eCommerce Business Models for Wholesale: Choosing the Right One

By
Mandy Movahhed
June 16, 2015

The Case for B2B eCommerce

In recent years, wholesale brands have experienced a dramatic shift in the way they do business. Until recently, wholesale sales has been predominantly focused on the field sales channel. However, with the advent of wholesale commerce technology, brands have not only been able to optimize the field sales experience by leveraging technology like sales order management applications, but also are implementing an omni-channel strategy with a focus on B2B eCommerce capabilities. Adopting B2B eCommerce is no longer a nice-to-have for only the most cutting edge brands, it’s now a critical pillar of the wholesale sales strategy. According to Forrester, "B2B companies that wait too long to implement eCommerce assume a big risk. Every day that B2B companies fail to offer a compelling B2B eCommerce experience, they fall further behind more advanced competitors.” Now that it’s impossible to avoid the eventual presence of B2B eCommerce as part of wholesale’s omni-channel strategy, brands are facing questions about the best approach to adopt for their businesses. This decision typically is whether to implement the Direct eCommerce business model, the Marketplace model, or a hybrid of both.

Considering Direct & Marketplace B2B eCommerce Business Models

According to Forrester's 2013 research report, B2B eCommerce platforms fall into two distinct models––Direct or Marketplace. The Direct model provides you with a portal that offers only your products and lets you control which of your retailers have access. The Marketplace model, as the name suggests, aggregates multiple retailers into a central location where they can order your products along with other brands. While Direct models may differ in their level of sophistication and implementation, they have in common that the brand itself is still the owner of the complete customer experience. This means that they are responsible for the online experience as well as the transactional and fulfillment processes, such as payment processing, shipping, and order tracking. Marketplace models, however, fall into two camps. Simple marketplaces entail a centralized location for retailers to buy from multiple brands, but still require that the brand be responsible for processing payments and the logistics related to order fulfillment. Others are more full-service, where they handle payment processing, inventory warehousing, fulfillment, and shipping for brands. In exchange, the brand pays a percentage of each order placed. Marketplace models can lead to increased brand visibility, and complex Marketplace models are attractive to brands that are interested in reaching the long tail without having to deal with the ramifications of servicing lower yield customers. However, the ability to build brand equity and develop strong customer relationships is limited when selling through a marketplace. In contrast, while the Direct model requires the brand to assume the responsibility of owning and maintaining the customer experience and lacks the positive network effects of its Marketplace counterpart, it does allow for the cultivation of higher quality customer relationships and the building of long-term brand equity.

eCommerce Business Models: Making the Decision

In the end, the decision to implement a certain B2B eCommerce business model depends on the immediate and long term strategic goals of your business. For smaller brands looking to build their customer base or experiencing challenges in servicing customers at scale, or large brands that can easily win on brand recognition, the risk of experimentation with a complex Marketplace model is low, as long as it doesn’t require cumbersome setup and integration. However, it is not possible for brands to survive solely on the Marketplace model alone. Brands that opt for the marketplace approach need to in tandem continue to build out their own Direct model implementation. The long term positive impact to your business and brand equity from adopting the Direct model are simply too significant to ignore. Direct B2B eCommerce allows brands to focus on high-value, long-lasting relationships with their retailers, create exceptional brand experiences, and provide outstanding service for the retailer that is tailored to their exact needs.