Building hardware is getting easier, but it’s still not easy enough. The minutiae of bringing a prototype to a real product is still to specialized. We need a platform that can do it at scale.
Software may be eating the words, but good hardware still matters. As more products get connected the lines between the two are blurring, but hardware still matters.
During the heyday of Web 1.0, B2B marketplaces were, we were assured, the next trillion-dollar gold rush. In 2000, Gartner Group was projecting B2B ecommerce transactions would reach $7.3 trillion by 2004. Goldman Sachs predicted $4.5 trillion by 2005. The assumption was that web-based technologies would completely automate virtually all supplier-customer transactions, including retailing, wholesaling and procurement.
Like so many other predictions of that era, B2B marketplaces proved to be more fizzle than sizzle.
With the dot.com crash, many B2B companies disappeared just as quickly as they rose to fame. The ones that survived were primarily solutions for large companies, from horizontal players like SAP’s Ariba to consortia-based marketplaces that focused on a particular vertical: supplyON.com (automotive), elemica.com (chemical), agentrics.com (retail), and hubwoo.com (MRO-Parts).
One major player of that era, Alibaba (which got its start in Jack Ma’s apartment in 1999), is on track to be the world’s first ecommerce platform to handle $1 trillion a year in transactions. This Chinese B2B trading platform connects buyers in North America and Europe with suppliers from China. Alibaba follows an aggregation of supply model (similar to other early B2B players), helping to solve the pain of global sourcing. Yet with Alibaba, buyers still need to work to identify the right supplier and complete the transaction.
While the overall market may not have skyrocketed as quickly as analysts predicted a decade ago, today we are seeing the emergence of a new wave of B2B startups that are focused on making procurement and supply chains more efficient for the long-tail SMB market. (Disclosure: The author’s firm holds investments in commerce-related companies Clarity, GroupTalent, Indiegogo, and tindie.)
New wave caters to small and mid-sized companies
More than aggregators, these new B2B marketplaces are buyer-driven workflow solutions for small and mid-sized businesses. While large companies can afford to implement EDI or other automated procurement systems, small businesses still fax and file paper purchase orders and quotes. There’s an enormous opportunity to streamline the procurement process, rather than having a purchasing manager call around to suppliers to fax over quotes.
There are a number of B2B ecommerce startups focusing on specific vertical opportunities. Examples include Joor, for fashion – the company is shooting for $350 million in sales this year – and Lookboard for furniture and home décor. Such marketplaces are particularly useful in those verticals where companies can source from a myriad of suppliers and need tools to help them identify, research and contact the right ones.
The future of B2B marketplaces
The B2B players we see today are just at the cusp of what’s to come, as there’s a massive opportunity to replace the paper-centric, error-prone supply chains for small businesses. Emerging B2B startups can improve on earlier generations by creating more value for their users either by lowering the costs of transactions or identifying unique suppliers/products. Here are three methods for doing so:
1. Increasing liquidity by providing more choice and enabling buyers to discover new suppliers. While these marketplaces are mostly buyer-driven (i.e. buyers post the products they need), marketplaces need to increase the supplier base in an efficient way beyond those that are already seeing the RFP. Without strong suppliers, there’s no incentive for a buyer to use that marketplace.
2. Employing modern technologies such as matching algorithms, personalization and big data crunching to help buyers find the right products and suppliers. For example, a platform can recommend new suppliers based on a buyer’s past purchase history or defined preferences.
3. Supporting mobile in addition to desktop. Even today, a large number of sales transactions involve face-to-face meetings between buyer and supplier. The addition of mobile streamlines these interactions, as quotes and purchase orders can be processed right on spot via smartphone.
Challenges to overcome
Still, given the rise of cloud apps alongside the use of iPads and iPhones in the workplace, the market is more ready today than it was 10-20 years ago for B2B ecommerce. While we didn’t see the projected numbers come to fruition during Web 1.0, today and tomorrow’s B2B startups will undeniably disrupt supply chain processes for small businesses.
Boris Wertz is the founder of version one ventures, and has invested in over 40 early-stage consumer and enterprise companies. He blogs at http://versiononeventures.com/blog/; follow him on Twitter @bwertz.
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