It seems that the most common conversation in ecommerce at the moment is whether brands should go direct to consumers or leverage the scale and established audience of the likes of Tesco, Amazon and Net-A-Porter.
While going direct to consumer offers marketers the most control over the brand experience, operating via retailers fits more seamlessly into most organisation structures.
However, perhaps it’s time to look to the East for the channel that may unlock the next phase of ecommerce growth and already accounts for 90% of Chinese ecommerce – marketplaces.
Marketplaces such as eBay and Alibaba.com are tech platforms that bring together buyers and sellers, with sellers responsible for trading and fulfilment, supported by marketplace services.
The marked difference from an e-retailer is that the marketplace doesn’t ever actually take over ownership or management of stock. By reducing dramatically the barriers to entry, marketplaces are set for explosive growth and expected to account for 40% of global online retail by 2020, according to a study by the Ecommerce Foundation and Nyenrode Business University.
For more than a century, retail has been defined by the dynamic tension between manufacturers and retailers – and marketplaces level this field.
So the commercial opportunity is too big to ignore. For more than a century, retail has been defined by the dynamic tension between manufacturers and retailers, and marketplaces level this field.
By acting as a tech platform, they have made these two categories of business in many ways peers. While the benefits of a marketplace presence to a manufacturer such as Bosch is clear (a new channel, more control over the brand, pricing and margins) the companies that have really embraced these platforms to date are, somewhat counterintuitively, retailers. Superdrug, Argos and Clarks, for example.
Argos has been a clear leader – initially using marketplaces as a way to sell clearance products, and now its eBay store acts as a full Argos outpost with mainline stock. The partnership extends to the full integration of Argos click and collect within eBay.
Many other retailers including Boden and Clarks are also using marketplaces as a way to enter new markets, working with the likes of Alibaba and Zalando to establish an advance cavalry before rolling out a more omnichannel presence.
That Alibaba has global ambitions should come as no surprise to anyone, so brands need to start figuring out this channel rather quickly. This starts by understanding how the algorithm for each marketplace works and getting the product pages right.
Onplatform SEO is a woefully underleveraged tactic. Once you’ve built the traffic on to the brand presence, brands can dial it up by expanding their range, investing in more marketing and launching in international markets.
The concerns most frequently encountered by brands tend to be around brand safety and the expenses involved in operating a marketplace store. This comes down to a lack of understanding of how the channel works.
As far as brand safety goes, the key thing to remember is that if you don’t place your product in these environments, someone else will – only that a non-sanctioned seller doesn’t care about your recommended retail price and will take product shots on an iPhone.
Brands are increasingly starting to solve these issues and, to their credit, the marketplaces have also put more of an effort behind driving education and best practice in this area. With regard to costs and resources, this is where technology is our friend. Because these marketplaces are essentially tech platforms, they have the tools to easily integrate into an existing business model.
There is also a small cottage industry that has evolved around marketplaces to make platform set-up and management much easier without a lot of dedicated resource. That marketplaces are a way to reach a new audience and generate incremental revenues is beyond dispute.
Established players such as eBay continue to expand their proposition and are now investing in growing the business-to-business market sector.
According to latest reports, eBay already accounts for $4bn of the B2B market, and is now investing in people and technical infrastructure to build this out. And this is just the beginning. The next phase in evolution will be vertical specific marketplaces, like Style.com for luxury.
Ultimately, marketplaces will become a part of an omnichannel retail landscape, together with retailers and direct-to-consumer channels.
Already, on average, 80% of online shoppers are buying products from marketplaces, according to the Post Office study Delivery Matters. Is your brand the one they will choose to buy?
How brands can build thriving business on marketplaces
- Achieve brilliant basics by ensuring product pages have the right content, rich images and a reliable inventory management system
- Ensure effective visibility of the marketplace presence by using owned, earned and paid mechanisms
- Go international: marketplaces are a turnkey way of achieving global distribution and an easy mechanism to test new markets before a full-scale launch
Raj Jerath is global ecommerce director at MEC Global Solutions.