Third & GroveThird & Grove
Jan 4, 2021 - Justin Emond

The Coming Onslaught of B2B Ecommerce Marketplace Competition

packing boxes

If you are responsible for a B2B commerce channel and you aren’t worried about what is happening in the B2B ecommerce space, you need to start paying close attention. This year represents a perfect storm of demographics, infectious disease, and long-term digital trends crossing the Rubicon. Add to that venture capital deployments that will result in old B2B players getting displaced, a half dozen or so unicorns emerging around 2025, and a few savvy B2B brand managers getting promoted and written up in Forbes. 

In this article, we are going to talk about what the essence of B2B ecommerce actually is, the major simultaneous trends that are driving this massive disruption, where the competitive threats are, and finally what you can do to position your brand to thrive in this new reality. Read on!

Understanding the essential nature of B2B ecommerce

Before we can dive into the four trends that are causing this transformation in B2B commerce, we need to first look at the essential nature of B2B. Why? A complete understanding is necessary to understand why these trends together equal far more than the sum of their parts.  

At this point, saying that digital is a crucial part of your B2B strategy is about as cutting edge as arguing that every business needs an electrification plan. Well, yeah. Duh. But still, it’s worth emphasizing that as the pie gets bigger the stakes get higher. And this won’t be a linear relationship. The rewards will be outsized because being the dominant player in 10 years when the growth of revenue shifting digital slows will create fewer opportunities for competitors to break in. Markets ossify. Think of building the first railroad between New York City and Chicago. That train had to make a few stops along the way, and unless you bought land at the start, it was very expensive to break in. This is exactly why venture capitalists love land grab businesses and are happy to buy market share and charge rents later.

And this is one hell of a land grab opportunity: A Forrester report1 projects that the ecommerce share of B2B sales in the U.S. will grow to a staggering $1.8 trillion, or 17 percent of all sales. And a McKinsey & Company report2 that scored the digital execution of various B2B companies showed that digital leaders experienced 5x revenue growth, 8x operating income, and 2x shareholder returns when compared to digital laggards. This pie is going to grow fast and hot for some time.

B2B is also notoriously complex. Unlike consumer sales, you have a variety of challenges you have to address:

  • Offline sales team with relationships and commissions they are keen to protect
  • Smaller customer pool
  • Higher acquisition costs
  • Longer sales cycle
  • Higher sales value
  • Personalized payment terms
  • Personalized pricing
  • Personalized fulfillment terms
  • Weird hours (B2B purchases often involve complex orders that need sales rep support to complete. Imagine a chef-owner who does their ordering for tomorrow's meal service during a break in the first wave of the dinner rush at 6 PM)
  • Price lists often have several different variants within accounts

But what most organizations miss about B2B ecommerce, lost in the complexity of fulfilling orders and over-indexing on how different B2B is from consumer channels, is that at the end of the funnel, at the end of the buying decision, you will always find the same thing: a human being. Selling to businesses is still selling to human beings. They might be at work or working at home, but they are still a person with all the cognitive miswirings that make consumers sometimes behave irrationally. But they are consumers nonetheless.

B2B buying decisions are human buying decisions. B2B commerce leaders should not forget this.

The four trends of change

Most people don’t know that Warren Buffet, the famous investor who runs Berkshire Hathaway, has a business partner. His name is Charlie Munger, and he’s probably the wisest person in America because he is unquestionably the best-read person in America. Years ago, Charlie coined the term “Lollapalooza Effect” to describe a situation when several small scale factors involving cognitive biases occur at the same time and have an outsized impact that far exceeds the sum of their parts. This effect explains why auctions are so good at driving prices up:

“Participants are pushed to bid by reciprocity ("I should buy because I was invited to the auction"), consistency ("I have been on record saying that I like this so I must buy it"), commitment tendency ("I am already bidding so I must continue"), and social proof ("I know that buying is good because my peers are doing it").”3

More broadly, you can apply this idea to help understand why extraordinary events occur: They are rarely caused by one factor, but by several factors that happen to occur at the same time, leading to an outsized impact. 

For example: The death toll of the 1918 Spanish Flu was so high not because that strain of influenza was deadly, but because a deadly influenza appeared 1) in an age where most people didn't travel (base immunity wasn't as strong) 2) during the largest mobilization of people ever (World War 1) 3) where the US military didn't believe in quarantining incoming sick soldiers heading into training camps 4) when the half of America's doctors that believed in this newfangled "germ theory" were all in France supporting the war effort, leaving no effective doctors at home. In this case, 1+1+1+1 doesn't equal 4, but 10, a once-in-a-century pandemic.

The bottom line is that major events — major shifts — have complex explanations. They aren’t unknowable, but they also can’t be distilled down to just a single, simple cause. 

As we turn to the major shift underway in B2B commerce, it is important to note that one of these trends in isolation is not enough to drive the dramatic seachange that is happening in B2B. These four trends happening simultaneously are driving this revolution. Indeed, this is exactly when the sum of the parts is greater than the whole.

From least important to most important, these trends are:

  • The COVID-19 pandemic
  • The rise of the dark funnel
  • Demographic change
  • Circuit City (Yes, you read that right; read on!)

Let’s look at each one in detail.

The COVID-19 global pandemic

This is the most obvious trend barreling into the plans of every business leader in the U.S. like a runaway freight train. As had been said already by many others, this once-in-a-century pandemic is not so much creating new trends as accelerating existing shifts already underway. The trend that matters is the same trend disrupting consumer commerce: the shift from offline sales to online.

The data supports that B2B customers are abandoning offline sales in droves: A recent McKinsey survey4 of B2B organizations reported that the percentage of customers that relied on a B2B rep dropped by a staggering 61 percent (from 55 percent to 21 percent) and that 80 percent of B2B companies expected to maintain the new selling models they rolled out during the pandemic. 

The pandemic is pushing up the date when a majority of B2B sales will be online.

When it comes to customer expectations, creation really is easier than destruction.

Now that we have covered the obvious trend, let’s turn to the first of the three less obvious, but more impactful, trends at play: the dark funnel.

The Dark Funnel Rises

The dark funnel refers to the part of the buying process that your prospect goes through before they ever reach out to your organization. Traditionally, this has been the part of the buying process where your prospect does research about the available companies and talks to colleagues with relevant experience.

The amount of information that buyers can use to evaluate business products and services created in just the last decade is orders of magnitude greater than the cumulative sum of all of the information available to buyers in the history of modern American business. This is a staggering achievement when you consider that this is a period that spans more than 150 years of the largest and most dynamic economy in the history of the world.

Like it or not, the Rubicon has been crossed: A recent Accenture report5 estimates that more than half (57 percent) of the buying process is completed before a prospect ever reaches out to the brand. B2B brands have lost control of the conversation; you must participate as effortlessly as possible where buyers choose to evaluate you, and you must focus creative energy on that conversation.

If you want to read more about the dark funnel for B2B, check out “No Forms. No Spam. No cold calls.” by Latané Conant. It’s a terrific, illuminating read.

Now let us turn to the third trend at play: demographics.

Sometimes demographics really are destiny

Millennials can be forgiven for their scorn: They have gone from being the popular source of blame over the last decade to recently being cast aside for the younger, prettier demographic: Gen Z. But that only happens because the consumer market is so large. When it comes to B2B, Gen Z won’t matter for a decade, and all eyes should be fixed on the rise of millennials.

First, what you should already know6: When it comes to B2B purchase decisions, those born between 1981 and 1995 provide input 73 percent of the time and make the decision 34 percent of the time. 

But here’s the thing that matters: The old millennial turns 40 on January 1, 2021. Yep, you read that right: The digital whiz kids are getting downright old. Why does this matter? Because people in their late 30s and early 40s are partners, managing directors, senior vice presidents — leaders of all kinds in all kinds of organizations individually managing millions of dollars of spend.

This means that starting next year, and every year for the next five years at least, a massive chunk of digital natives — people that grew up with technology and turn to their phones for car rides, groceries, and love as a reflex — will be gravitate towards any B2B buying process that reminds them of their consumer life.

And finally, our fourth major trend: Circuit City

We have now arrived at the most critical trend to understand; the trend to which the other three contribute and make possible; the trend that is an existential threat to B2B brands everywhere. But to really understand this trend, we have to first look at fabled retail brand Circuit City.

Since going bankrupt in 2008, Circuit City has been the punchline of jokes and case studies about brands failing to adapt to changing retail environments. But among all of this disdain, it is easy to forget that Circuit City is one of the great retail success stories of the 20th century. Founded in 1949, this retailer grew to hundreds of stores and tens of thousands of employees, peaking in the 1990s. To understand how remarkable this triumph was, you need to consider that this occurred during the same decade when Wal-Mart was considered an unstoppable and unbeatable force. Wal-Mart was the Amazon of the 90s, the stuff of competitive legend, the retailer that was simply too big to beat and too big to fail. No business editor rejected an article about what made Wal-Mart mighty.

How did Circuit City do it? It’s simple. They brilliantly executed the strategy that Sam Walton, the founder and iconic CEO of Wal-Mart, described in an interview in response to the question of how could any retailer possibly compete with the mighty beast of Bentonville: specialize. Wal-Mart sells everything to everyone. As Sam knew all too well, they couldn’t (and can’t) possibly be better at selling any one product category against a store that just sells that single category. Retailers like Staples, Barnes and Noble, Best Buy, and yes, Circuit City, are where the term category killer came from.

Let’s fast forward to the last decade of B2B digital commerce players. In this era, a variety of players grew into market leaders. These players tend to fall into two categories: companies that sell everything to every business (think toilet paper to screws to steel to cars), and companies that digitized business spend that was largely paper-based (think the marketing team onboarding a copywriting contractor for a six-month project). The former are brands like Alibaba and Amazon Business and the latter are leaders like Coupa and Ariba. Amazon Business isn’t built on trust; it’s built on ease and expansiveness of SKUs. Coupa and Ariba don’t create communities or create new value; they just focus on making manual processes more automated.

But now, entrepreneurs are founding businesses to use very different strategies to further digitize B2B commerce transactions, and venture capital investment is enthusiastically supporting these efforts. This emerging class of B2B marketplaces generally fall into two categories: those that sell commoditized goods and those that create networks for complex transactions. Provi is a terrific example of the former: It is a beverage marketplace for bar owners and operators to buy alcohol. Convoy is an example of the latter approach: It is replacing the traditionally paper-based, manual process of hiring a trucking company to ship your goods into a digital experience.

Provi, Convoy, and most of the players in the emerging B2B marketplace are differentiated largely in two ways: They are vertical-specific, and they focus on building trust into the platform. Reviews, community, social proof, and other elements work together to create a community of commerce.

Just like Wal-Mart and Circuit City before them, players like Provi will win against Amazon Business because they can provide a better experience in a niche market than bigger companies can provide to everyone. In five years, we will see half a dozen unicorns from these players. Can you even remember the last time you had a great meal at a restaurant that focused on two (or, gasp, more) cuisines?

A confluence of events

In the immortal words of Penny Lane in Almost Famous: It's all happening.

  • The pandemic is accelerating the shift of B2B sales from offline to online, leaving B2B organizations with less time to establish themselves digitally.
  • The dark funnel is causing more and more B2B purchase evaluations to happen before the brand is ever involved, making it impossible for brands to hide poor digital experiences. Could anyone argue that Ariba, notorious for its abusive user interface design, could be a successful business if launched today, in a world where buyers would be scared away by bad reviews of the software well before reaching out to the brand?
  • Millennials are coming of age and will naturally gravitate towards B2B buying experiences that are the most similar to their consumer buying habits.
  • Emerging, well-funded brands like Provi, which understand that trust and specialization are differentiators, present existential threats to B2B businesses that do not grasp the value these businesses offer to their consumers.

Think that no one will buy your $3 million product on a phone without ever talking to a rep? Well, do you remember when the idea of paying random strangers to drive you around in their own cars was just too wild to ever take off? Yeah, me too.

The threat landscape is clear. So how do B2B organizations not just stand their ground against this onslaught, but turn the tables and thrive in this market?

How to succeed in the emerging B2B ecommerce world

An effective strategy for B2B brands to thrive in a competitive landscape rich with next-generation B2B marketplaces has five pillars:

  • Industrialize insights
  • Trust, then product
  • Personalize to engage
  • Reward customers
  • Be everywhere*

Pillar 1: Industrialize insights

First, you must industrialize the creation and curation of insights. Website analytics is a great way to waste a ton of time. You can think of raw analytics data like a swamp: rich and full of life, but unordered, unpleasant, and not all that inspiring. But insights, those are where strategies are born. Smart decisions are based on insights.

And insights are the input, the fuel, for all of the subsequent four pillars. You must have smart insights to inform the way you execute trust, measure the effectiveness of personalization strategies, manage rewards, and evaluate your other channels.

Pillar 2: Trust first, product second

Every B2B transaction is high-risk and time-sensitive. Why? Because B2B transactions often involve extended decision-making timelines, high order value, high expectations for quality, and critical integrations into business operational flows (i.e., you can’t build a car without your spark plug order arriving on time).

Broadly, trust is achieved through a combination effect, so focus on three areas: 

  • Social proof (Primarily with reviews and product imagery)
  • Confidence (Customer-negotiated pricing and accurate inventory)
  • Brand experience (Mostly with page load speed and frictionless, delightful UX)

Essentially, a trust-first strategy empathizes and empowers. Let’s look at specific tactics you can use.

Empathize with the customer:

  1. Demonstrate that you understand how important every transaction is to them. Don’t take them for granted.
  2. Ask often “What do you need, and how can we help?”
  3. Focus less on your brand story and more on the customers. 
  4. Put customer stories front and center.
  5. Use assistants and wizards to guide decision making.
  6. Offer the ability to get an answer to a question in real-time, with chat and FAQs
  7. For those who know what they want already, double down on making the quick-add a pleasure to use.

Empower with knowledge:

  1. Offer rich, detailed descriptions on product pages, above the fold.
  2. Provide social proof: not just reviews, but user-generated content. Consider looking into syndication from the source, pull quotes from customers in other channels, and run post-purchase, incentivized email campaigns for gathering ratings and reviews.
  3. Offer no-cost samples to qualified customers.
  4. Provide real-time chat and engagement. “Ask us anything.”
  5. Ensure product and pricing data is accurate and timely. Inventory is real. Buyers need to trust that the data is accurate. 
  6. Ensure accurate pricing: Clearly distinguish negotiated prices from stock prices. Show buyers when there is wiggle room, when to talk to reps, and when the best price is the best price.

Pillar 3: Personalization 

Ah, personalization: the often discussed and rarely executed digital strategy. Successful consumer brands like Stitch Fix have been built solely on this pillar. When combined with the other strategies we are outlining here, personalization is gasoline on the fire of an engaging B2B commerce experience. What today is a luxury of time to execute will become table steaks in five years. B2B buyers expect frictionless buying, and personalized experiences offer that.

But buyer beware: You must nail the experience first — without getting the fundamentals in place, personalization is about as useful as giving a concert in a stadium with no entry doors.

What are the best areas to focus your personalization energy on? Take a data-first approach and look for areas that already work well and make them better. Look at anticipatory functionality that guides and responds to visitors needs in real-time, like dynamic navigation, promotions, and targeted search results.

Pillar 4: Loyalty Rewards

Forget loyalty: It's not about being loyal to your brand. It is about saying thank you on a personal level. It’s easy to forget but crucial to remember that every B2B transaction ends with a human being, with a consumer. This is why the secret to an effective rewards program is understanding the secret to giving great gifts to people.
Years ago, I was fortunate to learn from a master what the secret to giving was. It is stupid simple and stupid powerful when you master it: A gift is most impactful when it’s personal and unexpected.

And the same goes for rewards delivered digitally. Build your rewards program around this insight, and you will realize a great return for your investment.

Pillar 5: Digital focus

The final pillar is about the channels you should focus on executing. It will be unproductive to try to be good at every channel. Instead, thoughtfully identify the channels where your customers are most active and the channels where your brand can have the most impact. Execute exceptionally well on the overlap of those two. As for the other channels, don’t be present at all.

For example: If you have a website and a mobile experience, but the mobile experience is dragging, and the app has subpar reviews, drop the mobile app and focus all of your energy on a delightful mobile B2B ecommerce website.

Wrapping Up

The B2B buying environment is undergoing a dramatic revolution, driven by a once-in-a-century pandemic, the rise of the dark funnel, demographics, and the second generation of B2B marketplace players. Brands must understand the trends at play — and the threats these well-funded startups present — to execute new strategies to thrive over the next decade.

It’s about to get really interesting in B2B ecommerce. I hope you are as excited as we are. Hold on to something. It’s about to get really fun.

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