Unlocking Network-Effects and driving sustainability in B2B marketplaces

Mercateo is Europe’s largest B2B platform; in this open discussion with Managing Director Lars Schade, we explored how the company unlocks network effects and leverages them to build defensibility against Amazon. Lars also shared with us how he leverages data and product information to give customers the possibility of more sustainable product purchases.


Intro

In our first episode of the “Platforms 4 Future” podcast, we had a discussion with Lars Schade, Managing Director of the Mercateo Group. Mercateo is the leading B2B procurement platform in Europe, established some 20 years ago, in the year 2000, and therefore one of the most experienced network based businesses in the market.

Two years ago, Amazon announced their entrance into the B2B market; this announcement created a lot of “yeah” on the demand side, but also a lot of “oh no” on the supply side : a lot of suppliers indeed understood the domination and disruption potential of Amazon. The main question was : which industry was going to be  first?  As we know today, there is no industry safe  from becoming “amazonized”.


How focusing on the supply side helps Mercateo unlock network effects and compete against Amazon

Mercateo understood the impact straight away: they had a new competitor. But how could they win against such a dominator? Was there still room for Mercateo, or could there be a “winner takes all” situation in a few years? 

According to Lars Schade, “Mercateo is designed as a network, and as such, you have to carefully consider both sides – supply side and customer side; in short, we get our customers from the suppliers“ This short statement unveils Mercateo‘s strategy in the competition with Amazon :  focus on the supply side, not only the demand side.  

In B2B, if you only focus on the customer side, you will not stimulate supply-side-network effects. Consequently, there will be no supplier who says to his customers, „please buy my articles on this marketplace“.

Lars Schade, CEO Mercateo Group

On the consumer side “B2B business is based on strong one-to-one relationships with individual pricing, services and advice. To get into the consumer-side you have to lower the process costs to give them an argument to move to a marketplace.”, Lars Schade continues. The main reasons for customers to buy via marketplaces are not lower product prices. They already have those low prices, based on their individual procurement contracts. But what is still high, are the process costs. A marketplace therefore represents a “one-stop-shop” solution to lower these costs.

What about the supply-side?

The immense potential of network effects are very well understood by Mercateo. But what motivates a supplier to join the platform? 

“Joining gives smaller companies a chance to digitize and compete. Alone, they could not afford it, and they don’t have the competence today. Now, when they join Mercateo, they can tell their customers: if you want faster and digitized processes, please purchase via the Mercateo platform.”

In short : the platform is saving suppliers digital transformation costs. With “Unite” Mercateo supports this easy plug-and-play strategy, giving suppliers easy access to the marketplace and digitized processes to run their business. 

Today, the platform is hosting over 24 millions of products, and matches 1.5 million buyers with over 16.000 suppliers in Europe. They are present in over 14 countries with headquarter in Munich, Germany. Every day over 3.000 new customers are joining the platform. A healthy growth comforting them in their strategy.

But as easy as it sounds, it certainly isn’t.

“It is important for suppliers to understand the benefits of joining a platform, as well as to be able to articulate this to their customers. Otherwise customers will just leave and use Amazon. However, if the supplier understands the advantages, they will then influence the decision to purchase via Mercateo and not Amazon.”, highlights Lars Schade. 

As a result, Mercateo works very closely with their suppliers, supports them to get the onboarding right, and helps them to scale their business using the platform. That‘s their “customer-centricity” approach.

And sustainability?

When you orchestrate a market, you also have a big responsibility : .

Lars Schade believes that, “As a platform, one of the main stakes is to make the choice of sustainable products, transparent for everybody.” He‘s indeed convinced that you should not force the consumer-side to buy sustainable products, if your position is to remain a neutral actor in the market. But you can make those specificities visible, and give all stakeholders the choice to buy „sustainable“ or not. 

But this is, again, easier said than done. Mercateo, as every platform, relies on the data delivered by the supply side. “So you have to motivate the supply side to deliver the right data about products and their company.”, Lars Schade continues. 

Currently they still see a very low level of “sustainable” products purchased via their platform. Not because of missing data, but customers still prefer lower prices vs. sustainability. Hopefully, with the emergence of awareness and more and more companies incorporating sustainability goals into their corporate strategy, this will change soon.

Any tips on keys to success?

To conclude, we asked Lars about what he thought could be keys to success for corporates wanting to harness the platform economy :

“What I see is that neither side of the market (Suppliers & Customers) have a clear platform strategy. Before Corona, everything was fine, the economy was growing and lack of strategy was not so clearly visible, but now, it becomes really  obvious that clear strategies are missing.”

And we only can underline this statement: very few companies today have a clear platform strategy. Having a platform strategy does not necessarily mean building your own platform, but you need a clear strategy to leverage platforms in this digital economy – join, build, buy and/or partner. There are many different options, but you should pick one (or more) with the right focus.

Thank you Lars for the great insights. 


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