July 12, 2024

To B2B Platforms Founders: Overcoming Common Challenges and Leveraging Advantages

To B2B Platforms Founders: Overcoming Common Challenges and Leveraging Advantages

In the current digital ecosystem, distinguishing between business-to-business (B2B) and business-to-consumer (B2C) platforms can often be challenging, particularly for small and medium-sized businesses (SMBs). I recently came across a compelling paper titled ‘Nuanced but important: A literature-based comparison between B2B and B2C platforms.’ In this article, I’ll provide a summary of this paper and explore a case study involving my startup, Lookr.fyi. As a B2B apparel wholesale marketplace, Lookr.fyi connects small and medium independent brands with suppliers and manufacturers. We will discuss how Lookr.fyi is addressing the challenges of B2B platforms while amplifying its strengths as a B2B player.

This article it wrote for Lookr’s internal team and those of who are interested in Lookr’s development strategy such as investors and deep users in the future.

B2B Challenges and Our Solutions
Photo by Neil Thomas on Unsplash

[Challenge] Order Size: B2B transactions often involve minimum order quantities (MOQ). Without meeting MOQ, your suppliers tend to ask you to pay for a sample fee to start your collaboration, where each apparel sample will cost you around $200 and 14 days to create it. Suppliers also don’t like to make samples because they don’t really make much money from there. The reason they ask for a sample fee is to make their businesses break even. On the other hand, this brings friction to new brand owners with low budgets because it is very common that you need to pay 5–10 samples from different suppliers to narrow down into one.

  • This challenge is manageable. Typically, suppliers set a standard MOQ. If you, as a brand owner, meet this MOQ, you can request a refund of your sampling fee upon placing a bulk order. As a platform, Lookr can help validate your business’s credibility to suppliers, reducing the sampling fee and enhancing the likelihood of a refund. This demonstrates to suppliers that you are serious about your business and encourages a more mutually beneficial relationship.

[Strength] Partnership Duration: B2B seek long-term partnerships. This commitment to mutual growth and stability is the strength of B2B. Conversely, B2C platforms thrive on individual sales, where transactional frequency can vary widely without long-term commitments.

  • As a platform, Lookr encourages all communication to take place within our system. This enables us to track your interaction history and assess the reliability of the suppliers you engage with. By accumulating this data, we can provide valuable insights to the entire community. Additionally, our robust credit system helps facilitate easier partnership formations and accelerates the development of your clothing line.

[Challenge] Network Effects and Market Dynamics: B2C platforms can more easily leverage network effects due to their large user base, enhancing the platform’s value with each additional user. In contrast, B2B platforms, with their fewer participants and tighter markets, find it more challenging to generate similar positive network externalities.

  • This is less of a concern for Lookr because there are over 100,000 apparel brands on record in the US, and we estimate there are 12 million brands worldwide. On the supply side, there are 300,000 apparel factories. These numbers suggest that the actual count of apparel brands could far exceed those on record. Therefore, Lookr has a substantial base of participants to foster strong network effects. We further enhance these effects by actively identifying high-quality factories and promoting them to customers who may know each other.

[Challenge] Market Specialization: B2B platforms typically cater to specialized industries like manufacturing, where products and services are tailored to specific customer needs. This leads to a fragmented market with significant product heterogeneity. In contrast, B2C platforms often operate on a broader spectrum, enabling them to realize economies of scope and cater to a wider audience without extensive customization.

  • This challenge is manageable and similar to the network effect issues caused by limited participants. In B2C platforms, sufficient volume compensates for a lack of customization, ensuring adequate market reach. This is less of a problem in the SMB apparel sector, given the substantial number of businesses involved. Moreover, Lookr leverages AI technology, which specialized in personalization. This allows us to extend customization capabilities through AI, broadening our target customer base. For instance, without AI, we might need to design a search engine specifically for women’s apparel to ensure quality matches. With AI, however, we can encompass nearly all apparel categories and facilitate detailed comparisons between suppliers at a granular level while still personalized enough to meet every user’s needs.

[Challenge] Innovation and Adoption: B2C platforms are generally quicker to adopt innovative technologies and business models due to lower friction and resistance from users. B2B platforms, however, tend to support and reinforce existing business practices, making disruptive innovation more challenging.

  • This challenge is inherent and not easily mitigated. The nature of business, often formed by groups, complicates decision-making processes. However, since Lookr primarily serves SMBs, this issue is less pronounced. We try to integrate our solutions without disrupting existing workflows. For instance, if our customers are used to building personal connections with suppliers through social media, we won’t compel them to switch exclusively to our messaging center. We still encourage the use of our platform for communication, as it helps keep conversations organized and we can be helpful in terms of facilitating easier resolution of any potential conflicts in the future.

In conclusion, we believe that the key to being a successful B2B platform lies in building trust between the platform, buyers, and suppliers. This means that our platform should ensure fairness in our recommendations, take responsibility when issues arise, and identify trustworthy stakeholders within the platform. We are committed to fostering these relationships with sincerity and integrity.