BNPL can be adapted to B2B... but with some caveats!
Buy Now Pay Later (BNPL) has of course become a convenient option for B2C, but its implementation in a B2B context requires many adjustments, as explained by Arnaud Soubien, CEO and co-founder of RollingFunds. Here he is interviewed by Aline Abeya, Sales Manager France and Benelux at Webhelp Payment Services.
We often hear people say: “BNPL is easy: there are many turnkey solutions that allow customers to pay in 3 or 4 instalments”. This is entirely true when the end consumers are private individuals… but transposing the B2C model to B2B, without asking the right questions, is doomed to fail. Why?
For many years now, with many B2C brands, there has been the option to pay in 3 or 4 instalments, without charge, as a private individual. It is also the case that BNPL is now an off-the-shelf product that can very easily be integrated into a marketplace type environment.
But it must be emphasised that current solutions are aimed at individuals and for average baskets of small amounts that can be charged to a bank card. From a B2B perspective, however, there are specific factors that must be taken into account, including in particular:
1 – Establishing a relationship remotely via KYC
When it comes to entering into a financial relationship, the law requires that due diligence be carried out to acquire a good “knowledge of the customer”. This is referred to as a KYC, or “Know Your Customer”, process. However, the procedures required to verify the identity of a customer differ greatly depending on the type of customer involved.
Individuals can of course prove their identity with an official identity document, but companies need to be able to prove their existence (with a certificate of incorporation, articles of association, etc.), and to identify their legal representatives (natural persons with the power to bind the company) and the beneficial owners (the main partners). The procedures to be carried out in the context of a B2B business relationship are therefore much more complex, and they differ from one country to another. They are based on automated or human controls, or a mixture of the two, as offered by Webhelp KYC Services.
2 – The basket total and the payment methods
In the context of a B2B business relationship, average baskets are usually much larger, requiring limits much higher than those granted to individuals – typically from fifty or so to a few hundred euros.
In addition to risk management issues, the basket total, and therefore the due dates, cannot be charged to a bank card as is the case for individuals, given their payment limits. One must therefore look at the means of payment commonly accepted by companies (direct debits, transfers, cheques, etc.) depending on the target clientele.
3 – The margin on sales
BNPL is generally offered to individuals free of charge: “pay in 3 or 4 instalments, free of charge”. The financial costs are borne by the e-merchant. And the fees are quite high, since they are generally in the 3-4% range at the time of the transaction (i.e. for an average financing period of 30 days, an APR of more than 30% per year). In contrast, the margin on sales for B2B is much lower than for B2C. The cost of BNPL must therefore be adjusted to take this into account.
4 – Risk analysis and management
Unlike BNPL for individuals, where risk analysis can be purely statistical, given the uniform nature of the population and the granular nature of the exposure to risk, the great diversity of companies requires a specific analysis: a CAC 40 company, a medium-sized company, a VSE/SME, or even a sole-trader artisan are not analysed in the same way. Evaluating the credit risk of a company requires specific know-how and a specific model which, in addition to company size, must take into account many parameters such as the company’s activity (B2B or B2C activity), specific sector or location related factors, etc.
But the strategy for deploying a BNPL offer in B2B cannot, and should not, be defined based on these considerations alone. For a BNPL programme to be truly successful and to reflect short- and medium-term sales targets, it must meet two conditions:
- it must be structured to serve the marketing and business strategy of the marketplace,
- and it must be flexible enough to adapt in response to future developments.
An international dimension is often present in B2B. What constraints apply?
An e-commerce platform or B2B marketplace will often connect buyers and sellers who are separated by borders. Cross-border transactions require the specific administrative, legal, regulatory, monetary and fiscal nature of the countries concerned to be taken into account, even if these countries are all members of the European Union.
It is therefore important for the BNPL solution to be designed to “integrate” this complexity at a national and international level, in order to protect the marketplace from any risk.
What about specific business factors? Can a B2B solution be standardised?
First of all, I think it is important to remember that, in the B2B world, BNPL has existed for more than a century, under another name, and in another form: the trade receivable, an invoice with a payment deadline. In France alone this amounts to more than 650 billion euros.
However, each sector of activity has its own market practice: for example, payment periods are not the same for the sale of fresh products as for the sale of equipment and fittings. In addition, commercial policies may vary from one company to another, depending in particular on how marketing is conducted , the type of customer and internal procedures.
That’s why, at RollingFunds, we are convinced that a B2B solution cannot overlook the actual nature of the business.
“The specific nature of each sector of activity, and the marketing and commercial strategy in the short and medium term, must be taken into account from the outset of the project.” – Arnaud Soubien
To take a concrete example, that of the fashion sector – where we work in partnership with Webhelp Payment Services – one has to adapt to the specific nature of the sector, in terms of both the countries involved and their purchasing habits and payment methods. Typically, a large order will be placed at the start of each season, followed by small restocking orders as time passes. Other types of business have different customs of their own.
Ultimately, very specific risk analyses and flow analyses need to be adopted, regardless of the business sector.
As an attentive observer of this market, I can tell you that the simple roll-out of a BNPL solution from B2C to B2B, without taking into account the specific factors involved, has always resulted in failure and been a source of frustration.
What B2B financing solutions does RollingFunds offer in partnership with Webhelp Payment Services?
Webhelp Payment Services provides a range of customer relationship management services including billing, collection management and the collection of trade receivables.
As part of their partnership, Webhelp Payment Services and RollingFunds have linked up their information systems to allow Webhelp customers to easily subscribe to a financing offer that is perfectly tailored to their needs.
In addition, RollingFunds provides financing solutions dedicated to the purchase of products and services – which positions us as a key B2B player in the BNPL sector.
For example, a builder can choose to pay the Building Platform, of which Rolling Funds is a partner, for their equipment, on a deferred basis or on credit (the BNPL offer).
Our solutions are tailored to B2B players, whatever the sales channels: marketplace, an e-commerce site, a store network, click & collect, etc. Thanks to our omni-channel approach, customers have access to their payment facilities on all sales channels – just as we do for the Building Platform.
I would stress that our technical solutions are very simple to implement, being based on SaaS and APIs.
The combination of our technology and financing know-how, with Webhelp Payment Services’ 35 years of experience in managing international buying and selling transactions and customer relations, allows us to offer a range of BNPL services with high added value and adapted to the context in which companies operate and their target clientele.
How does BNPL work in a B2B marketplace?
It all depends on how far a project has advanced. Indeed, the strategy for deploying a BNPL offer is not the same for an existing B2B marketplace, with an established clientele, as it is for a developing marketplace.
But, as I see it, the first step is a BNPL offer deployment strategy that is perfectly aligned with a company’s sales and marketing strategy: target customers, payment deadlines, payment methods, etc.
It is our belief that in a B2B context we need to offer a tailor-made solution, one that corresponds to the lifetime of the marketplace, its outlook, its risk strategy, and its financial cost allocation policy. It is essential that the BNPL offer is fully aligned with the marketplace strategy.
It is this ability to adapt that we are able to offer, with our partner Webhelp Payment Services and, thanks to our technology, all without any technical complexity.
The CV of Arnaud Soubien, CEO and co-founder of RollingFunds
Arnaud Soubien started his career in the capital markets. At Crédit Agricole CIB, he worked for nearly 15 years in the structuring of corporate securitisation transactions, at European and international level. After his initial experience in the general management of a Fintech specialising in factoring, in 2018 Arnaud Soubien created the startup RollingFunds, which aims to provide financing solutions to VSEs-SMEs directly integrated into a B2B business relationship.
RollingFunds has developed a technology platform to automate the granting and management of loans for VSEs-SMEs. The financing platform is directly integrated into the tools and organisations of its key account partners, suppliers and VSEs-SMEs.
RollingFunds offers 3 types of funding:
- 1-click credit,
- advances on sales or other receivables,
- the financing of purchases.
RollingFunds has just completed a new investor round with AG2R La Mondiale, CCR, PRO BTP, Truffle Capital and leading business angels, for a sum of over 5 million euros.
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B2B - Buy Now Pay Later, a new payment standard: 4 ways to stand out
Now is the time! The opportunities offered by Buy Now Pay Later (BNPL) appear to be massive for B2B. When offering their payment methods, platforms and marketplaces should choose to stand out from the rest, as recommended by Meriem Ouenniche, Client Solution Manager at Webhelp Payment Services.
This is no longer simply an option, it’s a standard: Buy Now Pay Later is experiencing exponential growth in the area of B2B. It is noted that this credit purchase option has been offered in e-commerce and B2C marketplaces for years by fintechs such as Younited Credit or Klarna, who are now transposing their solutions to B2B. Buy Now Pay Later (BNPL) allows marketplace operators, sellers and buyers to access deferred payment solutions.
But is this not “merely” a new credit option? Here are the arguments suggesting that this phenomenon deserves to be looked at more closely:
– It is true that credit is nothing new in B2B commerce, but we are conscious of a new desire on the part of Buyers and Sellers for a solution that is perfectly integrated with the shopping experience. This “way of thinking” comes as no surprise: millennials represent a significant part of the workforce in companies, and 73% of them are involved in B2B purchasing decisions*. As keen supporters of B2C purchases on ultra-optimised platforms (eBay, Amazon, Cdiscount, etc.), they aren’t ready to give up this quality of experience in the workplace.
– From the perspective of Sellers and the business platform, BNPL is seen as an opportunity to increase the value of the average basket, to enhance customer involvement and loyalty, to reduce financial risks and to focus on the business and growth rather than on payments.
– From the Buyers’ perspective, VSEs and SMEs are a very receptive target for the benefits offered by BNPL, as long as the operations and formalities are straightforward and fast. These companies are looking for more flexible and less restrictive alternatives to the credit solutions offered by conventional banks.
4 ways to stand out with BNPL
In a context of rapid change it would seem appropriate to offer Buy Now Pay Later in the following 4 areas of differentiation:
1) You need to offer a highly personalized shopping and payment experience
The buyers must feel understood, listened to, and that their preferred payment methods are taken into account. Analytics and AI seem to be particularly relevant in this new purchasing ecosystem, thanks to their ability to personalise the customer experience.
2) Your payment solution should make it possible for the seller to be paid more quickly (instant pay out) and for the buyer to pay on the payment date that suits them (which may differ from the one proposed by the seller)
Scoring plays an essential role in the analysis and evaluation of the buyer’s profile in order to define the appropriate credit line and thus limit the risk of non-payment.
3) Your payment solution needs to be fully integrated, fluid and seamless
In contrast, a complex payment experience will, in the long run, prove to be a deal breaker. This shows the importance of continuous, dynamic improvement of the user experience (UX).
4) Your payment solution needs to be comprehensive and flexible
To meet new market demands, it is recommended to offer BNPL solutions in order to support B2B marketplaces in their growth and diversification of their offer.
As a PSP (payment service provider), Webhelp Payment Services covers the entire spectrum of B2B payment services through a scalable offer adapted to the client’s needs: scoring, onboarding of buyers & sellers, pay in / out, white label invoicing, dunning, debt collection, credit insurance, BNPL, etc.
*According to a report published by Merit.
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B2B Purchasing and Marketplaces - 7 tips from 3 experts: Manutan, Zetrace and Webhelp Payment Services
Which Purchasing platform models are best suited to B2B? This is the question we put to three experts in the field: François Duranton, CEO at ZeTrace; Julie Dang Tran, Managing Director for Southern Europe at Manutan; and Julien Duméry, International Development Director at Webhelp Payment Services. Here are their answers in the form of 7 practical tips.
- Identify the two main families of solutions for making your Purchases
- Choose the purchasing model that suits your business size
- Consider the punch-out solution
- Check whether a “Manutan” model would suit your requirements
- Payment services: comply with the B2B codes
- To onboard your Sellers, rely on an optimal KYC solution (automated systems + human input)
- Key Accounts: don’t underestimate the difficulty of operating a marketplace
1. Identify the two main families of solutions for making your Purchases
François Duranton (ZeTrace): To help you get your bearings in the vast universe of corporate purchasing platforms, we can distinguish two families that correspond to two ways of buying: shopping vs purchasing.
- In a shopping model, which we can also call a “seller-side” model, strategic purchases are set aside, and we look for the best solution for everyday purchases – bearing in mind how easy B2C platforms are to use. B2B distributors often have an e-commerce site of their own and are sometimes grouped into B2B marketplaces. In the latter case, the current software reference is Mirakl – a publisher that came out of B2C. In this particular context we would also mention Izberg, which has a few B2B solutions, and Uppler, a specialist.
- In a purchasing or “buyer-side” model, – we find the historical Purchasing and e-procurement platforms. They are more supervised from a contractual point of view and make it possible to manage strategic sourcing, but they are less attractive from a UX point of view (research, navigation, customisation, single multi-seller basket, etc.). In this family of solutions we would also mention products such as SAP-Ariba, Coupa, Ivalua and Determine.
In both cases, these families of solutions should be compared with certain key elements: the company’s internal Purchasing processes, for example, or integration with its IS.
2. Choose the purchasing model that suits your business size
François Duranton (ZeTrace): The larger the size and requirements of a business, the less suited the marketplace model is. In general, a VSE or a small SME does not see itself as a “Buyer” and does not think in terms of a “Purchasing function”: it is often the manager who deals directly with major purchases. As for average SMEs, they sometimes have this function for class A or B direct purchases, but indirect purchases are poorly controlled: there is no question of having single invoices or grouped deliveries, for example. This need for supervision increases with the size of the company, as the Purchasing function becomes a focus of value creation. But the greater this need for supervision, the less relevant the marketplace model is: it is well suited to a many-to-many distribution model (users, buyers) while the Purchasing function of a large company is more of the few-to-many type.
Julie Dang Tran (Manutan): From our point of view, the marketplace model is actually not well suited to managing the peculiarities of a Key Account Customer. Suppose, for example, that special conditions are granted – discounts, payment deadlines, delivery conditions, etc. – these conditions will be difficult to impose or enforce on third-party Sellers in the marketplace. Similarly, it will be practically impossible to impose a price, since this would affect the Sellers’ margin.
3.Consider the punch-out solution
Julie Dang Tran (Manutan): To the family of purchasing solutions we can add punch-out systems. These are dedicated and personalised websites for a Customer – which Manutan can deploy for some Key Account customers, e.g. on an SAP-Ariba basis. When the Customer connects to Ariba, it will see a Manutan icon among its Suppliers: with a click, it can access the punch-outsystem. This is where it will find its usual purchasing processes, in compliance with internal validation systems. In fact, under this solution, we do not place an order directly: we issue a purchase request, which will then go through the company’s internal validation system, and finally be converted into an order.
4. Check whether a “Manutan” model would suit your requirements
Julie Dang Tran (Manutan): Class A and B purchases are well formulated in large companies, unlike class C purchases. However, the latter, which represent a very large number of references spread across all areas and departments, account for the majority of indirect costs, even though they are presented as small amounts. At Manutan, for these class C purchases, we start from a basic premise: the company manager or the Purchasing manager is responsible with regard to their employees. Indeed, the teams use these products on a daily basis, informed by safety, ergonomics, and often CSR.
The Manutan model is therefore based on product selection, which must meet certain criteria. In contrast, with a marketplace model – where it is the Sellers that are selected – the choice of products rests with those Sellers. This means that the Manutan model is focused on referencing selected products, in the context of a partnership with Suppliers. From the Customer’s perspective this makes it possible to guarantee the origin of the products and to supply the corresponding certificates, while providing them with advice and monitoring the commercial relationship.
5. Payment services: comply with the B2B codes
Julien Duméry (Webhelp Payment Services): Everyone knows that B2B processes differ from B2C processes, and that they must be scrupulously observed. For example, certain key operations must be initiated prior to payment:
- facilitate the creation of a customer account;
- ensure a customer’s solvency from the outset;
- manage the entire order up to invoicing (i.e. checking the content of the order and the invoice; an incorrect or incomplete invoice may result in late payment and compromise the relationship with the customer);
- offer a recovery solution, automated or human;
- facilitate reconciliation (to avoid costly manual processing);
- and finally, manage the payment transactions associated with B2B codes (bank transfer, direct debit, card, etc.).
We therefore recommend ensuring that the operations leading to payment are also managed in a spirit of value addition.
6. To onboard your Sellers, rely on an optimal KYC solution combining technology and human input
Julien Duméry (Webhelp Payment Services): To ensure that the B2B marketplace remains a trusted space, in full compliance with the latest regulations at all times, ensure that you have effective KYC procedures in place. These will enable you to onboard Sellers, regardless of their geographical location and their local legal constraints.
Offering your salespeople good onboarding experience is important. We recommend that you ensure human support is made available; this is essential, because automation cannot meet every need, especially when the items expected are not the right ones. This is why you should favour hybrid solutions that combine technology and human input, and ensure that they are perfectly integrated. What if the automated system has failed to resolve the problem? It sends the file to an expert so that they can provide an immediate solution, or enter into dialogue with the Seller in order to obtain the information or documents essential for finalising onboarding.
7. Key Accounts: don’t underestimate the difficulty of operating a marketplace
Julie Dang Tran (Manutan): Learning from some of the failures or difficulties encountered on purchasing platforms, it must be recognised that it is easy to underestimate certain key processes. For example, the onboarding of Sellers may be seen as nothing more than a straightforward large-scale administrative operation. The reality is much more complex and does not allow the operator to rely entirely on existing tools: for example, some reference suppliers of turnkey platforms, coming from B2C, do not provide a satisfactory response in B2B. To put it briefly: it’s not the same business as negotiating with suppliers when buying products from them, or referencing them on a platform by taking charge of all administrative aspects.
Julien Duméry (Webhelp Payment Services): I also think it important to advise great caution: some platform projects are started without taking sufficient account of certain obstacles. As far as Key Accounts are concerned, it is not enough to launch a project around a platform publisher, hire a payment intermediary, and then hope that customers will on their own initiative go to the new marketplace without communication, training of buyers/sellers, or prior marketing. In reality, these Key Accounts are then the only ones managing and running a marketplace – which is not actually where their expertise lies. Bringing this distribution channel to life is a real challenge! It will require integrating the costs associated with marketing and communications, or the recruitment and training of buyers/sellers, into the business plan.
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Whitepaper: The sun rises - The role and opportunities of B2B marketplaces in a post-Covid world
Following our last studies “The spring of B2B marketplaces” (2017), “B2B marketplaces are blossoming” (2018), and “The summer of B2B marketplaces” (2020), we once again joined forces with the strategy consulting firm Roland Berger and Mirakl to take stock of this new year of development for B2B marketplaces.
This new edition, entitled “The sun rises – The role and opportunities of B2B marketplaces in a post-Covid world”, goes further into the new development and opportunities for B2B marketplaces which played a key role in helping businesses continue their activities during the pandemic.
While the growth of B2B marketplaces has thus accelerated, they also face added pressure from B2C marketplaces, as customers’ expectations have also risen. Increasingly threatened by leading generalist marketplaces, B2B players have turned to diversifying their products and developing vertical services on highly controlled and specialized markets to protect themselves. This specialist approach shows clear success potential today and in the post-Covid era, as B2B marketplaces are expected to continue to grow at a strong rate.
We invite you to download this study, which addresses the following topics in detail:
- The relevance of B2B marketplaces in a post Covid-world
- Two distinct strategies for B2B marketplaces: digital generalist natives and incumbent B2B players
B2B Marketplace: how to reduce payment terms?
Payment terms, if not met, do businesses a disservice by depriving them of a source of funds. In the case of B2B marketplaces, which act as a link between professional sellers and buyers, it will be crucial to manage these deadlines by offering tailor-made solutions adapted to the business lines and operating models.
Although the Modernisation of the Economy Act (LME), which entered into force on 5 August 2008, made it possible to reduce payment terms and thus improve the cash flow of some suppliers, these payment terms vary greatly from one sector to another*.
On average, payment terms are 44 days for customers across all industries, with 25 days for commercial customers compared with 55 days for manufacturing industries. Within these same industries, companies pay their suppliers between 42 and 61 days on average.
How can one remove barriers and offer buyers payment terms while keeping control of the seller’s cash flow and exposure to risk?
This is the equation that operators must solve in order to convince buyers to finalise a transaction and to ensure that sellers use the marketplace as a strategic axis for growth.
As a payment institution, Webhelp Payment Services is used to working with different business sectors such as fashion, agri-food, pharmaceuticals and manufacturers. We offer marketplace operator customers solutions specific to their customer strategy, including maintaining control of payment terms and deadlines in order to reduce risk. In fact, it is up to the marketplace operator to define the rules that apply on its marketplace. It thus directs the buyer towards a risk-free but potentially prohibitive prepayment, or towards payment on the due date, which facilitates the transaction but places a financial risk on the seller.
The payment terms themselves contain a number of elements that facilitate risk management, such as payment dates or the method of payment (bank transfer, direct debit, financing plan, etc.). Also, this decision-making phase is even more crucial than the transactional phase because it will help avoid problems in the future.
Tailored solutions to reduce payment terms
In addition to its function of bringing sellers and buyers together via the platform, the marketplace makes it possible to automate the tracking of invoices until they are integrated into the interested parties’ CRM. Automation of the process thus allows considerable time savings between invoicing and payment, significantly reducing the payment date.
To reduce and control payment terms on your marketplace, our experts support you based on the profile of the transaction and the buyer with tailor-made solutions adapted to your situation:
- Is this a first purchase?
- Do you have qualitative information about the buyer and their payment behaviour (have they ever had outstanding payments to their bank? Do they have overdue debts?)
- What is the transaction worth? (a €100 purchase does not involve the same financial risk as a €50,000 purchase)
- Is the buyer covered by credit insurance?
Finally, it will be essential to set up a proper credit management process, following-up overdue invoices and a step by step reminder and recovery process (amicable, pre-litigation, litigation).
Our experts will recommend good practice to suit your situation:
- If it’s the first transaction between a seller and the buyer: focus on zero risk
In the case of a new customer it is preferable to offer only prepayment by credit card or bank transfer to reduce the risk of unpaid invoices (order not despatched until payment has been received).
If you know your customer, you can give them the choice of payment method. Alternatively, you can calculate the customer’s outstanding payments and offer the customer only prepayment if outstanding payments are already very high in your marketplace.
Either way, these management rules are decisions for which the operator is responsible and are applied in the marketplace via the PSP and the platform.
- The due date has passed
Above all, it will be necessary to manage an incremental approach to future payment reminders. A customer who is late in paying is not necessarily a bad customer. Also, it is advisable to send the first reminder by e-mail or SMS, then to space out reminders so that they are not perceived as harassment.
However, if after several weeks the payment has still not been received, we will recommend that you call in specialist collection agencies who will be responsible for contacting the customer (by post and telephone).
To conclude, while it is true that, in the context of how a marketplace operates, the risk of non-payment is borne by the seller, it nevertheless remains the responsibility of the marketplace operator to set the rules and more particularly the payment terms made available, the payment deadlines granted or the type of reminders when payments are in default.
These good practices apply internationally, adapted to normal practice in each country, something which Webhelp Payment Services does through its seven subsidiaries based in Europe and North America, making payments to more than 35,000 buyers in 35 countries.
* Based on the 2018 Annual report on compliance with payment terms
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The Summer of B2B Marketplaces
Following our last two studies “2017 – The spring of B2B Marketplaces” and “2018 – B2B marketplaces are blossoming”, we once again joined forces with the strategy consulting firm Roland Berger and with Mirakl to take stock of this new year of development for B2B marketplaces.
This new version, entitled The summer of B2B marketplaces: a bright future ahead for marketplace development, goes further into the new development and opportunities for B2B marketplaces.
We invite you to download this study, which addresses several topics in detail:
- The different maturities on the subject of B2B Marketplaces by industry;
- The 5 different strategies of B2B Marketplaces;
- The different approaches to launch such a project;
- A focus on the automotive spare-parts market based on the Marketplace model.
Trends 2020 – Upply is digitalising the supply chain and integrating Webhelp Payment Services solutions!
A preferred marketplace for transport and logistics professionals, Upply brings increased transparency and fluidity to the supply chain market. Highly innovative in terms of data and AI, Upply uses KYC and payment services provided by Webhelp Payment Services. For more details, we spoke to Christophe de Sahb, Business Developer at Webhelp Payment Services.
Launched in November 2018, Upply's mission is to help supply chain and transport firms control volatile freight rates by accessing prices and transport capacities in real time.
Several initiatives have followed:
- Launch of a service for real-time comparison of transport prices in 2018
- Launch of a price analysis and trends functionality in spring 2019
- Launch of a marketplace for road transport in France in July 2019
Data science, AI and Marketplace for supply chain optimisation
Upply combines business expertise and data science: the fast-growing company currently employs 110 people, including 9 data scientists, and processes 150 million data updates every week. It's a winning formula, since more than 700 companies have registered on the Upply marketplace since July 2019!
Marketplace offers its users – hauliers, shippers and charterers – a direct digital connection service and a valuable decision-making tool.
The platform collects data (prices, meteorological data, financial indices and economic indicators, etc.) and analyses it using mathematical algorithms and advanced machine learning methods.
Xavier Fraval, Product Director at Upply, details the company's approach: "Thanks to the marketplace, we give all players – large or small, old or new – free access to offers and requests that correspond to their transport needs, using a matching algorithm."
How Webhelp Payment Services manages KYC and Upply's payments
"We started working with Upply in January 2019. Thanks to the pragmatism of this start-up and its agile mode of operation, our KYC and payment solutions were able to be integrated into marketplace in just four months," explains Christophe de Sahb, Business Developer at Webhelp Payment Services.
As of July 2019, we have enabled payment by bank transfer (denominated in euros), which is heavily used in the B2B market. Bank card and SEPA direct debit payment will be available in early 2020.
As Upply states, prices are freely set and negotiated between the client and the carrier, with full transparency. For the marketplace service, Upply receives a management fee corresponding to 5% of the transport price, shared equally between the parties (2.5% for each).
A customised onboarding and payment solution based on a specific API
As Upply is 'API centric', it is natural that they chose this solution. "Our API solution builds on the one we successfully implemented for our Rungis marketplace customer", emphasises Christophe de Sahb.
Tight deadlines and a challenging level of demand for the Webhelp Payment Services team. "We had to work intensively to produce specific diagrams, because, for example, Upply wanted one invoice for the seller and another for the buyer for each payment", adds Christophe de Sahb.
In practice, these two invoices are produced by Upply and forwarded to Webhelp Payment Services, which is then responsible for overall reconciliation.
"We have prepared a specific system for Upply, from ordering through to delivery", explains Christophe de Sahb. That's why we organised technical workshops between the teams, particularly around certain key themes: payment, identification and vendor onboarding (linked to KYC and AML regulations), invoicing and reconciliation, and finally pay out (remittance of funds).
"Upply's tools and operating methods allow for a successful balance in relationships among all players in the supply chain, today in Europe and tomorrow worldwide. We are delighted to be of service in this great technical and human adventure", concludes Christophe de Sahb.
Also read:
B2B Marketplaces – Limits of the Marketplace model for Global Account customers (1/2)
B2B – Marketplace or Drop Shipping: It is urgent not to choose (2/2)
B2B Marketplaces – Limits of the Marketplace model for Global Account customers (1/2)
In B2B distribution, the new challenge is to massively expand the product offering. The Marketplace model has rapidly prevailed in this context. It is now showing some limitations, as François Duranton, CEO of ZeTrace, explains in this first column.
B2B marketplaces are gathering momentum! They are currently winning VSE/SME targets, especially for service-sector and non-strategic purchases.
But it is true that they are still facing some difficulties with Global Account and Government Contract customers, particularly for strategic or primary purchases.
Before going into detail regarding these difficulties, we may specify that there are three models for massive expansion of the product offering:
- the industrialized Drop Shipping model, where a distributor shows its customers the catalogues of suppliers who will perform delivery;
- the Marketplace model which establishes contact between vendors and customers around a trusted third-party operator; and
- a combination of these two models.
The advantages and disadvantages of these models are very different. For Global Accounts and Government Contracts, the Marketplace model has five main limitations.
1. Risk of legal requalification of the marketplace
On paper, the Marketplace model enjoys an excellent image. For example, it is very efficient for the delegation of tasks to the vendors – which take charge of catalogue onboarding, stock and price management, orders management and customer service, etc.
But the marketplace is based on a special business model, which could pose a problem for Global Account and Government Contract customers.
For example, the concept of personalized prices or prices negotiated with the operator is problematic, because, on a marketplace, the price is usually controlled by the vendor. But, if the marketplace imposes negotiated prices on its vendors, the latter could blame it for not complying with the standard intermediation model, i.e. doing “disguised drop shipping” – and this requalification could take place before a court.
Just recently, Cdiscount avoided a ruling of liability on counterfeit products sold on its Marketplace, in particular because it had in no way changed the information provided by the vendor, and had therefore remained in a role of hosting service and not publisher.
To meet the needs of these customers and to reduce the legal risk, the operator will therefore be obliged to take on numerous responsibilities (product compliance, tax reporting, customer relationships, etc.). And this complicates the pure marketplace model and has an impact on its profitability.
2. IT problems in ensuring an assortment for each customer
The Global Account and Government Contract customers tend to compartment their procurements: certain products, at a certain price, from a certain supplier.
The marketplace must therefore filter its assortments according to the customers who log on, and combine them with the negotiated prices.
This situation is not always well managed by commercially available solutions.
3. Constraint of the single invoice
For Global Account and Government Contract customers, they dread having numerous suppliers. They want to rationalize the full acquisition cost – which includes invoice processing, order forms, reconciliation of payments and deliveries, etc.
Hence the goal of reducing invoicing. But in the marketplace model, the current standard is as follows: if there are five vendors in a given order, that will result in five invoices.
Firms such as Webhelp Payment Services propose packaged third-party invoicing solutions. With this system, the operator signs an invoicing mandate with each of the vendors, which authorize the marketplace operator to issue in their name and on their behalf the invoices produced for the end customer.
The advantage of this solution is good standardization of invoices, which become easier to integrate by the customer and by the platform.
For example, the operator can compile all the monthly invoices in a statement of invoices, which greatly simplifies administration and reconciliation tasks at the customer level.
There is a limitation, however: certain auditors could consider that this invoicing becomes a “hotchpotch” and demand a personal account for each supplier. Ultimately, everything depends on the customer’s accounting strategy.
The only alternative solution to produce a single invoice is to switch to a dropship model, possibly supported by the marketplace information system: the operator creates the vendor listing catalogue, manages sales to the end customer and sends the order to the vendor, which manages dropship delivery to the end customer. This solution amounts to taking responsibility for the sale on the operator side (product compliance, taxes, etc.).
4. Rationalization of the supply chain
Global Account and Government Contract customers want to rationalize product delivery. Very often, they impose time slots for delivery, together with penalties. This situation is complex to manage for a marketplace in which each vendor manages their shipments.
There are solutions to the supply chain problem, such as groupage of deliveries in the warehouses of the marketplace distributor (cross docking). Then, this distributor manages deliveries in the time slots agreed with the customer.
However, these solutions are complex to implement, more costly, and they entail longer delivery times.
5. Globalized customer service
Another requirement: customer service will have to operate in the language and in the time slots wanted by the Global Account or Government Contract customer.
Possible case: a German vendor must ensure relations with a French marketplace customer. If this vendor is not capable of this, there must be a replacement solution.
In this respect, the marketplace must take charge of the costs that on paper it was supposed to save.
In the second article of this column*, I invite you to discover that the conventional opposition between Marketplace and Drop Shipping deserves to be left behind.
François Duranton, CEO of ZeTrace
3 key questions about your marketplace business model
One of the main marketplace elements you should consider is, of course, the business model and profitability. How can I develop my marketplace project into a profitable long-term business? Here are three key questions you should ask yourself to find out.
What ratios should I envisage in my business model?
By its very nature, and for the sake of profitability, a marketplace should not be managed by a large team. In markets where the commission rate is around 15%, the ratio 1 person to 5 million euros of business volume is an empirical figure to be considered. As for the profitability threshold, it seems to be around: 1 person to 1 million euros.
Another important ratio: the promotional budget. For some players, such as startups, the challenge is twofold: finding sellers and finding customers. Other B2B players - such as professional media (news sites, magazines, etc.) - certainly have the same problem, but they have an advantage in that they have a community and can activate acquisition levers (professional social networks, Google Ads, etc.). In both cases, it may be wise to devote a reasonable budget to acquiring customers.
The ratio of 15% advertising investment to business volume is often quoted for starting up a business, but everything depends on the type of business. At the end of the launch phase, this ratio can be as low as 4 or 5%. The promotional actions must be perfectly synchronised and fully consistent with the actual products offered and your brand advertising.
Should my sales staff be given a share of the profits?
Many B2B companies have traditionally relied on a network of sales representatives for whom they draw up a product sales commission plan.
But on a marketplace, the scenario is more competitive and the prices charged by sellers and their personal commitment must be taken into account.
The marketplace opportunity study is a good time to examine a new remuneration scheme in which no sales channel will feel penalised. Otherwise, some sales people or stores will not try to sell the goods displayed on the platform.
A profit-sharing scheme involving salespersons or stores in selling products on the Internet can be used to create a win-win scenario.
When can I expect my business to be profitable?
Take a look into the future: your marketplace has just been launched, the first customers are arriving and encountering the inevitable minor technical problems... But your business is not yet profitable. In B2B, as in B2C, this phase - which often feels as if you are in a commercial wilderness - can last between three months and two years. One of the challenges is to considerably reduce the length of this phase, with the help of experienced partners.
It will be followed by an acceleration phase, with satisfactory sales performance. This will typically last between one and three years, depending on the type of business.
Clearly, a lot of effort will initially be required. But make sure you don't try to go too fast and be careful not to cut corners!
Our aim is to make you aware of this reality: when an already established retailer creates a marketplace, this causes a split in the company and severe disruption that cannot be avoided. Advance planning is therefore essential to make this phase as brief as possible.
To put it differently, with a lot of pragmatism and a little humour: complex situations take a lot of effort!
If you liked this article, click here to learn more about our marketplaces services, or contact Christophe de Sahb (CDesahb@wps.webhelp.com).
Contributors:
François Duranton, director of Expertime Consulting
Martial Frugier, director of the Ecommerce, Retail & Transport business unit (Webhelp)
2019: marketplaces set to take the B2B market by storm
We look back at the B2B marketplace morning discussion to explain the main changes and challenges set to be feature in 2019.
“Our starting point was the observation that whereas in 2017 we were at the very beginning of the "B2B marketplace spring", we are now seeing it in full bloom!” announced Sébastien Murbach, a Partner at Roland Berger, at the opening of the morning discussion on 25 October 2018.
An analysis begun two years ago by Roland Berger, in partnership with Webhelp Payment Services and Mirakl, resulting in the annual publication of the B2B Marketplace Observatory and the #MPB2B newsfeed on Twitter.
“B2C marketplaces radically changed a lot of markets. Since 2017 it has been B2B’s turn to start taking on this transformation tool. Initially, many factors slowed its development, such as the complexity of B2B relationships, the extent of the negotiations, consultancy work and contractual formalities required,” continued Sébastien Murbach.
These factors are now under control, and 2019 will see an increase in the growth of B2B marketplaces. This is the way Alfred Hawawini, Director of B2B Business at Mirakl, sees it: "Mirakl, Webhelp Payment Services and Roland Berger all share the same conviction: B2B marketplaces are no longer an emerging phenomenon but represent a clear willingness on the part of B2B players to transform their business completely.”
The four B2B marketplace models
“In 2017, marketplace projects were very vendor-oriented,” explains Christophe de Sahb, Business Developer at Webhelp Payment Services. Today, these projects are much more focused on buyers and buyer expectations. That’s why we are now seeing a lot of procurement departments showing an interest in new marketplace models. This phenomenon is set to grow in 2019.”
This new four-model classification has been adopted by Mirakl, Webhelp Payment Services and Roland Berger:
1. Range extension (G&S) or the one-stop shop
Typically initiated by a distributor or wholesaler wanting to broaden its products and services offer through third-party vendors to create a one-stop shop. The objective is to drive up customer loyalty and create barriers to entry by new competitors.
2. Distributor platform or distribution channel extension
Initiated by a manufacturer or service provider keen to create new sales channels without compromising its existing channels. The idea is to encourage customer loyalty among existing customers and attract new ones through an optimised platform.
3. Internal hub or business model transformation
A distributor or service provider wants to start up or reorganise around a marketplace to facilitate the crossover between supply and demand in a relatively unstructured market. This need is felt mainly by buyers looking to rationalise their procurement accounting by referencing a single supplier for each procurement category (for example promotional items from Pandacola).
4. Procurement platform or procurement network
This service is initiated by the members of a group of buyers or procurement departments that are looking for an easy way to secure offers at attractive prices. This category of contract givers has four key requirements:
- suppliers must be in automatic competition
- an excellent e-commerce purchasing experience
- more straightforward accounting procedures
- simple, automated supplier management
Payment, a key element in the growth of a marketplace
Whichever model is chosen, it must offer a payment system tailored to the specific national and international requirements of B2B business. As Axel Mouquet sums up, the four challenges will remain the same in 2019:
- compliance with national laws and customs in different countries,
- the diversity of payment modes and methods,
- the asynchronous nature of different payment terms,
- managing invoicing
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Marketplace experiences: AccorHotels, Première Vision and Pandacola
Each of the four models has its own advantages and challenges. By way of example, we invited three companies to talk about their marketplace experiences: the AccorHotels group, the fashion show organiser Première Vision and the startup Pandacola, which is set to reinvent the distribution of corporate promotional gifts.
The AccorHotels Group: an international procurement platform that uses a procurement network model
“We negotiate the prices for the products and services required by our 4,500 hotels around the world,” explains Coline Pont, Chief Procurement Officer for the Southern Europe region at AccorHotels. Our platform must meet the requirements of some thirty brands with very different characteristics. The objective of this platform is to enable our hotel customers to make savings and to facilitate the procurement process for our hotels. Currently, we are also working to win new customers outside the AccorHotels group. This is one of our areas of development.”
Première Vision: bringing together fashion pros through a one-stop-shop model
The Première Vision marketplace is for textile industry professionals. It is open to exhibitors and visitors to Première Vision fashion shows in France and around the world. Its vocation is to foster exchanges between textiles and fashion industry professionals (distributors, brands, accessory manufacturers, etc.).
“This business is made up of a lot of self-employed suppliers. It is only loosely structured and the rate at which new collections come out is continually increasing. Our marketplace does not claim to replace human contact, but it does complement it well. Nearly 70% of the visitors to our website connect to our marketplace. Our main challenges lie in helping vendors who have little experience of using digital tools. That’s why we’ve published a lot of tutorials online,” says Gaël Séguillon, Première Vision‘s Head of Marketplace.
Pandacola: selling corporate promotional gifts using a business model transformation model
The Pandacola marketplace is set to market corporate gifts and goodies. “We are the only ones on the European market. This loosely structured market features 2,500 promotional-item retailers in France, only a dozen of which have a turnover of more than €10 million. Hence our desire to create a marketplace to structure this market starting in 2019. Very few of our vendors have embraced digital technology, so we work hard to help them and publish lots of aids", explains Arthur Manier, CEO and founder of Pandacola.
To learn more about the changes expected in 2019 and events in the pipeline, send your request to Christophe de Sahb (CDesahb@wps.webhelp.com).
