Most people who work in manufacturing will be only too aware of the challenges in the sector – talent shortages, supply chain instability, struggles with the pace of digital transformation, the growing cybersecurity threat, and much more.
These all help to squeeze margins and restrict growth. It's little surprise, therefore, that manufacturers are turning to other revenue streams, such as commerce marketplaces. The potential rewards from these are vast, but manufacturer-driven marketplaces are far more complex than B2C marketplaces, with more sophisticated requirements for success.
The rise of B2B marketplaces
In recent years, there has been an undoubted trend for B2B firms to launch their own commerce marketplaces. Gartner has predicted that by 2023 at least 70% of enterprise marketplaces launched will serve B2B transactions. Point Nine Capital research revealed that in 2020 there were more than 300 B2B marketplaces in Europe – a stark increase from 20 in 2010.
It's likely that now there are far more. Many of these B2B companies launching marketplaces are manufacturers, attracted by the potential for additional revenue streams, supercharging their way of doing business and creating wider ecosystems.
But any manufacturer considering their own commerce marketplace must be mindful of the following five critical success factors.
1. Made to order issues
A retail transaction is straightforward. A customer buys the product, and an exact version of it arrives with them shortly afterwards. Manufacturing is rarely that simple. Sales often take place on a made to order basis. Sometimes this can mean a manufacturer will only start making the product when an order has been made, often with strong specifications. At others, it can mean at least there is a significant element of customisation to the order.
The US still uses a non-metric measurement model, for example, so any manufacturer selling to the US would need to be mindful of this. Essentially, customers want the product to be configurable – a marketplace must be able to accommodate this.
2. Request to quote processes
There is also the issue of pricing to consider. A standard commerce model is simple – the price is the price. There is no haggling, no negotiation and no requesting a specific price. This is known as a request to quote and is very common in manufacturing, where standard pricing rarely applies.
In B2B and manufacturing, a customer will ask for a company’s best quote based on several different variables – quantity, quality, location and more. It’s a very sophisticated feature that does not occur in retail or a B2C marketplace.
3. Supply chain complexity
Some manufacturers produce products that are built almost exclusively using one or two core materials that they hold already. But others are much more complex and cannot deliver a finished product without using other products or materials from many other manufacturers.
This supply chain complexity requires further sophistication in any manufacturer’s commerce marketplace. One substantial order can trigger a significant supply chain requirement, so it’s essential for the manufacturer’s systems to be interconnected.
4. Different interfaces to order
A large customer will likely order from a whole range of different places. An order can come automatically from a company’s ERP system, or it might come from HQ or one particular location. An order could be made directly from procurement or from another department.
Any marketplace must be able to facilitate orders from a wide range of different interfaces, and it must meet each customer's preferences. If you dictate to a customer how and where they order from you, they may find another manufacturer that is more accomodating. The answer lies in Headless Commerce architecture, which separates the front-end and back-end of a commerce application.
This relies on the use of an application programming interface (API) to connect multiple platforms on the front-end. It’s easier for developers to then create personalised experiences without having to make alterations to the back-end system. This allows customers to purchase products on their platform of choice and helps businesses approve orders using smart devices such as wearables or voice assistants.
5. Be ahead of the need for change management
For any manufacturer to pivot and become a commerce business, they will need to be mindful of the need for change management programmes. Most manufacturers are very sales-driven and may struggle to get their sales teams to accept that there might be components in a deal that they don't control.
Or there might be a sale made over the marketplace, where the sales team did not have a call with the customer, so they don't earn a commission. It’s essential to address this shift with employees, as a successful marketplace project can benefit the business as a whole.
While there is enormous potential in manufacturer marketplaces, it’s not a question of copying the many B2C marketplaces that exist, watching the products sell and then counting the profits. They are highly complex and sophisticated, and any manufacturer marketplace must be aware of this or run the risk of failing.
Headless Commerce is the key to this. It allows manufacturers the freedom to build a marketplace without constraints, improving the customer experience by decoupling the storefront from the back-end where all the complexity is contained.