We’re amidst the so-called “great consumer shift”. The COVID-19 pandemic was the final push for consumers to begin adopting online marketplaces en masse. McKinsey found that the number of consumers who purchase online is expected to grow by up to 30% when compared with pre-COVID levels.
At the very heart of this shift are marketplace platforms – where multiple online businesses list and sell their products on a shared marketplace. Felix Meintrup, Director Partner Growth & Enabling Services at SCAYLE and ABOUT YOU, knows: “Marketplaces are loved for their convenience, greater product range, and reliable customer service – which is why customers tend to be more likely to come back for repeat purchases. If you’re looking for a way to boost your sales and build brand trust, online marketplaces might be right up your alley.”
So what exactly is an online marketplace? What are the main benefits of using it? What are the two main approaches that businesses can use to take advantage of online marketplaces? We’ll introduce you to the world of digital marketplaces and discuss how your business can benefit from this eCommerce trend.
What Are Online Marketplaces?
An online marketplace is a website where third parties integrate into the platform and sell their products. Some of the most popular marketplaces in the DACH region are Amazon, eBay, Zalando, and ABOUT YOU.
Sometimes marketplaces have their own fulfillment options – such as eBay’s Global Shipping Programme – but will most commonly leave shipping and handling of the product to the seller. Marketplace platforms integrate other apps and services into the marketplace – such as fulfillment, digital services, data, etc. One example of such a platform is Amazon and its Prime subscription model. In this case, Amazon warehouses all products and ships them as well. It can be more difficult to grow on marketplace platforms, as the competition is growing increasingly fast. Often, you need specialized expertise to really boost your sales on external marketplaces.
Yet, marketplace commerce is very popular. Instead of managing an own online shop or in addition to it, businesses are turning to marketplaces that already have an established infrastructure and large reach to generate demand for their products. Businesses using this approach tend to follow a multichannel approach, where the same products are sold on several different platforms.
A recent trend that brands and retailers are picking up to extend their own assortment is to become a marketplace themselves. This approach requires a more sophisticated shop system, though. Also, providing mature logistic and customer service solutions challenge many eCom businesses, so they need to seek partnerships with external providers to provide a convenient customer experience.
How can your businesses take advantage of marketplace platforms and start selling on online marketplaces?
External Marketplaces: Benefits
Selling on existing marketplaces is the easiest way to get started with marketplaces – and is the fastest way to increase your revenue.
Existing marketplaces offer the framework to get started instantly – so the time it takes to get your products live is dramatically reduced. Moreover, marketing is easier on marketplaces as these platforms have an inherent audience to take advantage of. The high user count of these marketplaces also means you’re more likely to boost your sales faster than you would on your own. Another benefit that boosts sales: Consumers tend to trust products on marketplaces – such as Amazon – a lot more. Why? They trust the returns and customer support process of platforms more than those of individual (perhaps unfamiliar) storefronts.
External Marketplaces: What You Need
To unlock an omnichannel experience using multiple marketplaces, you’ll need these two essential software products.
An eCommerce platform: The most effective way of managing multiple marketplace channels is to have a robust eCommerce platform in place. This will store your prices and inventory in one place, handle your first-party fulfillment, and provide you with your own storefront.
Marketplace management software: A platform to bridge your commerce platform – and the products you sell – with marketplaces. The idea is to leverage standardized APIs to all major platforms and improve access to multiple platforms. Some eCommerce systems even provide an already integrated marketplace tool.
How do you pick the right marketplace platform? You should look for:
Standardized API implementation
Out-of-the-box features allowing fast implementation
Dedicated, experienced support team
A ready-to-use feature set for pricing
Creating Your Own Marketplace: Benefits
What we’ve learned so far: Selling on marketplaces can be a great opportunity for your business. And guess what could be even more beneficial? Right: Diversifying your commerce channels and developing your own marketplace.
By creating a marketplace, you are in charge of your own destiny. And not only are you in control of the revenue of your own products – by bringing on third-party merchants to sell on your platform, you will open up another great revenue stream for your business. Most importantly: This is a huge opportunity to expand your product range and therefore enhance your customer experiences.
Most businesses who adopt this route create a marketplace as an additional channel – and will continue to sell on established external platforms to benefit from the best of both worlds, so to speak.
Creating Your Own Marketplace: What You Need
As you can imagine, building your own marketplace takes more resources and dedication than selling on someone else's marketplace. Let’s have a look at a few things you’ll need.
An integrated multi-merchant eCommerce system: Some of the big players develop their own cloud-based shop system from scratch. However, many marketplaces prefer to work with an experienced eCommerce partner to deliver the framework they require. An eCommerce solution should provide businesses with a more seamless foundation to build their marketplace on. Some vendors offer great built-in features to dramatically cut your time to market.
Marketing steering strategy: Building your own marketplace presents businesses with a unique marketing challenge. Your marketing strategy will need to build your brand’s reputation and build trust with your audience. This will require great marketers to successfully steer your own marketplace efficiently.
Offer a customer experience worth coming back to: Establishing trust and loyalty requires a customer experience that is a cut above the competition. This involves providing fast and free delivery, having a smooth and seamless customer experience, and offering killer customer services. Remember, to lure customers away from the established platforms, you’ll need to provide a customer experience that is on par, or even superior, to the big players.
Online Marketplaces in a Nutshell
Felix concludes: “As consumers increasingly turn to online platforms to purchase products, the importance of marketplaces will continue to rise. We believe the best way of orchestrating marketplace business is by using an approach which relies on synergies. This can be done by keeping all your product data centralized and steering your different sales channels depending on target group and strategy. Dimensions to differentiate on would, for example, be assortment, prices and discounts. ”
In addition to your own online shop, selling your products on other marketplaces provide quick and easy sales, strengthens your D2C strategy, and opens you up to brand-new audiences. Mature brands may also consider launching their own marketplaces, as this is a great way to build brand recognition and grow your business.
Either way, the backbone of your undertaking should be a well-designed marketplace management system that allows you to integrate into well-known marketplaces or provides you with the technology to craft your own bespoke platform. By partnering with an experienced eCommerce software provider, you will be able to tackle your marketplace commerce strategy.