Second-Hand Is The New First Choice — B2B Marketplaces

B2C second-hand marketplaces, have become a “no-brainer” for several years. From eBay in 1995 to Vestiaire Collective, Vinted or Back Market, there are tons of actors that are a real part of our day-to-day life. The B2B marketplaces different story, as it has a lower maturity. If a few companies such as ServiceTitan, Flexport, Ankorstore and Sennder have emerged, there are still a lot of room and even more in the second-hand segment. B2B second-hand marketplaces faces very specific challenges. Here are a few lessons that we get from our investments in Hubcycle (ingredients), Save Market (electronic) and Faume (Fashion) but also Back Market and Geev where we have been investors for years.

There are very strong long-term fundamentals on this market. According to recent market research, the global B2B marketplace accounts for $21k Bn in 2022 with 14%+ CAGR, second hand is still a super small slice of this cake.
While they face the traditional challenges of B2B marketplaces (liquidity, transparency, volume VS take rate, repeat VS AOV…), second-hand add specificities:

Standardisation: One of the main challenges is the standardization of a heterogeneous supply. Many B2B second-hand marketplaces struggle with ensuring that the products offered for sale are of consistent quality and are accurately represented.

Operation: B2B requires more turnkey solutions than for B2C. This is one of the reason why we backed Faume in the Fashion industry as we consider that you need to embrace the complexity on the market including the operation. Offering simply a layer of software is appealing in term of simplicity but probably do not address the needs of your B2B clients.

Trust: The need for a strong customer service and a MVP that is not too scrappy in term of service provided is critical. In B2B, you have no second chance…

As a founder, you have to understand early on the state of maturity of your market and what are the key drivers of your buyer. We consider 4 main drivers for second-hand B2B marketplaces. Their respective weight is very different regarding the verticals. This analysis will also help you to target the right sponsor internally and the best way to sell your product.

Affordability: In a period of high inflation the cost of raw materials can skyrocket, the opportunity rely on the cost that you can obtain. In this situation, buyer is the right person to reach in the organisation.
Examples: Market with high dependencies to energy, transportation cost or international such as ingredients, spare parts or raw materials.

Carbon impact from consumer pressure: In this case the buyer is probably to find in the marketing team. While this use case will be more common in the future, we consider this is not the main driver for the buyer yet. As carbon accounting will become a standard, it should grow over time.
Examples: Fashion, electronics, …

Carbon impact from regulator’s pressure: Your sponsor is probably to find in the compliance team.
Examples: E-commerce

Availability: The current economic situation with tension among the production and the supply chain and international turmoil favor local second-hand as cycles are shorter.
Example: Market with shortages such as electronics, batteries or ingredients

In the same industry, drivers will definitely evolve over time.

While B2B second-hand marketplace is still a new segment, the main challenge for the early days of a marketplace is liquidity. As they are already launched and they already have liquidity, a B2C second-hand player definitly has an advantage.

However, B2B and especially with corporates requires a very specific mentality, marketing and processes and we do believe that even in categories that could be in common with B2C, pure B2B player will take a lot of room.

We have a strong conviction that Europe is the right place for this new generation of champions to emerge due to few drivers:

  1. Early regulation that is establishing new standard: The European Union (and France at the forefront!) has taken a proactive approach in regulating to push the circular economy. EU ETS, Life Cycle analysis, no waste policy or regulation on energy efficiency are great examples. Early regulation will participate to create the future standard outside of Europe in the future providing a first mover advantage for European companies.
  2. Dependency to other countries for its energy: The main part of European countries are dependent on other countries and even other continent for their energy. Circular economy is one of the lever to become a bit less dependent on it.
  3. Dependency to importations: The recent French polemic about its dependency to China and Asia for a lots of strategic products has shocked. Circular economy is one of the lever to reduce this dependancy.
  4. Strong awareness from the European consumer: European consumers have demonstrated a high level of maturity when it comes to adopting second-hand goods and services.

In conclusion, the B2B segment of the second-hand market is still in its infancy, with significant potential of growth and value creation. The existing challenges represent great opportunities for innovative startups to enter the market and make their mark as leaders. At daphni we definitely want to back the founders that will address this way the challenge of the century.



VC @daphni

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