The state of B2B marketplaces in Europe

Since 2015, global online B2B (business-to-business) marketplaces grew 8.6x — and VC investments in them have grown by 4.5 times since 2017.

But recently there has also been a pandemic, a downturn, geopolitical instability and other market changes. So where do European B2B marketplaces stand today – and are they on track to match their B2C (business-to-consumer) counterparts? We asked the experts.

Strong growth despite downturns

The B2B market has shown resilience in the downturn. It had a total enterprise value of 214 billion dollars in 2022 despite turbulent market conditions, according to Dealroom.

Dealroom data shows that over 40% of B2B unicorns was created since 2021. And currently it is over 250 B2B marketplaces active in Europe and many more are being created.

Luke Trayfoot, chief revenue officer at payments platform Mangopay, says that while B2B marketplaces used to be fairly nascent, they are maturing at a rapid pace due to digitalisation.

“There is still demand [during the downturn] because some of the traditional ways of shopping or doing business are being overtaken by the digital front – with this you can get better results and more optimization at a lower cost,” he says.

“You’ve got your incumbents now scrambling to become digitally savvy, so there’s a big opportunity for startups and digitally native platforms to take significant market share.”

“The benefits of B2B marketplaces are indisputable: they give companies access to a wider range of suppliers, products and services, as well as increased visibility, efficiency and cost savings”

For Heath Lansbury, a B2B investor, the market’s growth during recessions and the pandemic is due to the inherent nature of B2B products and services that make them necessary for other businesses and industries to function.

“The benefits of B2B marketplaces are indisputable: they give companies access to a wider range of suppliers, products and services, as well as increased visibility, efficiency and cost savings,” he says. “As more businesses embrace digital transformation, B2B marketplaces will become increasingly important for completing transactions and building relationships between companies.”

VC funding lags behind

The B2B e-commerce market is expected to grow to $26 tn by 2028. While VC funding has also grown over the past five years, funding levels are still just 19% of their B2C counterparts, according to Dealroom.

“Compared to B2C, B2B models tend to have longer sales cycles and require a deeper understanding of the target market, making valuation more challenging. This complexity may prevent some venture capitalists from investing in such businesses,” says Lansbury.

“Compared to B2C, B2B models tend to have longer sales cycles and require a deeper understanding of the target market, making valuation more challenging.

But all is not gloomy. VCs invested 16 billion dollars in B2B marketplaces by 2021, which equates to 20% of global marketplace funding — 7.7 billion dollars of which went to key EU markets including France, Denmark, the UK and Spain.

Lansbury adds that to further bridge the funding gap, create more awareness of the opportunities in B2B, encourage VCs to have a deeper understanding of the business models – which will help them appreciate the long-term potential of these ventures – and more training and networking opportunities for B2B entrepreneurs to develop fundraising skills are all key.

Changing regulatory landscape

IN 2023, startups have been warned to expect a large number of changes to Europe’s rules and regulations. EU’s Digital Markets Act (DMA) and Digital Services Act (DSA) are two such regulations that aim to bring about content moderation rules and challenge the power that Big Tech enjoys, thereby leveling the playing field for the growth of European startups.

Lansbury says these regulations will result in stronger growth in the B2B sector. For him, regulations like the DMA and DSA are likely to create a level playing field for “companies of all sizes, prevent monopolies and promote innovation in the digital economy”, which in turn could open up new opportunities and gateways for B2B startups.

Trayfoot says the regulatory environment is only going to become more rigid with increasing digital adoption – and for payment technology providers, such as Mangopay, this presents an opportunity to add compliance as a service to their value proposition.

For the B2B market, this means that there will be smaller players entering the market, on their own terms, offering products that are already strong in compliance – larger companies may need more due diligence and be slower to implement the necessary changes. The DMA will set guidelines to stop Big Tech platforms from imposing unfair conditions on businesses and consumers.

“There was already the GDPR, the second Payment Services Directive (PSD2), the fifth Anti-Money Laundering Directive (5MLD) and so on, and now with the DMA there will also be a lot more scrutiny of payment transactions and transfers. But that’s part of it we offer as a service – the specialist guarantee that we understand our space, says Trayfoot.

Verticalization and impact on B2C

The expansion of B2B marketplaces can be linked to advances in three main areas of the industry: platforms for aggregating supply and demand for companies, purchasing tools and financing solutions. But in the future, vertical specialists – focusing on specific goods and services that meet the needs of a particular customer group – and managed marketplaces, which are marketplaces that attempt to improve the customer experience by being more involved in the execution of the product or service, are expected to generate and capture more value.

“The growing importance of digitization, verticalization and ‘B2B-sation’ of B2C is expected to drive the growth of the B2B market. So it is possible that the B2B market will continue to grow and reach similar levels to the B2C market in the coming years, says Lansbury.

The B2C market in Europe is expected to grow from 878.6 billion dollars in 2021 to $1,564.9 billion by 2026.

“The growing importance of digitization, verticalization and ‘B2B-sation’ of B2C is expected to drive the growth of the B2B market.”

Trayfoot says that as franchising, sourcing and wholesaling try to go digital, and entrepreneurship and start-up culture grow, digitally native businesses are flourishing and gaining more market share.

He adds that the convergence of different verticals will also be an interesting place to watch.

“Unlike B2C where you have a mall mentality with broader categories of goods that can be bought or sold, in B2B, typically platforms will set out to solve problems for an industry. So an interesting trend to watch is when you start to see these the hyper-verticalized industries converge and become more like a B2C marketplace as the offerings increase, he says.

Find out more about Mangopay here.