How can decentralized technologies drive the adoption of better business to business marketplaces?
The last few decades have produced many successful marketplaces. We went from product marketplace pioneers like eBay and Amazon to simple service marketplaces like Uber and Upwork. These companies have fundamentally shifted the consumer landscape. Consumers now have more options at better prices, with products and services delivered more conveniently.
These same benefits should accrue to businesses. This can create more streamlined value-chains, more effective procurement, better profitability, and access to better intelligence. These benefits will deliver value to all stakeholders, including consumers, through efficiency gains.
The Opportunity
Global B2B spending runs at approximately $120 trillion annually [1]. However, many markets still rely on offline, relationship-based transactions (think phone calls and lunches). So why haven’t we seen many successful B2B marketplaces? This is a difficult and nuanced question to answer. The good news is it looks like the tides are changing. Vertical B2B marketplaces, for instance, areforecast to grow to $3.6 trillion by 2024. Historic growth has been equally robust, reaching an annualized rate of just over 13% between 2013 and 2019 [2].
According to NFX, this growth has been driven by several factors:
Changes in consumer behavior — people increasingly expect e-commerce to be the first point of call.
New financial infrastructure — embedded finance and integrated payments are changing traditional financing models
Increasing data availability — is driving better scale and efficiency of software and other automated models
Increased efficiency from technology — the rapid pace of hardware and internet maturation has enabled software to accomplish increasingly complex and valuable tasks
Role of Technology
Put simply, technology overcomes the legacy barriers and operating issues that have historically stymied innovation. It is also being increasingly accepted, heralding a new dawn in the B2B space. An understanding of the legacy barriers is important and highlights the value of tech-enabled solutions moving forward:
Complexity — Capturing transactions online is challenging due to complex workflows (like negotiation-based pricing, complicated payment terms, customized orders, and multi-party relationships)
Value — B2B transactions tend to be higher value, and so the stakes are high. A single bad transaction can damage a business and reflect poorly on all parties. So, more emphasis is placed on trust.
Concentration — Often there are a limited number of participants in niche markets, leading to a concentration of supply and demand. This can mean participant retention is difficult without subsidised pricing or other incentives to remain on platform.
How to build a B2B marketplace
A successful business to business marketplace must incorporate many elements of the transaction value chain.
Discovery — a marketplace must solve the search problem and help users identify the right buyers or suppliers
Trust — a marketplace must solve the counter party risk problem and provide assurance that the parties are legitimate
Convenience — a marketplace must minimize transactions costs and remove frictions from the matching process
Financialization — a marketplace must offer avenues to financing and make capital purchases as easy as possible for buyers
Collaboration — a marketplace must solve the coordination problems and encourage more productive partnerships and communication
Data — a marketplace must be thoughtful in its use of data, using data to improve the customer and supplier experience
Community — a marketplace must encourage shared value creation and avoid traditionally extractive models
Incentives — a marketplace must give value back to participants
Achieving each of these outcomes is hard, and examples of successful marketplaces that incorporate these values are rare (a good resource for further information on this can be found here). Operators typically rely on traditional internet-based technologies, reward mechanisms based on subsidies, and supply-chain integrations to deliver value.
A better way
In the B2C space, there is increasing recognition that platforms are extracting value from their customers’ data. This is driving a push towards Web 3.0 and decentralized technologies, the ethos of which is wresting control of data back from these platforms. A side effect of the rapid increase in blockchain adoption are efficiencies through smart contracts, digital trust, and financialization through DeFi.
Can these same technologies be deployed in the B2B space to improve current solutions and accelerate growth? We believe the answer is yes.
At 180Protocol we operate at the nexus between enterprise and Web 3.0. We are a decentralized collaborative computing framework that supports the development of the next-generation of enterprise software. We power the creation of custom data feeds built from the anonymized and aggregated data of buyers and sellers, driving the matching process (Discovery). We create digital trust, by using distributed ledger as an audit mechanism for transactions and by incentive creation through staking and rewards (Trust. We enable digital transactions and workflow automation through smart contracting and automation (Convenience). We offer potential for digital asset issuance and integrations into the broader DeFi ecosystem (Financialization). We leverage confidential computing to securely aggregate private data from multiple parties and to ensure the efficient and collaborative use of data. (Data and Collaboration). Finally, marketplaces built using our technology will be democratized and fair (Community). Businesses who transact directly benefit from the fees that would otherwise accrue to a broker or marketplace provider (Incentives).
Get in touch
We are interested in engaging with potential marketplace hosts, with an emphasis on those operating in markets that are fragmented, opaque, heavily intermediated, large, or with potential for bolt-on revenue streams. Examples of verticals are wide ranging and include financial services, agriculture, transportation, manufacturing, energy, arts and culture, and construction.
To learn more, please contact the management team at management@180protocol.com.
[1] Pymnts.com
[2] Statista.com
