largely built on our thousands of small, medium and large sized B2B companies within both manufacturing and distribution – with a substantial part of them operating on a globalized market – and we need to be careful not to jeopardize that. 

Digitally empowering our B2B companies and securing their most valuable relations and assets should be at the top of the to-do list for all of us working with and in B2B companies. We are more than likely moving into troubled waters if we leave our B2B companies and industries stranded on the train station with an empty valuables wagon.