The marketplace model is not new – it was initially primarily used in the B2C sector, but in many industries, digital dealer portals have now become daily B2B tools for procurement and sales. Digital platforms enable companies to connect directly with suppliers, manufacturers, and service providers to procure products and services for production. Does this approach also work for a complex industry like the automotive sector?
The Status Quo
The B2B automotive industry is largely dominated by major automakers and their suppliers. However, there are other key players in the procurement market: participants such as mechanics, parts dealers, and workshops play a smaller but still crucial role in the provision of spare parts.
McKinsey predicted even before the pandemic that the share of e-commerce in the auto parts market would increase by 20 to 30 percent by 2035. The digitalization and socioeconomic circumstances of recent years have greatly accelerated this development and advanced digital processes in B2B procurement in the automotive industry. Digital networking, big data, and efficiency improvements are becoming increasingly important strategically for market interactions.
What Are the Advantages of the Marketplace Model?
Efficiency Gains through Direct Access
Companies can directly access a wide range of products and services without relying on specific intermediaries and their inventories. This accelerates the procurement process and significantly reduces administrative overhead.
Cost Savings through Transparency
The ability to compare prices and conditions from various suppliers and providers directly enables automotive companies to make more cost-efficient decisions and optimize their budgets. It also provides smaller market participants with the opportunity to establish themselves globally.
Promotion of Innovation
A B2B marketplace offers access to a variety of technologies and services that contribute to the advancement of processes and products. Companies can more easily and independently access innovative solutions or new products through a transactional platform, strengthening their competitive position. Considering the increasing competition from China in the same market segment, the European market must drive innovation, including in B2B procurement.
Time Savings and Supply Chain Acceleration
The marketplace model reduces delays or even breakdowns in the supply chain, as direct communication and simplified ordering processes lead to faster delivery times. Supply chain bottlenecks can have severe consequences, as experienced by many European manufacturers in 2023 who faced production disruptions due to the Ukraine war, preventing them from completing cars. This production halt cost the affected manufacturers billions.
Global Presence and Scalability
The marketplace model especially benefits smaller players by enabling them to be present in the global market and compete on equal footing with larger players.
The general benefits of the marketplace model are attractive and efficient. However, it is challenging to apply digital commerce platforms like a template to the automotive industry. Many prerequisites for successful marketplace integration are still not met.
What Are the Biggest Challenges?
The Complexity of Products
Products and spare parts in the automotive industry are highly complex, from the vehicle itself to various components and spare parts. The requirements and specifications of buyers can vary significantly, making the development of an effective marketplace challenging. Additionally, the trend towards electromobility is transforming the car entirely. As the components and spare parts of a vehicle change, so do the demands on the supply business.
Historically Grown and Inflexible Processes and Systems
Automotive suppliers and wholesalers operate with long-established, historically developed systems. Many of these companies struggle to collect, store, and utilize qualified data in a way that can be used for marketplace integration. Too often, data is dispersed across numerous departmental silos. The existing data typically only covers parts of the needed and demanded services and products, making it inefficient for use in a marketplace. Solutions to existing data silos can be found in our Automotive Blueprint.
Supplier Integration and Management
The automotive industry involves a wide range of suppliers integrated into the procurement process. Effective digital management of these suppliers and the integration of their products into a marketplace require an appropriate information architecture as a first step. Without this foundation, the basis for such a complex network is lacking.
Security and Digital Quality Control
In the automotive industry, safety and quality standards are prerequisites for bringing individual parts and products to the market. Ensuring that products offered on a marketplace meet required standards necessitates stringent quality controls and safety measures, which many market participants currently struggle to implement digitally due to a lack of resources and technologies.
Technical System Integration
A successful marketplace requires seamless integration with the existing systems of manufacturers and suppliers, including ERP systems, inventory management, payment processing, etc. The technical complexity of this integration process can become problematic if the technological prerequisites are not met and if existing systems cannot be linked to new processes. Today, numerous solutions and software providers offer middleware to connect existing and new systems, known as a best-of-breed approach. Various solutions for specific areas can be combined and connected.
Competition and Pricing
The price transparency mentioned as an advantage also carries risks: On a marketplace, multiple providers can offer similar or even identical products. This can lead to increased competition and price pressure, affecting suppliers' margins and strategic pricing.
Marketplace Acceptance
The acceptance of the marketplace model by both manufacturers and suppliers is crucial. If major automotive companies and key suppliers are unwilling to use a marketplace, the scalability and success of the model can be significantly hindered.
The marketplace model as a standard tool for B2B procurement in the automotive industry is still a vision for the future in 2023. The prerequisites and willingness are not yet in place for many market participants. However, the marketplace model definitely has the potential to sustainably transform the B2B automotive industry by driving efficiency, cost savings, and innovation.
Companies that technologically position themselves to leverage the advantages of such a digital platform can enhance their competitiveness and optimize business processes. In an increasingly digital and globally connected world, the marketplace model will undoubtedly continue to gain importance and influence the future of the B2B automotive industry. The market will expand, new services and players will emerge due to the trend towards electromobility, and new digital business models will develop.
For more detailed predictions, see our article on Connected Cars.
In our blueprint you will find solutions and specific recommendations for action.
