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Insights

Making the most of your marketplace might: All-important strategies for success

The dominance of marketplaces means they can no longer be overlooked, but it’s not as straightforward as treating the channel as a simple add-on to a business strategy.

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Making the most of your marketplace might: All-important strategies for success

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.

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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.

Brand control

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.

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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.

Brand promotion

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.

Outlet product

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.

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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.

Insights

Brands and marketplaces: The relationship that can't be ignored

After responding to the rise of ecommerce and social media, plus the changing high-street landscape, brands are once again evolving in line with millions of customers, who are overwhelmingly turning to marketplaces for their retail needs.

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Brands and marketplaces: The relationship that can't be ignored

In the early years of Twitter’s existence, very few brands considered it a viable way to meet specific consumer demands. In 2019, it’s used by thousands of companies as a primary means of communication.

Now, brands are once again evolving in line with millions of customers, who have overwhelmingly turned to marketplaces for their retail needs.

Since its inception in 2006 as a microblogging service, Twitter has morphed into a social media giant with 330 million active users; what was once a means of recording day-to-day lives has turned into a key marketing channel for thousands of companies, with many putting it at the heart of their brand strategy.

When looking at the changing relationship between brands and marketplaces, parallels with Twitter’s evolution cannot be clearer. Brands have long been wary, and cynical, about marketplaces. Many initially viewed them as glorified jumble sales, and in the early stage of their existence, this was a fair perspective to have.

However, marketplaces have now entirely reshaped the ecommerce landscape and, just as Twitter has changed the way people communicate online, marketplaces have fundamentally changed the way consumers shop.

Big businesses leading the way

Until recently, the common belief shared by the majority of brands was that selling via marketplaces would weaken brand identity, affect the legitimacy of their offering, and ultimately surrender control of the customer to a third party. Although some of these are understandable concerns, brands are now having to weigh them up against the countless benefits that come with trading via marketplaces.

A recent UPS survey found that 96% of US and Europe consumers shop on marketplaces. It’s higher still in Asia, where 98% of customers use them. Brands are now waking up to the realisation that they need to be where the customer is and, as such, marketplaces are fast becoming an integral part of their growth strategy.

BMW was one early adopter, launching its BMW Direct store on eBay way back in 2011. The brand understood there was an existing, yet untapped, customer base searching for its products on eBay, but it couldn’t access them. BMW is a clear example of a leading global brand which has a successful marketplace strategy as an integral part of its broader ecommerce model, and now sells across multiple marketplace channels, including a branded store on Amazon.

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Another standout example is Nike, the world’s biggest sports brand, which decided to launch its brand directly on Amazon.com as part of a pilot initiative in 2017. Rather than a desire to capitalise on the huge traffic levels, Nike’s decision was driven primarily by a desire to re-exert control over its brand, as thousands of Nike items were already being sold by third parties on the site.

Nike ended this pilot program in late 2019, but its two-year commitment to the platform proved that even the world’s most recognisable sports brand could no longer deny the power of marketplaces.

These powerhouse brands are certainly not alone. A recent survey by Feedvisor found that over half of US brands are selling on Amazon and over 80% of these are looking to expand to other third-party marketplaces.

Indeed, an increasing number of companies are shifting their entire ecommerce offering to a marketplace-led model. A good example is the long-established Hallmark, which has a non-transactional UK site that directs customers to its branded Amazon store.

A change of tack

Brands that previously exhibited reluctance to explore marketplaces are now looking beyond outdated perceptions and facing up to the reality they need to use them to succeed in the long term. Ultimately, they have little choice. In 2018, the top 100 marketplaces sold $1.66 trillion in merchandise globally, accounting for over 50% of global web sales. This figure is up 19.6% from the previous year, and shows no sign of slowing.

Accelerating this growth is the fact that major marketplaces are working hard to remove the last remaining barriers to adoption by brands of all sizes and offerings. For example, Amazon now offers an array of brand-building tools and services, with a large degree of success. These include Amazon Brand Registry, which is designed to help sellers protect, control and promote their brands, as well as the recently launched Transparency program, an item-level authentication service aimed at preventing counterfeit products.

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Asian competitors are also taking note, specifically in the ways to attract investment from Western businesses and consumers. Earlier this year, Tmall Global unveiled key initiatives aimed at supporting brands of all sizes to enter the Chinese market and access the company’s 307 million active buyers.

Tmall Overseas Fulfilment is a new solution for brands that want to test their products on the largest cross-border platform in China. Additionally, the marketplace launched an English language website aimed at expediting the process for brands looking to introduce their products to Chinese consumers, further removing the hurdles that once prevented brand entry into the market. Indeed, the marketplace plans to bring in $200 billion worth of branded goods into China over the next five years.

There for the taking

While it’s true to say the customer is the major factor driving brands to marketplace selling, marketplaces themselves are catering to business requirements in order to accelerate and facilitate uptake.

The leading players across the world now offer the infrastructure, reach and scale for brands to grow and develop their entire offering. Every major marketplace is launching payment models, warehousing options, fulfilment services, advertising solutions and even lending opportunities for selling partners, giving them all the more reason to work with them.

Those remaining businesses resisting these undeniable positives of marketplace selling simply need to remember that, as was the case with Twitter, they need to be where their customers are.

In other words, they know they can’t beat them, so why not join them?

Learn more about the incredible opportunities that marketplaces can provide brands by downloading our State of Marketplaces Report.