In Feb 2020, Bessemer wrote about the rise of B2B or Vertical marketplaces and wrote the guidebook to identifying them and helping build them in the US. Since the start of the pandemic, Latin American B2B marketplaces are booming, and the trend seems to have been pulled forward by 5-10 years. You should read Bessemer’s article before reading this article.

The majority of LatAm’s biggest winners today are B2C companies. B2C has a huge head start. Take a look at neobanks: Nubank, founded in 2013, ($35B valuation, Warren Buffett investing $500M), leads the charge, followed by Albo (2016), Uala (2017) and more. The first significant neobanks for business got started in 2019/2020 with Clara/Tribal/Mendel/Cora/Oyster raising significant rounds.

In Latin America, B2B trails B2C but B2B is poised to close the gap quickly.

Ecommerce is booming, with 10 years of growth packed into 10 weeks at the start of the pandemic, and continuing to grow through 2021. New industries are being formed around logistics, ecommerce, and fintech to help serve these markets and billions of dollars are flowing to startups that are breaking out.

But why do businesses still have to purchase the vast majority (if not all) of their goods and services using antiquated, inefficient non-digital channels?

As Bessemmer wrote, the thesis is clear:

As consumers we can buy basically anything online: car washes, deodorant, home renovations, even Albino Pac-Man Frogs. So why do restaurants have to order their most basic supplies over the phone? Why don’t dentists have an easy way to compare latex glove prices from different vendors? And why do most gas stations manage their fuel purchases in email and Excel?

I constantly ask myself: why are Latin American companies buying offline, accepting terrible customer experience, when they wouldn’t stand for it in their day to day lives?

If I zoom out 10-20 years, what will B2B commerce look like? I can’t see a future that isn't mostly, if not fully digital, which means that current incumbents need to become more like Amazon or Mercado Libre, or marketplaces will come in and facilitate these relationships.

People know Latin America’s top consumer companies like Rappi, Cornershop, Nubank, Mercado Libre, etc but most cannot name a top B2B company. Why is that….when as Bessemer puts it:

...B2B markets are many times bigger than B2C markets (annual global B2B spend is more than $100 trillion), and they’re much more offline. Indeed, massive B2B markets like wholesale and logistics remain opaque and intermediary-driven, with orders and payments flowing via email, SMS, fax, and paper check.

The Good and Bad News About Latin American Vertical Marketplaces

In Latin America, there’s both good and bad news. The good news is that many B2B payments already flow digitally.

The bad news is that they’re done via inefficient, hard to track bank transfers. Think instant, free wire transfers for payments under $10k-$20k, and more traditional fee-based wire transfers for “high value” transactions. Some payments are still done via paper checks, and smaller payments are done via cash.

More bad news: many large Latin American companies force small suppliers to drive 1-2 hours, sometimes outside of the city, during a specific 2 hour window on something like the 3rd Thursday of the month to pick up their check.

In all other markets, from product and service discovery, to making the purchase, to delivery, to tracking to payments, Latin America is years behind the US. The vast majority of companies don’t use credit cards to make online purchases from their suppliers. They have to pick up the phone and deal with someone who is selling via pen and paper, or maybe a spreadsheet and a rudimentary understanding of email.

If you’re lucky, you might find some prices and products online, but they’ll be in a list (sometimes a PDF or downloadable excel), with outdated prices and product listings. You might also need to purchase from 10 different suppliers and pricing can be extremely different depending on your company or who specifically is calling.

Bessemer identifies the new trends that are creating opportunity for B2B marketplaces: