B2B Marketplaces
A $20+ Trillion Global Opportunity with a CAGR of 18.7% from 2021 to 2028
I remember visiting Barcelona many years ago and seeing this incredible city center marketplace called “Mercado de La Boqueria” it was stunning in its’ breadth and depth. Of course the fresh fruit and vegetables and the local Jamon (Spanish Ham) all made it worthwhile.
As romantic as this image is, today I want to talk about B2B marketplaces with a decidedly less romantic feel but that is replaced with an unmatched efficiency. So first what is a B2B marketplace and why do they matter. They enhance or replace depending upon your viewpoint the current US booming multi Trillion Dollar opportunity in distribution of wholesale goods.
Amazon joined the B2B Marketplace fray by launching Amazon Business in 2015, yes think AWS but for distribution. In March of 2021 Amazon announced that Amazon Business had done $25 Billion in GMV (Gross Merchandise Value). Half of those sales came from 3rd party sellers. These Amazon points are from B2B Marketplaces by Applico, Q2–2021.
You may not know the company Grainger, but they are famous for their wholesale catalogs and have been a staple in B2B distribution since 1927. Grainger’s revenue is half of Amazon Business’s and their catalog lists details on over 1M products and is updated annually. Few procurement leaders in manufacturing companies would not know Grainger and their catalogs.
Everyone knows of Alibaba in China that ecommerce powerhouse worth billions, but few know that Alibaba was started by Jack Ma and 17 friends as a B2B Marketplace that grew quickly. It was designed to allow small to medium Chinese manufacturers to sell their wares around the globe.
A key point about B2B Marketplaces is they tend to be vertically focused. According to the excellent report by Applico. Only two verticals have a GMV over $10B
Agriculture and Fashion are the largest Vertical B2B Marketplace segments
The industries with more than $1B GMV are Auto Parts, Cannabis, Contract Manufacturing, Food Products, General Retail, Healthcare and Liquor.
As we all know where there is money moving, the VCs are not far behind, even in something as low key as B2B Marketplaces. The largest investments shown in the Applico report are no surprise:
- Farmer’s Business Network with $629M in venture investing
- Faire, a Fashion B2B Marketplace with $435M in investment.
This of course supports the fact that the largest segments are Agriculture and Fashion.
Another organization that really looks at the B2B Marketplace market is Bessemer Venture Partners as they have a whole section on their website about the space. https://www.bvp.com/atlas/b2b-marketplaces/
These B2B Marketplaces also are centers of payments. Who processes these payments and will become the Stripe of B2B Marketplaces? Beyond payments is all sorts of infrastructure opportunities.
Bessemer shows the following “stack” and notice how Stripe ends up in the Marketplace Infrastructure as does Bluevine (working capital) along with Modern Treasury and Fundbox. So our traditional Fintech folks end up in this space supporting Marketplace transactions.
I like the Bessemer breakout of B2B Marketplaces between
Homogenous Goods “Wholesale marketplaces facilitate B2B transactions where SKUs are relatively standard, commoditized and easily comparable across vendors, typically connecting some combination of retailers, distributors, and manufacturers.” Bessemer Venture Partners
Heterogenous “In high-friction B2B markets, SKUs are less standard and comparable across vendors; examples include used cars, investment banking, bulk commodities, freight, and logistics. In these markets, buyers must specify the goods or services they need, and suppliers respond with quotes.
Personally I would label them Commodity vs Custom as that seems more obvious. But the key point is that there are two distinct types of marketplaces for B2B ecommerce.
Finally I want to talk about one of my favorite vendors in the space because they have been at it a long time and are quite good.
Tradeshift from their own website:
“We (Tradeshift) digitize trade. A global network of 1.5 million buyers and sellers use our trade technology platform to access supply chain payments, B2B marketplaces, and apps.”
Tradeshift allows buyers to put all of this in one place with minimal paperwork and a prebuilt workflow to follow. To the point of what Tradeshift delivers, the Bessemer Venture Partners reports shows two things that are necessary for High Friction aka Customized or Bespoke B2B Marketplaces:
“Robust workflow tools for buyers and sellers to manage multi-step, multi-stakeholder transactions”
“Highly managed and vetted supply along with reputation systems to instill trust.”
Remember Bessemer Venture Partners considers B2B Marketplaces to be a key investment target for their venture fund. Basically, they did the research to ensure sound investments in the space.
