B2B marketplaces have become a preferred addition for top companies in North America and Europe in their tail spend purchase management strategy.
Mature companies in the top categories have already started managing their tail spend purchases using B2B marketplaces. Some companies are exploring and trying to understand how B2B marketplaces operate, their adoption trends, and other features. They are also looking into the procurement process, typical tail spends channelized categories and optimization avenues. “B2B online marketplaces provide a self-service environment with products digitally sourced from multiple vendors who can offer products or services to business customers. B2B Marketplaces have offerings from varied top suppliers to corporate customers in a cost-effective and convenient manner,” said Sujeet Kumar R, Senior Research Analyst at Beroe.
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The online marketplace is meant for direct selling to corporate customers while also acting as intermediaries for other sellers, obtaining sales margins from each transaction. The online marketplace is a high volume, low margins business and a cost-effective way for corporates to make business purchases.
The B2B online marketplaces cater to lower purchases involving $2,000 of sales per supplier per annum and the second category of up to $50,000 per supplier per annum. The latter is called the Middle of the Tail, while the former is called the Tail of the Tail.
B2B marketplace are convenient for companies for managing tail spend purchases as they facilitate single purchase order entry payment solutions against multiple suppliers. One of the factors favoring increased adoption of tail spend purchases through B2B marketplace is the increase in millennials becoming purchasing managers.
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B2B marketplaces provide the advantage of diversifying tail spend purchasing for companies as they list many products and product categories. For many companies, 80 percent of the large purchases are accounted for by 20 percent of the suppliers. As a result, B2B marketplaces have become the preferred choice for top companies in North America and Europe as it serves the objective of reducing cost on tail spend purchases.
According to Mckinsey, B2B online marketplaces create a win-win situation for both buyers and sellers. It provides buyers with choice, value, and greater efficiencies while sellers gain access to a broader pool of buyers. Marketplace procurement can also facilitate reporting and data analysis. There are different types of market places such as product-focused markets, time-and-materials marketplaces, scope-of-work marketplaces, corporate-spinoff marketplaces.