Marketplaces have devoured ecommerce; the long-term viability of any consumer product business will come down to its ability to reach and interact with marketplace customers. In short, every brand needs a clear and considered marketplace strategy if it is to thrive in this rapidly evolving retail environment.
So where do marketplaces fit in as part of your broader strategy? That depends on your core business objectives.
Of course, you may see the marketplace model as a simple means to acquire new customers, boost sales and increase your brand’s visibility from high-traffic channels. But with over 450 marketplaces to choose from globally, there are so many more exciting possibilities that will have a much deeper effect on the very nature of your business, as well as its long-term success.
Marketplaces are far more than just a sales platform: they’re a tool you can use to revolutionise your company.
Testing new markets
A recent report published by research firm Forrester predicted that cross-border ecommerce would reach $627 billion by 2022, accounting for 20% of total ecommerce. Expanding cross-border is not without challenges, whether that’s because of product localisation, payments, managing delivery expectations or, of course, the cost of driving sales in the first place.
Yet for any business looking to trade cross-border, marketplaces represent the quickest, most efficient and cost-effective way of testing new territories and markets. Indeed, for brands looking to expand overseas, marketplaces mean the cost of acquisition and associated risk has never been lower.
Leveraging Amazon’s network of European fulfilment centres is the clearest example of how a business can quickly penetrate new territories without any of the complexities that would typically face brands looking to expand across national borders.
For example, Amazon’s Pan-European FBA program enables sellers to place their inventory closer to customers in Europe’s dominant markets (UK, France, Germany, Italy and Spain), fulfilling orders at a lower cost and far quicker than most brands could ever achieve using their own logistics. Moreover, Amazon deals with all customer services, localised for the relevant region. Naturally, products are made visible to millions of customers throughout Amazon’s European marketplaces.
As a result, marketplaces allow businesses to test the demand and viability of products in new markets without the need to invest in a costly ecommerce site, localised currency payments, or even bricks and mortar stores.
When it comes to forming a strategy for international expansion, marketplaces are the most efficient and cost-effective way of gaining valuable market insight to support a more comprehensive regional roll out.
Brands are increasingly looking to re-exert control over their products and brand message through marketplaces. In 2017, after years of resistance, world-leading sportswear brand Nike began a pilot program on Amazon. While many believed its primary motivation was to increase sales or market share, this was far from the truth: it wanted to take back control.
At that point in time, Nike was already the number one clothing brand on Amazon; a search for its products returned approximately 73,000 results. The problem for Nike, however, was that it had no relationship with the sellers responsible for these listings, and as such there was no consistency underpinning how the brand was being presented to millions of consumers viewing it on a daily basis.
Amazon works with brands through its Brand Registry function to help them protect their intellectual property, safeguard against counterfeit products, halt unsanctioned third-party sales, and accurately represent brands across the site.
It’s not the only one. Indeed, the majority of major marketplaces have rolled out brand protection measures. eBay, for example, operates its Verified Rights Owner programme, which supports brands that want to protect their IP across its platform. These measures have the dual purpose of overcoming brand reluctance to sell via these channels, but also ensuring marketplaces continue to be regarded as trusted shopping destinations for the consumer.
When approaching marketplaces, your brand strategy must focus heavily on controlling who sells your products, as well as how and where they sell them.
Amazon is now the most popular place to search for a product online: in late 2018, Jumpshot discovered that 54% of all searches for goods online are made on its network of sites. Brands now look to leverage the dominance of marketplaces with sponsored placements aimed at driving brand awareness as much as sales themselves. Indeed, according to eMarketer, Amazon advertising is growing six times faster than Google and Facebook, with a 122% increase in platform revenue in 2018 alone.
Marketplaces have historically been seen as sites that sell products, rather than ones that build brands, but this is simply no longer the case. In a 2019 Feedvisor survey of 500 brands, 59% of respondents claimed that “driving brand awareness” was a major reason for advertising on Amazon.
The top three marketplaces now have a total of nearly one billion users, and brands now have the tools to engage with these customers at every stage of their journey. As such, a clear brand promotion strategy must be closely aligned to wider business objectives in any marketplace plan, especially given how effective marketplaces are at driving connections with both new and existing customers.
While many brands want to run mainline products across marketplaces – effectively mirroring their ecommerce businesses – an increasing number of brands are utilising marketplaces as a channel to sell discounted, off-price products.
Earlier this year, eBay launched its Brand Outlet, which features heavy discounts on goods from renowned brands such as Adidas, Bose, Ray-Ban, Samsung and even Rolex. Meanwhile, other marketplaces operate entirely on a discounted, deal-driven model.
Privalia, as an example, is an online fashion outlet operating across Spain, Italy, Germany, Brazil and Mexico, with more than 15 million users worldwide. Brands including Adidas, Lacoste, Converse and Calvin Klein have found great success here.
Using marketplaces for liquidation can help brands better manage their stock position, essentially treating sites like eBay as a virtual outlet where they can shift large volumes with markedly better margin than traditional clearance avenues.
Excess inventory and terminal stock is an ongoing struggle for retailers and can be a very costly one. Not only does it take up valuable warehouse space, it often results in challenges around cash flow and supply chain management. Having a clear plan in place for inventory reduction can be invaluable and marketplaces should be considered as part of this wider strategy.
One size doesn’t fit all
These example strategies are by no means the only ways a business can get the most out of marketplaces, and every company using these platforms will combine different elements as they see fit. But as marketplaces expand and evolve, even more possibilities will emerge; this only highlights the importance of acting quickly to set a strategy in place, so new developments can be responded to as and when they arrive.
The success and viability of a marketplace strategy relies on the level of understanding of those working within or alongside the business. Marketplaces are here now, and will only exert more dominance in the future. Without drawing on the experience the right people, you’ll be left behind.
Finding prosperity through marketplaces means having an open-minded and flexible strategy that can be quickly, constantly tested and adapted – much like the marketplaces themselves are refined on a daily basis.
Learn more about the incredible opportunities that marketplaces can provide brands by downloading our State of Marketplaces Report.