Did you know that 45% of Amazon’s business is now conducted via Amazon Marketplace? Retail giants — including Walmart, Sears and Best Buy — are also launching their own online marketplaces. The wave is coming!
Online marketplaces are everywhere, and retailers should consider not just selling on established marketplaces, but creating their own. By opening up their websites for select sellers to list products on, retailers can increase the volume and breadth of products, keep shoppers on their website and open up a significant and lucrative new e-commerce channel.
Can any retailer really afford to ignore the potential of launching an online marketplace?
The Rise and Rise of Online Marketplaces
Online marketplaces are one of the most significant retail trends over the past five years, driven by Amazon’s success, as well as other retailers’ marketplaces. At Mirakl, we conducted research earlier this year that showed that 95% of consumers have purchased from an online marketplace. More than eight out of ten shoppers said that online marketplaces save time, improve choice and are more practical.
Despite this, not everyone recognizes the merits of an online marketplace. When I first meet with retailers, I often sense an initial fear of this strategic business shift. (“Not yet,” “too Amazon,” “we have enough products”…) But if you have an average online conversion rate of, say, 2%, can you continue missing out on this opportunity? Many online merchants don’t realize that with their competitors a click away and without richer product options online, their e-commerce offering can seem like walking through a half-empty physical store!
I recall that the CEO of Darty, one of our European customers that specializes in electronics and has 224 stores and a very successful online presence, once thought that online marketplaces were a gimmick or a fad. Barely nine months after launching, Darty’s online marketplace is now a major success, offering new product categories as well as tens of thousands more products. It has, in the words of that same CEO, Regis Schultz, “provided us with a revenue stream that we simply wouldn’t have had without a marketplace.”
Marketplaces are an efficient way to create an “endless aisle,” expand the retailer’s brand territory and better engage with online shoppers. They’re suitable for almost any sector, whether B2C or B2B. But there are a number of marketplaces that aren’t delivering what they should for the retailer in question. This is because they aren’t following the three pillars of success that every good online marketplace should have.
An online marketplace simply cannot succeed without the right technology behind it. A marketplace is complex, involving many different parties: buyers, sellers and operators. It also requires consistent product data, effective workflows and great seller quality control.
No online marketplace can function without the right commercial proposition and the right kind of sellers. Some retailers use their marketplace to offer products that are similar to those they already sell (just many more of them), while others use theirs as an opportunity to branch out and test the waters with other product lines and ranges.
Whichever option a retailer chooses — and many will choose both — the marketplace must be able to scale quickly and effectively, with easy onboarding of new sellers. There’s increasing competition to attract the best sellers to an online marketplace, so the retailer must make it as easy as possible for those quality sellers to join, ensuring they match the overall proposition.
For an online marketplace, marketing is no less important than it is for any retail store. Customers must know about the marketplace and what it can offer them, whether that’s value, choice, quality or a combination of the three.
A good online marketplace will also react quickly to customer expectations and expand its range at short notice. For example, if there’s a final blast of hot weather in the fall and a retailer has finished its summer promotions, using sellers on the marketplace is a good way to bridge the short-term demand for summer products. If the onboarding process is easy enough, the right sellers can be added quickly to meet consumer expectations.
According to eMarketer, worldwide e-commerce is predicted to grow to $3.5 trillion by 2019, and online marketplaces are going to account for a significant proportion of that figure. That’s provided that they are supported by good technology, have the right sellers on the platform and make sure the sellers and marketplace are presented well.
So again, can any retailer really afford to ignore the potential of an online marketplace? In a word, no!
Adrien Nussenbaum has more than 10 years experience in building and operating online marketplaces. In 2011 he co-founded Mirakl, a leading provider of online marketplace technology. Mirakl now serves more than 50 retailers all over the world, including Best Buy, GAME, Halfords, Darty and Galeries Lafayette, and was the only marketplace provider to be named in Gartner’s list of “Cool Vendors” in Digital Commerce, 2015.