Covid-19 has accelerated customer behavior toward digital and B2B distributors need eCommerce now, more than ever. That’s why large incumbent distributors and manufacturers should be giving eCommerce tools away for free to their smaller competitors. Yes, that was not a typo! If incumbents don’t, large tech monopolies will. In the past few weeks, for example, we’ve seen Facebook strike a deal with Shopify to roll out eCommerce tools to small businesses on its Facebook Marketplace.
It’s one of the most common platform strategies: commoditize the complement. Give away the technology, in exchange for access to the ecosystem.
Small distributors need eCommerce tools – so give it to them or one of the large tech monopolies like Facebook or Amazon will. Small distributors will upload their inventory onto the eCommerce infrastructure. Once you have live inventory data and a large supply base, those assets enables a larger marketplace opportunity.
eCommerce is a great mechanism to drive immediate revenue lift for smaller distributors and also feed into a longer term marketplace strategy. As we’ve seen with Shopify’s recent launch of its Shop app, a centralized marketplace can be spun out from its eCommerce tools. The Shop app leverages the inventory being sold in Shopify’s individual eCommerce stores. Similarly, this strategy was used by OpenTable, who gave reservation management software to restaurants and then launched a centralized reservation app.
It may seem odd to be advocating for large incumbents to enable their smallest, and sometimes fiercest, competitors. But the enemy of my enemy is my friend. While small competitors may seem like a threat, the larger threat is the tech monopolies like Amazon Business.
Large tech monopolies like Amazon Business, Facebook and others can’t focus on a specific vertical of B2B distribution. Their solutions need to be generalized for a variety of different types of businesses and industries. This presents an opportunity for large incumbents to specialize on their vertical in both an M&A capacity as well as product specialization.
Fortunately, there are many B2B marketplace startups that have all the needed capabilities to provide eCommerce tools to small distributors. They have multi-tenant eCommerce infrastructure, they have standardized product catalogs, they have existing inventory and fulfillment capabilities, and much more.
They need capital and scale: something large distributors and manufacturers have plenty of. Through strategic M&A with a marketplace startup, a large distributor can quickly get these eCommerce capabilities into the hands of small distributors and set themselves on a marketplace path. We have published B2B marketplace startup landscapes for the Chemical, Food and Medical Supplies verticals so far (and more to come!).
By standardizing the product catalog, a large distributor can bring photos, product descriptions, attributes and other relevant information to small distributors. This system should be extensible with virtually no limits, and it will help customize the eCommerce solution to that industry. Every product variant is easily converted to a known and standardized SKU, and vice versa. This system will also make the small distributor more successful and provide a clear differentiator for using your eCommerce solution as opposed to a generalized SaaS solution like Shopify.
Lastly, a standardized product catalog enables the large incumbent to roll out a centralized marketplace much more easily and successfully. Shopify’s Shop app has one big weakness: none of the products are standardized on the Shopify eCommerce infrastructure. This means that if multiple vendors are selling the same product, Shopify will never know and can’t surface the best price to the customer.
In a centralized marketplace with a standardized product catalog, there aren’t duplicate product listings and the best value is presented to the customer. If 100 small distributors all upload their inventory into their separate eCommerce stores using a standardized product catalog, it’s relatively easy to centralize all that inventory into a marketplace. If 100 small distributors upload their inventory using their own product listings, then that task becomes immensely complex and almost impossible.
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