Two Types of Online B2B Marketplaces
Small Businesses Should Know
When a large enterprise decides that it wants to export to a new market, it just needs to open a new subsidiary that will handle the importation and distribution of its goods directly. This is why, even on the most remote island in Thailand, you will find convenience stores selling Coca Cola or Ferrero candies.
However, for a small or medium enterprise, setting up a subsidiary in each market is almost impossible. Think about all the costs about establishing what is in fact a new company, such as office and retail space, workforce, and complying with the local regulation.
As a consequence, small businesses do not establish subsidiaries around the world. Until a few years ago, the only way for small businesses to find buyers abroad was through trade fairs, or intermediaries such as chambers of commerce and export agencies.
Even before the current pandemic made most of these channels unavailable, small businesses were already turning to new ways of selling abroad. The rise of technology platforms such as social media, online retailers, and B2B marketplaces made possible for small businesses to find customers more easily and independently.
Some businesses do sell B2C abroad, but that still entails going through some level of investments in marketing, logistics, compliance, and customer service.
Instead, it is far easier for small businesses to sell B2B, i.e. to find another company interested in purchasing the products.
There are two types of B2B marketplaces that small businesses interested in selling abroad should know: the marketplaces where companies buy in bulk and the ones where companies look for long-term partnerships.
B2B Marketplaces for Bulk Purchases
Roughly 20 years ago, industrial production in Asia was experiencing a meteoric rise. Led by China, places such as India and Southeast Asia were fast becoming the factories of the world.
Since it was difficult to source suppliers smoothly, a few bright entrepreneurs, most notably Jack Ma of Alibaba, established online platforms where companies in the West could easily buy products from Asian suppliers, without the need of wandering around Asian megacities in search of a proper factory.
These marketplaces evolved to become nowadays stalwart of international trade. The most famous are Alibaba (China), DHgate (China), Global Sources (Hong Kong), eWorldTrade (China-U.S.), EC21 (South Korea), Tradekey (Saudi Arabia), and go4WorldBusiness (India).
If you are familiar with the Amazon marketplace, you will find that these platforms operate in a very similar fashion. Essentially, the seller puts the goods on the marketplace, with pictures and product characteristics.
The buyer just needs to place an order (there are minimum quantities) and wait for the product to arrive. Now, since an international B2B transaction can be complicated (have you ever heard of Incoterms?), most of the abovementioned marketplaces offer trade services such as logistics, trade finance, insurance, and even product inspection.
As I said, it is pretty much like shopping on Amazon.
B2B Marketplaces for e-Partnering
Suppose that a manufacturer of plastic products wants to launch a new line of business, for which it needs additional manufacturing capacity. The company could buy the necessary machinery on a B2B marketplace, then train its workforce, procure the raw material, and finally start the production.
Or the company could find someone with expertise in the field to which outsource the production. Essentially, a supplier to partner with for the long term.
This is exactly what B2B e-Partnering marketplaces do. Companies do not trade the single item but agree to partner together on a specific project.
As you might imagine, most of the requests for distribution agreement or outsourcing agreement. At the end of the day, the best way for a small business to sell in a new country is to find a reliable local distributor, such as a wholesaler, a retailer, even a niche online platform for the domestic audience.
B2B e-Partnering marketplaces do not look like a giant store with plenty of pictures of different goods. Rather they resemble a classified ads website, such as Craigslist.
In fact, if you need to find a business partner, you want to know as much as possible about the company, and why they want to carry out a certain project.
Contrary to B2B marketplaces for bulk purchases, B2B e-Partnering websites are still relatively young: the first one dates 10 years ago, and is called Enterprise Europe Network, or EEN, and stems from a government-sponsored project to help European companies partner with each other.
Another good website where to find companies that manufacture is Globartis, a young and technology-driven e-Partnering platform which connects European small and medium enterprises with the rest of the world.
Opportunity Network is an exclusive e-Partnering platform that is underpinned by a network of banks to improve compliance within the network.
UpInsales is a London-based marketplace focused on connecting manufacturing firms with local agents and distributors.
Conclusions
Technology has helped small businesses in many ways, and the ones who are capable of embracing it are able to perform well even during the current difficult times. Small businesses can now count on a number of online platforms, called B2B marketplaces, that can help them find buyers or source products abroad smoothly.
While the most established platforms deal with bulk purchases, a new breed of marketplaces called
e-Partnering helps small and medium enterprises find partners for the long term, such as a local distributor or a manufacturer.
