Clarify your strategy regarding Marketplaces or someone else will do it for you

Everyone knows Amazon, the multinational e-commerce company. In 2018, Amazon’s share of the US ecommerce market hit 49%. That’s 5% of all retail spent across the entire country. 55% of people go to Amazon.com site or app when searching for products.

In China, 90% of e-commerce business in B2C is conducted by Marketplaces.

In the first half of 2018, more than 85% of all retail e-commerce sales were shared by ten major market players: Taobao, similar to eBay and owned by Alibaba is the most important Marketplace in China, with 3 million shipments a day and 58,2% of retail Ecommerce sales share. (3).

Marketplace is not a new concept as it has been created in the 90’s when online transactions became secured. These online platforms allow vendors and customers to meet within a secure environment. The customers can purchase products or services directly on the website and the Marketplace redistributes money to the vendors after collecting a commission.

Illustration of the 10 largest ecommerce markets (by billions of $USD)

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Source: shopifyplus, 2018

Leverage captive audiences and exploit top-notch E-Commerce capabilities

Selling through a Marketplace is a good lever for businesses with limited resources, time or required skills to set-up and steer E-Commerce channel. 70% of small business owners declare that Marketplaces like Amazon and eBay have helped them to increase sales (4).Using Marketplaces such as Amazon, Alibaba, eBay, Sears, Newegg, etc. is an easy and reliable way for retailers to distribute their products or services to millions of potential customers.

Fish where the fishes are, be where the customers are, face the competition, take advantage of the traffic with customers interested with your products.

Online Marketplaces leverage traffic acquisition strategies such as search engine optimization (SEO) techniques. The Marketplace also prevents from being too dependent from Google. Each time Google updates its algorithm, it can have high impacts on the e-commerce visibility.

The Marketplaces offer a safe and technical environment including the control products distribution through the Order Management System and the payment infrastructure as it acts as a trusted third party between customers and partner vendors. Some Marketplaces can also manage a first level of after-sales service and claims. This provides top customer trust and satisfaction who does not question the security and reliability of online transactions.

You can take advantage of Marketplaces expertise with offering an optimal and seamless customer journey with debit/credit card already registered, one click purchases, one-hour shipping or delivery within one to two business days, quality and responsive customer service.

You may be wondering how you can get a bigger piece of the lucrative Marketplaces, but you should take a look and understand the platform’s key areas of opportunity and risks before jumping ahead.

Expand your International reach and take advantage of an efficient customer journey

The Marketplace is also a good way to reach customers in other countries, either by selling via a local Marketplace in a specific territory or one with an international reach. They can allow you to establish an International presence without managing the cost and supporting the risks and red tape that can come with selling directly.

As a distribution channel, you must control your product range, continuously check and monitor your pricing, emerge from the competitors by exploiting Trade Marketing capabilities offered by Marketplaces.

It requires to:

  • Appoint a leader and assign the resources within your organization, both human and financial to get started and especially monitor and steer this activity. Once your presence is set up on Marketplaces, you may encounter difficulties, such as claims, customer satisfaction follow-up, etc. Your rating and then your visibility within the Marketplace will depend on those criteria and it will directly impact your sales
  • Identify the right partners in terms of positioning, business potential, their ability to provide useful data and insights to develop your business
  • Set-up a high-level P&L for at least 3 years in order to define the growth path
  • Identify precisely the business potential for every Marketplace you activate to allocate the right level of resources, this is a no brainer for your future negotiations
  • Define the budget required for activation & promotion
  • Define your objectives and set-up the right set of KPI’s by partner and continuously monitor them to identify your optimization levers

In a nutshell, if you’re not mastering this distribution channel by yourself, someone will do it for you (distributors or competitors) and then, put at risks your pricing and business strategy.

In 2019 it’s a no brainer to clarify your strategy and approach towards this channel.

Axys Consultants team of experts are there to support you through this journey.

Célia El Bayed (Digital Marketing Consultant)

Sources:

(1): eMarketer, July 2018

(2): https://www.nchannel.com/blog/risks-of-selling-on-online-marketplace-sites

(3): ATKearney publication: China’s E-Commerce Market: The logistics Challenges

(4): https://www.businessinsider.fr/us/heres-how-small-businesses-can-benefit-from-online-marketplaces-2018-4

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