Do retail buyers really want to do business online?
Retail Watch | Jul 6, 2023
They were supposed to be the next big thing in wholesale B2B buying. The pandemic conditions of 2020 and 2021, when travel and in-person gatherings were severely restricted, seemed to create ideal circumstances for online rather than in-person ordering. The technology was said to be state-of-the-art and up to the task.
It turns out that there’s a reason they call it virtual: It doesn’t quite line up with reality.
The promise of B2B digital marketplaces remains just that—a promise that the medium will eventually dominate the wholesale trade. While these marketplaces exist, and some companies are using them for aspects of their business, they remain works in progress, stalling any optimistic forecasts that they would take over the industry.
There’s an exception to every rule, and in this case, that’s Faire. As in-person shows and markets return to near-pandemic levels, the ensuing shakeout in online marketplace competition has resulted in the San Francisco–based platform emerging as a clear winner. Founded in 2017 with serious private equity backing, Faire has been valued at $12.6 billion by some estimates, with its funding now topping $1.7 billion. The company’s four co-founders Max Rhodes, who remains the company’s CEO, and Daniele Perito, who stepped back from his chief data officer role earlier this year, in addition to COO Jeff Kolovson and CTO Marcelo Cortes are all veterans of the order-processing company Square.
Faire is privately held, so rock-solid information is hard to come by, but the company says that 700,000 retailers have used its platform to make purchases, and that it represents 100,000 brands selling in 50,000 cities. Tech industry advisor Contrary Research estimated that based on about $1 billion worth of orders, “Faire’s revenue couldn’t be higher than $250 million (25 percent take rate), and was likely somewhere between $130–$200 million in 2021.”
Whether Faire is profitable yet remains unknown. It has adopted generous payment terms, generally 60 days versus industry norms of 30 days. When it started, Faire also offered free freight and free returns, although that has been cut back more recently. It charges a 25 percent commission on all transactions, more than the typical 10 percent to 15 percent cut usually given to sales reps, who are not part of the Faire model.
If Faire seems to be the one platform that has—dare I say it—fared well, then Juniper is the one that has not. Created right before the pandemic hit but delayed several times before finally going live last year, Juniper was the creation of International Market Centers, the primary landlord for showrooms at High Point Market, and owner and operator to the design centers and seasonal markets in Atlanta and Las Vegas. While IMC put serious development and marketing money behind the venture—it reported investing more than $100 million—Juniper never really took off, and IMC pulled the plug on it in late 2022. Last month, IMC rebranded to Andmore and removed all direct transactional elements from its online platform, remaking it into a purely informational site for its physical markets and exhibitors.
Landing somewhere between Juniper and Faire is MarketTime, a platform owned by Crow Holdings, the parent company of the Dallas Market Center, but operated separately. MarketTime, which acquired the order-processing platform Brandwise in 2021, facilitates both physical orders and virtual ones, claiming to “represent more sellers and reach more buyers than any other company in the space.” Again, hard numbers are not available. MarketTime includes sales agencies in its model and also serves some sectors beyond gift and home, including apparel, outdoor, toys and beauty (Faire does too—indeed, home is only one part of its larger portfolio).
There are a few other smaller players working the digital marketplace space, including the subgenre of in-person markets that launch a digital twin, like Shoppe Object’s Shoppe Online or, across the pond, Maison&Objet’s MOM. That’s not to mention the 9-billion-pound gorilla Amazon—which has long had a B2B side, though it doesn’t get promoted anywhere near its B2C operation.
So, what’s been the difference between success and failure in all of this? And why haven’t these online marketplaces taken more share of the buying process? First off, “success” may be a relative term. Faire has built a very large business, but speculation suggests that it is not profitable. It remains to be seen how long its backers will wait to get their investments back. MarketTime has been a proponent of a decidedly go-slow strategy, building on the base of Brandwise but not making a massive financial investment, as its competitors have done.
The general consensus is that just as consumer e-commerce took a long time to ramp up before shoppers felt comfortable buying online, so too will B2B platforms. Right now, users have said they primarily will use them for reorders, or perhaps to explore new vendors and products. But the majority of buying continues to happen in person, and that’s unlikely to change anytime soon.
The home and gift industry, like so many well-established sectors in the overall economy, can be slow to accept new ways to do business. Wholesale buying online is likely to follow that pattern—at least for now.
____________
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.
Want to stay informed? Sign up for our newsletter, which recaps the week’s stories, and get in-depth industry news and analysis each quarter by subscribing to our print magazine. Join BOH Insider for discounts, workshops and access to special events such as the Future of Home conference.
