A-suppliers should evaluate founding a Marketplace

A-suppliers should evaluate founding a Marketplace
12.09.2019 Rainer Wiedmann
Marktplatz

Who doesn’t know it, the classification into A, B and C customers – an extremely important instrument of CRM. But on the other hand, manufacturers should ask themselves whether they belong to the A, B or C suppliers in a certain category. The answer to this question can be very helpful for the right online strategy.

Because only the A-suppliers, those with the highest turnover shares in a certain market, have a good starting position to found an online marketplace and to defend it against the big competition of e.g. Amazon Business (see blog article about Amazon Business) or Amazon Marketplace.
ABC Supplier analysis

ABC Analysis for suppliers 
Source: iq! Management Consulting

ABC analysis from the supplier’s point of view

When it comes to defining the own online sales strategy, each manufacturer should be aware of their individual market position and market share. If you are one of the suppliers with the highest turnover in a category, you can think about setting up an online marketplace. An online marketplace bundles the online sales of different manufacturers of a market. However, these considerations should also take account of future sales potential and profitability, not purely turnover.

If, on the other hand, you belong to the B-suppliers of an industry, the focus of the online strategy should be on sales via third-party platforms (3rd party eCommerce). These can be either suitable marketplaces or online merchants. Your own eShop can complement the online channel. However, every manufacturer should be aware that generating the reach for their own shop is very time-consuming and costly. For many manufacturers, setting up and running an eShop is therefore more like a flagship store to show full assortment of recommended price level than a massive retail outlet.

After all, C-suppliers were advised to sell online platforms solely via 3rd party platforms. It is highly unlikely that the investment in their own online sales channel will pay off.

Examples of marketplaces operated by A-suppliers

There are still not many manufacturers who have dared to create Online Marketplaces for their industry. Mostly it is online companies (such as Amazon or Alibaba) that dominate the market or start-ups that try to achieve a more dominant position in a particular online market segment.

The Würth Group is one of the few manufacturing companies that has dared to establish an Online Marketplace:

Wucato LogoWürth Logo
The cross-manufacturer marketplace Wucato for handicraft and industrial supplies has been in existence since December 2016 and was launched by the Würth Group. After version 1.0 of the platform had a variety of flaws, the company introduced an improved version in 2017. Even more than a pure marketplace, the company is a SaaS provider that digitizes customers‘ purchasing processes.
Zoro Tools LogoGrainger Logo
The platform Zoro Tools for industrial commodities was not founded by a manufacturer, but by one of the largest US retailers, W.W. Grainger. Grainger is the market leader in the USA and founded Zoro Tools in 2014. The online marketplace is an ideal starting point for entering new markets.

Conclusion

Manufacturers who are market leaders or have a position right behind the market leader should consider whether creating an online marketplace would be an option to expand the online channel. Of course, the competition should also be included in the feasibility considerations for cross-industry platforms such as Amazon Business or Alibaba. For all other suppliers, 3rd party eCommerce is the better option, which is also preferable to their own eShop.

Outlook

Only in case subscription businesses (Economy of Things) are on your strategic roadmap you might consider own eShops as a base for invoicing recurring revenues.

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