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U.S. Government Pilots $6 Billion Marketplace Opportunity

Growth of online marketplaces

Last November a group of McKinsey experts issued a long-term prediction regarding the growing use of B2B marketplaces. Seven months later, a major move by the federal government signaled that the consultants’ forecast was coming to fruition faster than anticipated.

Here’s the prediction, which appears in the consulting firm’s How B2B Online Marketplaces Could Transform Indirect Procurement paper:

“As demand grows, the breadth of product and service categories available on B2B marketplaces will expand dramatically, in turn making them more attractive to procurement teams. Over the next three to five years, we expect a marked rise in the proportion of indirect purchases managed via marketplaces. In effect, indirect procurement will increasingly become platform management—a shift that will require teams to tailor their indirect-procurement strategies more carefully.”

The government’s announcement illustrates how indirect procurement is evolving into platform management. The U.S. General Services Administration (GSA) awarded no-cost contracts to three e-marketplace platform providers — Amazon Business, Fisher Scientific and Overstock.com — “to test the use of commercial e-commerce portals for purchases below the micro-purchase threshold of $10,000 using a proof-of-concept (for up to three years),” according to the GSA press release.

Online marketplaces offer new opportunities for business growth

Marketplaces are a natural fit for government agencies to source and compare products from multiple vendors before making a purchase. The GSA stresses that this move to marketplaces will save money, reduce fraud, and greatly increase transparency while modernizing the buying experience of federal agencies. The GSA also estimates that open-market purchasing by the government represents an “addressable market of $6 billion annually.”

While that figure will capture the attention of marketplaces and online sellers, so, too, should the GSA’s focus on visibility. This pilot program is designed to help the GSA “gain insights into open-market online spend occurring outside of existing contracts” — a valuable feature that buyers increasingly expects from the marketplaces they use.

Bridging the gap for B2B buyers on marketplaces

One way to generate spending insights is by organizing spending data and presenting it to buyers in a convenient, actionable manner. That’s why, for example, Amazon Business now offers consolidated invoicing, to some purchasing organizations who have dozens, or even hundreds, of different purchasers. Besides consolidating those invoices, Amazon Business and other marketplaces also deliver purchasing analyses that pinpoint opportunities to save money and highlight other opportunities.

Here’s where I’ll venture a prediction of my own: As more large business and government procurement functions modernize their purchasing approaches, more marketplaces will offer consolidated billing and other enhancements that help reduce data-management and data-analysis strains on buyers.

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