The people manufacturing and selling the goods that power global business giants, from furniture to vaccines, aren't so different from everyone else. Like most of us, they have grown accustomed in their personal lives to hunting down merchandise on marketplaces. Whether it's kitchen equipment or rock‐climbing gear, they compare options and often buy with a single click. Yet there's been a disconnect between home and work. Consequently, while consumer marketplaces rocketed ahead quickly, B2B marketplaces have been a step or two behind. Now, though, they're sprinting to catch up.

One reason for this delay is that many enterprises have heavily invested in high‐touch systems and processes. They operate with complex constellations of buyers and suppliers, each with their own relationships to navigate. These hinge on expectations of credibility, integrity, and authenticity. Business buyers seek to purchase from experts that they can trust to deliver the right product at the right time. Why? Because they aren't spending $50 or $100, but much more. And if a component doesn't fit just right or arrive on time, it's not just a matter of swapping it for the right size or waiting an extra few days. It means business operations could very well shut down.

However, given the efficiencies of online marketplaces, it was just a matter of time before they spread into B2B. Indeed, the model that offers customers so much choice, flexibility, and speed is proving hard to resist. For Airbus Helicopters, the value of the marketplace looks remarkably similar to marketplaces in the retail world. Put simply, they can provide buyers with a broader selection of the parts and services they need. “The marketplace brings together specialty players, who do better than we do in their areas,” says Paul Louit, the company's marketplace manager.

If there was ever a question of the role of marketplaces in B2B commerce, its inevitability became clear in 2015, when Amazon plunged into the sector and grew within five years from $0 to $25 billion in global annual sales.

The global pandemic accelerated this trend, spurring a rapid uptake of eCommerce technology and marketplaces. At Mirakl, we launched a B2B marketplace of our own: StopCOVID19, a platform with backing from the French government created to get urgently‐needed medical supplies from manufacturers and distributors into the hands of the essential workers that needed them. Launched in just 48 hours, StopCOVID19 was further proof of the agility and scale of marketplaces, with more than 8 million masks and 420,000 liters of hand sanitizer sold or donated through the platform in its first month of operation.

Though it came about in unique circumstances, this rapid growth was just one marketplace in a much larger, momentous shift in B2B eCommerce. Sales on B2B marketplaces leapt 48% in two years, from $1.1 trillion in 2019 to $1.63 trillion in 2021.

More than 90% of B2B buyers are now making at least some of their purchases on marketplaces, and some of them are growing extremely comfortable with new digital channels, according to a McKinsey & Company study, spending as much as $500,000 on a single purchase online. And with growing supply‐chain disruptions, B2B marketplaces provide vital backup. They now appear on track to replicate the blistering growth of their retail counterparts.

To be sure, there are important differences between business and consumer marketplaces. Many of the relationships are firmly established, by custom or contract, with companies operating in sync, as if parts of the same machine. Yet while some players are on the digital cutting edge, others still operate on aging software spreadsheets and place orders by phone. This is why businesses launching B2B marketplaces sometimes find themselves in the role of evangelists, having to nudge both customers and suppliers along. The platform pioneers are bringing along the others, much as we saw in retail markets in previous years.

A marketplace, however, also provides the opportunity to establish new relationships and develop new streams of revenue. Services is a common example. Tom Kraus, who heads up the marketplace for the wholesale health and specialty food distributor UNFI, outlines the progression. “You go from selling a subset of widgets to a broader set of widgets. Then you can move to consultative services: How to assemble them and monitor them in running operations.” This can become a marketplace service, a new business. In fact, it often changes the very mission of an enterprise, evolving from selling things to solving customers' problems.

So, yes, despite many similarities, B2B is different. But perhaps the most important distinction has to do with the stage of its development. While for consumer companies, a marketplace represents table stakes, B2B players who move quickly with these powerful tools can still gain first‐mover advantage.

Toyota Material Handling – Transforming relationships

The mechanic says your car needs a new water pump, and that the part costs $229. At another shop, or in another geography, it might cost $269, or maybe $199. There's variety in parts pricing, and always has been. Consumers deal with it.

But when corporate customers, like Hertz or FedEx, shop for auto parts, they often expect something closer to uniform pricing, and usually with a significant discount that is specific to them. Increasingly, they also expect to find the prices, availability, and shipping information online.

This may sound self‐evident, but for industrial companies with networks of independent suppliers, such uniformity and transparency has required adjustments. This was certainly the case for the U.S. division of Toyota Material Handling, the global manufacturer of forklifts.

The problem, explains Nick Ostergaard, the company's head of digital advanced services, grew from the freedom and autonomy of the company's dealer network. To this day, it comprises scores of independent companies. Traditionally, each one has set its own pricing strategy for parts and servicing. It's their business. They have figured out the best ways to sell to the customers they know. That has been the age‐old tradition. Dealers didn't want to lose their freedom to run their businesses as they saw fit.

Trouble started with the growth of big corporate accounts for forklifts. As large companies sourced machinery from different suppliers, whether in Hackensack, New Jersey, or Nashville, Tennessee, their accountants noticed a sometimes stark divergence in pricing. With modern information systems, variations like that are easy to spot – and they're irksome.

The freedom of the dealers, as in other industries like automobiles, was grounded in the customers' ignorance, or what marketers call “price opacity.” Customers didn't know what others elsewhere might be paying for a replacement joystick for a certain electric forklift. Companies certainly didn't share data with competitors about how much they were paying for things. As in many other industries, price opacity created a comfortable status quo for decades. But it was unsustainable in the networked age.

This meant that the forklift business, like so many others, faced digital disruption. And that's what Nick was brought in to help with, and ultimately lead. Nick had insights not only into the technology, but also understood from personal experience the bruising transition that people in the workforce face when the world stops working the way it used to.

He'd graduated from college in spring 2009, just months after the 2008 global financial crisis. It was a miserable year to be looking for work. At one point, eager for job interviews, he clipped out the photos of business executives in Indianapolis and learned to identify their faces. Then he would go to a downtown Starbucks in his only suit. When he spotted executives coming in for coffee, he would follow them back and deliver his spiel, sometimes in the elevator.

That didn't result in a job, at least directly. But through those face‐to‐face encounters, Nick gained vital insights: companies were facing digital transformation, and they'd need young tech‐savvy pros to guide them through it.

Nick landed jobs at Gannett Digital Ventures and the Better Business Bureau. But he got much deeper into digital transformation at the Indiana Chamber of Commerce. That's where he learned that Toyota Material Handling was moving its headquarters from California to Columbus, Indiana, where it ran a production facility. As Nick might have predicted, they needed someone just like him to help with digital initiatives.

Any adjustments to the traditional product pipeline was bound to affect operations at more than 60 independent dealers scattered around North America. Such changes required consensus. After all, in many ways, these dealers were another type of customer for Toyota – one whose needs and expectations had to be met to achieve success. So in 2017, Nick and his team brought together a dealer council. That would be a sounding board and a collaborator as the two sides worked to build a structure that would work for both of them.

An online marketplace was not yet under discussion. These initial meetings were about something much more elemental: launching an eCommerce site. While 2017 might seem late for jumping into online sales, a great number of B2B companies, as we've said, had not yet felt the urgency to change.

At Toyota Material Handling, the eCommerce site was the first step in its marketplace journey. “From the beginning, the idea was that we'd do it in stages: crawl, walk, run,” says Steve Tadd, the company's director of marketing and information technology. But even this early step raised apprehension among dealers. They worried that a central eCommerce site would reach over them and poach customers, taking out the middle person. “eCommerce is pretty scary when the OEM [original equipment manufacturer] says they're getting into your space,” says Nick. “The [dealers'] initial feeling was, ‘Hey, man, stay in your lane!’”

The dealers were experiencing the same concerns as legions of others facing digital disruption. When such operations gear up, whether an initial eCommerce site or a full marketplace, the legacy brick and mortar teams have a natural fear of being left behind – disintermediated.

Handling such issues is painstaking work. And if in these stories we've given you the impression that the process might be easy, fast, or painless, we want to be clear: for nearly every enterprise, a new marketplace leads to conflicts, misunderstandings, wrong turns, sleepless nights. It's a big change, and it's hard.

For Toyota Material Handling, reaching an agreement with its dealer network was a make‐it‐or‐break‐it test. It took a while, but the company and its dealers managed to hammer out a new approach that worked for both sides. The corporate team promised not to compete with distributors. Instead, the eCommerce site would route customers, based on their zip code, to the nearest online dealer for the parts and service they needed. In this sense, the eCommerce site worked as a lead generator for its dealers, sending more business their way.

This helped win the support of the dealer network. While these independent operators lost their freedom to set prices, they won new business. And at the same time, the new website produced data that uncovered previously missed opportunities for the dealer network. Studying traffic on the site, it was clear that many current and potential customers landed there looking for something, whether a part or accessory, and didn't find it. They had no choice but to look elsewhere. Each of these potential purchases was a lost opportunity for Toyota and its dealers.

In the industrial economy, failed searches can also signal something even worse: lost revenue for the end customer. After all, if a business needs a part to fix a forklift, crucial operations could be paralyzed until it's found. “Downtime is the largest cost for most industrial customers,” Nick says. Reducing these failed searches was one of the most critical opportunities that Toyota had to strengthen its relationship with buyers.

In the traditional model of B2B commerce, the message to customers was simply to hew to the manufacturer's offering. The value chain was firmly established and inflexible. Customers had to adapt to it.

But once the focus shifts from the pipeline, and the customers' needs are front and center, it becomes clear that their needs are far more than any single provider can supply.

Toyota Material Handling saw this. And in summer 2018, only months after launching the eCommerce site, the company began working with a consultant, Deloitte Digital, to come up with a way to offer customers coming to the site a much broader selection of parts and products. They carried out analysis on different ways to fulfill demand, from building an in‐house solution from the ground up to buying one outright or teaming up with others.

Nick, by now promoted to eCommerce manager, was at a meeting in Chicago with the company's enterprise software provider, SAP, when he heard about our company. “I didn't even know how to spell Mirakl,” he says.

It was clear right away that a marketplace would shake up the company's business model much more than the eCommerce site alone. With a range of sellers on board, the marketplace would dramatically broaden the online presence: from a stand‐alone site for forklifts, it would become an entrepôt for its entire sector of the manufacturing economy. In addition, the marketplace would strive to offer not only the machines and components that customers were looking for, but also related items, from stools and safety vests to protective gloves and cleaning rags. If successful, a Toyota Material Handling marketplace could become a near‐default site for the sector.

That was the pitch Nick and Steve took to the top of the company. It was mid‐2018. They knew that they had support for a transformative digital journey, and they got it.

Their digital journey, as they said, had been mapped out to crawl, walk, run. They were about to start running.

Parts Town – Kinetic growth

Emanuela Delgado, a recent college graduate with a degree in psychology, was working in the early years of the century for an Illinois puzzles‐and‐games company. Her job was to help migrate its catalog onto an eCommerce platform. She didn't have a technical background, but she knew how to figure out things.

Parts Town, a family‐owned restaurant parts supplier in nearby Addison, Illinois, was a small company that sold and distributed genuine OEM parts for commercial foodservice equipment. Annual sales at the time totaled $3 million, and the company had much grander ambitions. The industry, after all, was large and growing. But the market for replacement parts for restaurant equipment – fryers, toasters, freezers, convection ovens – was scattered among small players and customers were challenged to find the parts they needed. If Parts Town could make parts inventory more available and provide technology to make them easier to find, it could grow into a giant. And the World Wide Web provided a powerful tool to make it happen.

The company hired a new CEO, Steve Snower, in 2004, to pursue this journey of transforming a fragmented market into a simplified and connected digital journey. He saw what Emanuela was up to, and he knew he needed those same skills. He hired Emanuela in 2005 and tasked her with leading the company onto this path. The company was headed for dramatic growth.

The first step for Emanuela was to lead the company on its eCommerce journey. This was so new to the industry, and so threatening, that when Parts Town surveyed customers, 70% preferred to avoid eCommerce altogether. Stick with catalogs, they urged.

Now all along, as you've surely noticed, we've been stressing the importance of listening to customers. Listening is at the heart of the marketplace revolution. There are occasions, however, especially when customers and partners are responding to the fear of change, that it's OK to move in a different direction. That's what Parts Town did because Emanuela and her team understood both their customers' best interests and where the industry was headed. Emanuela foresaw the growing need for faster, more cost‐effective delivery of everything customers could want, and she was confident that online buying was the path to get there.

As expected, the eCommerce initiative, much like the one at Toyota Material Handling, created its share of discomfort. Service companies and distributors saw their businesses change. They sold fewer parts, but most of them more than made up for lower sales by servicing equipment – installing and maintaining the machinery, and simplifying their businesses in the process. Manufacturers also benefited. eCommerce sites provided them much greater visibility to their customer base, and customers received the parts they needed faster than ever before, making customers happier. “The disruption had to be valuable not just for Parts Town, but for the entire industry, for customers, and for manufacturing partners,” Emanuela says.

By 2021, following a decade and a half of digital reinvention and a flurry of acquisitions, Parts Town had become the titan of its industry, with sales topping $1 billion. It had dramatically expanded its distribution center, and had driven available products from 11,000 to more than 200,000. The workforce had grown from less than 10 to more than 3,100.

The question facing the Parts Town team at this juncture, as the management team mulled strategy, was how to maintain its growth trajectory. Over the previous 15 years, the company had grown organically at an annual compound rate of over 20%. To maintain this pace, the company decided to make a dramatic – and disruptive – change in strategy. Fortunately, disruption was now imbued in the culture. It seemed to be encoded in Parts Town's DNA. The mission to disrupt is evident in Emanuela's title, senior vice president of the Revolution.

“Change is easier,” Emanuela says, “when you're building from nothing.” There's nothing to tear down or disrupt, and much less to lose. “The bigger challenge is to continue to adapt, and to change what you've already built.”

As the Parts Town leadership team, including its SVP of the Revolution, drew up a growth strategy in 2021, it was clear that the next step in the company's digital journey was to open a marketplace. Like other companies we've discussed, such as Best Buy Canada and Catch, Parts Town could not keep scaling by building ever more distribution centers. Stocking everything that customers might want would gobble up mountains of working capital and rob the company of flexibility.

The trick would be to sell more, but without having to buy, stock, and ship more. For this, Parts Town was well positioned. Thousands of customers already shopped on partstown.com. This was no longer the tiny regional player outside Chicago. Parts Town had evolved into an online destination. (Such brand recognition is not essential for success. Marketplaces can thrive alongside earlier‐stage ventures, as we'll see. But well‐known brands with a strong customer base take off with a running start.)

At the heart of Parts Town's brand was its promise to deliver only (OEM) parts. A restaurant chain looking to repair an industrial oven doesn't want to bet its business on a part that might work. It wants absolute confidence, a guarantee from the manufacturer itself. This solidified Parts Town's reputation for quality. OEM parts were central to Parts Town's brand.

However, there were plenty of other things customers needed to run their kitchens, from industrial cleaners and mops to ceiling fans. Digging into website search data, Emanuela and her team could see that people were looking for items Parts Town didn't stock. These opportunities were exciting, as if hanging within reach. And they represented lost sales.

With a marketplace, Parts Town could fulfill many of those lost searches, providing customers with what they needed, and earning commissions from the sales. The key for Parts Town, as for other B2B marketplaces, was to expand its offering while safeguarding its core brand.

Website data pointed to possibilities. Emanuela's team started focusing not just on what customers were looking for, but on where the orders were coming from. They noticed that although restaurants still made up most of their customer base, other businesses popped up: hotels, hospitals, universities. Yes, these places had commercial kitchens. That was what brought them to the site. But they also had other needs. While they might be looking to fix an industrial fryer, they also wondered if Parts Town stocked HVAC (heating, ventilation, and air conditioning) parts. They searched for parts for their refrigerator or washing machine, computer parts, and components for cell phones.

It was clearer than ever that a marketplace could dramatically broaden Parts Town, carrying it into adjacent markets beyond the kitchen. This would stoke growth. The company signed with Mirakl in 2018.

Parts Town's strategy, we soon learned, extended beyond a new parts and services marketplace. From listening to the customers, the Parts Town team said, it was clear that they not only wanted dependable parts and a great selection. They were often hungry for something else: speed. Every once in a while – hopefully not too often – they were desperate for a part or a repair. If an industrial refrigerator, for example, went down, it could ruin a restaurant's weekend, waste thousands of dollars of food, even pummel its reputation. For a business in such straits, receiving a crucial part within a day or two is simply not fast enough.

This, too, represented opportunity. Parts Town decided to create another marketplace dedicated to rapid service. It would be called Parts in Town and would feature a network of rapid‐response suppliers across the country. The goal would be for one of them to provide within an hour whatever original manufacturer part or service a customer urgently needed.

This second rapid‐delivery marketplace was not positioned as a growth engine. It was more of a community asset, like a fire station. But by using the marketplace platform to provide vital services, it would bolster the community of buyers for the rest of its expanding field of products and services.

Parts Town's decision was made. Now it was just a question of building the marketplaces and getting them up and running.

TradeSquare – A purpose‐built B2B marketplace

One of the wonders of a new technology, whether it's the wheel, the printing press, or the cell phone, is that each one opens up myriad possibilities for novel business models. This is true as well for marketplaces. The opportunities exist not only for established companies, but also for entrepreneurs.

The key for coming up with new concepts is to turn a standard question on its head. Instead of asking how the new technology can boost an established business, it's often more fruitful to switch the focus from what already exists to what's possible. The question then becomes: “What business could we create with this platform?”

Nati Harpaz witnessed the potential of marketplaces first‐hand. He had been the chief executive for Australia's Catch, whose story we shared on page 28. Working with the Leibovich brothers, Gabby and Hezi, he helped shape and launch the Catch marketplace. He quickly spotted the gold in the marketplace model. And in 2020, a year after the Leibovich brothers had sold the company, he left to start his own enterprise.

This was during the pandemic, and Nati was thinking about all of the small shops across Australia. How did they source their merchandise? For many, he knew, their business was built on relationships. Merchants knew some of the wholesalers. They haggled with them over the phone. But these merchants could see only a fraction of the available market. The rest was hidden from their view. And even if someone had given them an immense spreadsheet with the universe of potential suppliers, there wasn't time in the day to negotiate with legions of wholesalers and cottage industries. The pandemic shutdowns of that year made things even worse. “There were no show rooms,” Nati recalls. “No travel.”

His solution was to create a marketplace of wholesalers. “Knowing the Mirakl platform,” he says, “I knew we could build something quickly.”

Speed has never been a barrier for Nati. Nor has change. Only four years earlier, he was running a media startup in Australia, and before that a fashion jewelry business. It was on a flight from Hong Kong to Sydney, in 2016, that he wrote an email to his friend Gabby Leibovich outlining a new strategy for Catch. Within days, they gathered to discuss, and weeks later, Nati moved his family to Melbourne and took a job as managing director at Catch. There, he helped lead the company toward its marketplace.

Now he saw the possibility for a B2B marketplace, which he would call TradeSquare. He envisioned it as a new matchmaking space for retailers and wholesalers, one that not only would create new opportunities for them, but also change their behavior. In the traditional setup, a gift shop in Sydney orders woolen mittens from a producer in Tasmania. The buyer, who considers herself a savvy negotiator, may believe she got a good price. But she can't be sure. Much like the pre‐marketplace dealer network for Toyota forklifts, there's scant price transparency and little choice.

Now, Nati thought, if that same gift shop owner went to his marketplace, she would see the price everyone else sees for those mittens. But she would also encounter other providers of mittens, including some she hadn't heard of, and the enhanced competition would mean that she'd find the best possible offer.

The way Nati saw it, a marketplace would also open opportunities for artisan industries across the country. Candlemakers or chocolate operations could devote themselves to making their goods, and spend less time pushing on the phone and online for retailers to carry them. And they wouldn't have to burn up so many hours drawing up purchase and sales orders for each line of merchandise. These would be processed and recorded with a few keystrokes. “This would help small businesses flourish,” he said.

As he hatched this business plan for TradeSquare, Nati still faced plenty of questions. How much should he invest in first‐party versus third‐party? His company could buy merchandise and resell, or with third‐party sellers could take a commission. How to strike this balance to optimize profit? These were important questions. But he could decide after the launch, when the dynamics of the marketplace would come into clearer focus.

He decided to push forward on TradeSquare, and he would move quickly. The pandemic, which disrupted traditional sourcing, opened a window for a marketplace. Who knew how long it would stay open?

He hired a small team, keeping costs low by offering “sweat equity,” pieces of the company in lieu of high pay. And he and his team formulated a vision. The company would remain local, in Australia and New Zealand, and would start out by focusing on three categories: homeware, gifts, and pets. If successful, the marketplace could later grow into a general business to business hub, linking a broad range of wholesalers with retailers. Data from operations would point to the most promising opportunities for growth.

In April 2020, he signed up for a TradeSquare marketplace. If Nati and his team could meet his ambitious target, they'd go live within four months.

Chapter Summary

We focus on the fast‐growing marketplaces for B2B transactions, looking at three companies configuring their strategies and facing the crucial decision about whether to launch a marketplace.

Relationships and communications are fundamental because each B2B company functions within webs of suppliers. A new marketplace can mean dramatic change for them – and can stir deep concerns. And the process can be rocky. In fact, it usually is.

Toyota Material Handling, a market leader in forklifts, had to iron out an entirely new arrangement with its continental network of dealerships, each one a separate company. For the marketplace to work, Toyota Material Handling and its distributors had to devise an entirely different business model, one that worked for everybody.

Parts Town is a leading distributor of OEM parts for commercial kitchens. It built a flourishing eCommerce business, and for the first decade and a half of this century, it went on an acquisition tear. This fueled massive growth. How could the company keep up this fast pace? A marketplace provided that possibility. With it, Parts Town would be able to venture from its core market of commercial kitchen parts and sell other things a restaurant would need.

For B2B entrepreneurs, a marketplace platform spells possibilities. Nati Harpaz knew the power of marketplaces well from his tenure as chief operating officer for Australia's Catch (which is featured in Chapter 2). Now he wanted to follow his own vision. His marketplace, TradeSquare, would line hundreds of artisans in Australia. This would free them from the confines of geography, whether a corner in Adelaide or a village in New South Wales, and introduce them to vast new online markets.