The global supply chain is moving online. The Covid-19 pandemic may have accelerated this shift, but the trend towards an online economy had been already under way for a while.
Massive product offering, competitive pricing, and convenience are the most defining traits of online businesses.
The disruption has been so dramatic that most people have yet to understand how the online economy really works: for example, can you tell the difference between B2B, B2C, B2B2C, and B2M?
Do not worry, I will explain in a moment.
At its roots, the online economy is underpinned by online marketplaces. These are global or local digital platforms where businesses and consumers meet to buy and sell goods.
Of course, we all know of the king of the online marketplaces, Amazon, but you will be surprised to know that there are many other different players that populate this industry, and each operate with its own business model.
From the perspective of a small company, we can sort the online marketplaces into three categories: dropshipping, e-commerce, and business matchmaking.
Dropshipping is the most common application of the B2B2C concept, which in plain English means business to business to consumer.
Essentially, for every buyer there are two different sellers involved. How can that be? Let us immediately make a practical example.
The rise of online platforms such as Instagram and YouTube has meant that a lot of normal people all of a sudden have a public. I am not talking only of high-flying influencers, but also of people with a few tens of thousands of followers.
Basically, these people find themselves in the rare situation of having a lot of potential clients but nothing to sell them.
Of course, the easiest thing to do is to sell some random merchandise: can be a book, a shirt, a mug, etc.
Once upon a time, the only way to do so was to contract a manufacturer for each product.
Nowadays, there is dropshipping. The influencer can use websites such as Oberlo (owned by the e-commerce giant Shopify) to outsource the entire part of the supply chain:
When the influencer receives an order (B2C), it is passed down to the supplier in Oberlo (B2B), who then ships the product directly to the customer’s door.
If you have ever bought something online you know what I am talking about. Perhaps what you do not know is that there are both B2C and B2B marketplaces.
B2C marketplaces are the likes of Amazon, Aliexpress, or Ebay. Some of them are retailers, i.e. sell products to consumers (Amazon, Aliexpress), others are just platforms where third parties sell to consumers (Ebay).
B2B marketplaces are a different story. Such platforms act as giant trade fairs: suppliers show their products, and buyers purchase goods in wholesale quantities.
So, even if you run a brick-and-mortar clothing shop, you may use such platforms to source socks from Vietnam for example.
Due to the massive rise in China’s manufacturing capacity in the last 30 years, the most important B2B marketplaces are Chinese.
Some famous ones are Alibaba, DHgate, Global Sources, and eWorldTrade.
The best way to describe online business matchmaking is through an experience that I witnessed not long ago.
A construction company received an order to renovate a hotel. For the exteriors, the company could use its own means. But for the interiors, the company needed to buy new furniture.
Then the question for the company was: shall I buy all the pieces that I need and install them myself, or shall I find a furniture company that can assist me as a partner throughout the project?
The company decided that the best way to proceed was to find a reliable partner. Since the hotel was in Munich, Germany, the construction company was looking for a partner from Southern Germany, Northern Italy, or Austria, with the ability to carry out large projects and the willingness to work together for several months.
This is exactly what business matchmaking websites do: the construction company posted its request and was immediately contacted by a few furniture companies that met the requirements.
Essentially, the idea behind business matchmaking is that you look for a partnership, not for a single sale.
One of the best b2b portals of this kind is Globartis, where companies can close any type of deal, including joint venture and sale of the business.
Another interesting one is Enterprise Europe Network, which is mainly focused on Europe.
The beauty of such platforms is that they can be used for several purposes: they are good for exporters and importers as well for investors, construction companies, retailers, manufacturers, subcontractors, etc.
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