Sunday’s Business Insider had a great article on, Cargomatic, a company promising (as do many others) to be the “Uber for Truckers”. By that, Cargomatic means it will match shippers with goods to ship with truckers with excess capacity. On paper it is a great idea in a huge market: less than truckload (LTL) shipping. As with all B2B SaaS marketplaces, however, the challenge is not the total available market, it is solving the “chicken and the egg” adoption problem. (See here).
The Challenges of B2B SaaS Marketplaces
B2B SaaS marketplaces face many challenges addressed in the article:
- Problems with Adoption: All marketplaces need density, thickness, or liquidity (pick your favorite term) to succeed. It looks as though Cargomatic expanded to NY before this density was sufficiently achieved in its core market.
- Pricing: Pricing in a two-sided market is always tricky. Cargomatic charges both sides of the transaction and has a take rate of about 20%. (See more about Take Rates for B2B SaaS marketplaces here.)
- Tech-Enabled Service Versus SaaS Marketplace: The company pivoted to becoming more of a tech-enabled service, or brokerage, rather than a true SaaS marketplace. This issue recurs in many industries where end users are slow to adopt or transactions are very complex. (See here and here.) But, adding this layer of service adds costs and changes the nature of the business.
B2B vs. B2C/C2C SaaS Marketplaces
My favorite part of the article is a Cargomatic competitor’s description of why the Uber analogy is not a good one in the B2B world:
“The industry is changing rapidly because of new technology but the adoption curve is slow. This is not an industry where you have a Snapchat, where you give the app access to your contacts and have 150 million active users. It’s B2B and adoption is lower,” Salgado said.
“Lots of people describe themselves as the ‘Uber for trucking,’ but I disagree with that completely because moving people is much easier. With Uber, you just have the rider and the driver — two parties. And one in every 200 times there’s an operational issue: the rider left their cell phone in the car and he just writes to firstname.lastname@example.org and they figure it out.”
“When you’re moving freight, you have six different players touching the cargo. The cargo is worth X, there’s insurance, the driver, the dispatcher, pick-up at the warehouse, drop-off with the warehouse manager, sometimes there’s a broker, a shipper. Things happen all the time — the cargo is not ready, the truck broke down, the driver needs to rest because he drove 12 hours — all that type of stuff makes it more complex than on the consumer side.”
B2B SaaS Marketplaces: It’s all about, Adoption Stupid
The Business Insider article details intriguing personal drama involving founding versus “suit” CEOs, quota-driven salespeople, and competitive trash-talking (a la Silicon Valley). Look beyond the personalities. The bottom line for B2B SaaS Marketplaces is that the market is often big, and there is often a great profit to be made at a sustainable take rate–if you can get to critical mass. That’s the challenge, how to get there, not whether getting there is worth it!
When reviewing a new B2B SaaS marketplace the real question is: What is the adoption strategy? How will density, liquidity, or thickness of the market be achieved? There are five to ten ways to try to achieve adoption. A B2B SaaS marketplace better have a clear hypothesis on which to use (and some plan Bs as well). Otherwise, they will be in for a long-haul (terrible pun intended).