Online marketplaces
Why start your own online marketplace?
Today nearly half of all online product searches start on marketplaces. Marketplaces are fast displacing search engines like Google as the place to find what we want to buy.
If you are a successful ecommerce company, you may wonder what creating an online marketplace can do for your business. Is it really that different to how you do commerce today? Today nearly half of all online product searches start on marketplaces. From Amazon to Tmall to eBay and more, marketplaces are where your customers are, and it's also where they make their search.
This means that non-marketplace online retailers are at a disadvantage when it comes to attracting and retaining customers. Shoppers prefer to use marketplaces because they can see an array of buying options for the item in question all at once. This means that they can compare pricing, delivery options, reviews and more to find the right choice for them.
Expose your brand and products to new customers on marketplaces
Marketplaces also serve customers who aren’t sure exactly what they want to buy. If we know what product we want or what brand we want to buy from, such as the latest iPhone, then it’s easy to go direct to the retailer’s website or store. But often we may want to buy something, like a razor, but don't know exactly which one. In this case, the customer is likely to turn to a marketplace as a point of discovery.
Brands who are not present on marketplaces therefore loose out. This makes sense because if a customer doesn’t know who you are, they’re aren’t going to be looking for your website. They need to be able to find you in other ways. By displaying your brand and your products on a marketplace your company can be found by new customers who you wouldn’t have acquired otherwise.
Who takes over the relationship with your customers?
The above certainly are good reasons to sell on a marketplace, but why should you create your own? Simply put, if you only sell through another marketplace you are giving a portion of your sales to another company in the form of commission or other remuneration. What’s more, you’re also giving them the relationship with the customer. It is possible that they could continue to acquire more and more of that customer’s business to your detriment.
For many companies thinking about how to take the next step in their e-commerce business, marketplaces are a threat and an opportunity. More digital sales in all verticals are moving away from specific websites and stores to the marketplaces of others – including those of their competitors.
Industry and category-specific marketplaces are the new e-commerce norm. But there isn’t room for as many marketplace players, as there are e-commerce companies. It’s important for brands to be one step ahead of their competitors by claiming the top spot in their product category in as many marketplaces as possible. This includes the possibility of creating their own.
From a sales pipeline to a platform model
By moving to a marketplace model, you’re turning your e-commerce business into a platform. We tend to think of retail as a sales pipeline that goes in one direction from the brand to the customer. In contrast, a platform model places you in the centre as a point of connection between the customer and other brands. You put yourself in front of more customers. You hold some level of relationship with them even if you don’t actually manufacture, market or deliver the product they’re buying.
Starting your own online marketplace can give your e-commerce business a leg up, but it also adds another complementary strand to your business model: As well as making money from your own sales, you also make money from commission from the sale of other products.
If you don’t meet the marketplace needs of your industry, then one of your competitors will. This means that if you’re not the leader you’ll be pushed down a level in the food chain. Can your business survive that?
Who should start an Online marketplace?
Strategic advisory
What does your marketplace strategy look like?
We have helped companies start selling on both big and small marketplaces, and establish customer-unique marketplaces of their own. If you don't have a vision or a strategy in place, we can help you gain the knowledge and the structure you need to be able to use marketplaces to optimize your business, short term and long term.
The time we need to be able to give your company a thorough strategy depends on a number of factors. Learn more about our stratgic advisory when it comes to online marketplaces.
Understanding the business models for operators and retailers
Sales commission is normally what the principle revenue model is based on for a marketplace operator. This means, that the operator takes a percentage commission on the transaction (or a flat fee) when the retailer sells a product on the marketplace.