Peter Mills
July 22, 2021

How to adapt to the rise of online marketplaces

Well-funded marketplaces are continuing to enter the competitive retail environment and it’s likely that they are going to invest big in digital marketing. So, what risks and rewards do these multi-brand platforms pose for eCommerce sites and should brands get on board?

Online marketplaces provide easy, one-stop shopping. They are an online shopping mall, housing multiple sellers so that buyers can purchase items without having to leave the platform. The depth and breadth of their product offerings are difficult to compete with and for many consumers, an online shopping search begins with a marketplace. Some of the main household names include Amazon, eBay, Kogan, Catch, and MyDeal.

Many shoppers use marketplaces to discover, research, and purchase products and services. Given their scale, they make it easy for customers to check out reviews and make comparisons so that they can secure the best deal. 

While marketplaces can provide tremendous reach and even the opportunity to test international markets at low risk, eCommerce managers and store owners have to forgo a degree of control when they participate. Many marketplaces give brands limited control over how products are displayed for their own consistency, and will only accept products that align with their eligibility criteria, such as price, customer service, and reputation. That’s why you need to think about your strategic approach before diving into a marketplace. 

Consider brand alignment.

Being featured in off-price channels could affect a brand’s integrity, so it’s important to consider if the marketplace aligns with your target audience. Consider the depth of the category you want to sell in, and the competitors your products will sit alongside.  How curated is the range and at what price point will you need to offer to compete? What experience do you want your customers to have on the platform?

Winning over customers is essential.

eCommerce stores typically have a centralised customer service support system which can enable a direct line of communication between the brand and customers. Customers can ask questions and share their feedback while receiving a quick response. However, in a marketplace, unsatisfied customers will often direct their grievances to the review section. That means that you can’t engage with customers until a problem has been verbalised. Considering that 88% of marketplace shoppers are influenced by customer service reviews before making a purchase, brands entering a marketplace should have a strong customer experience strategy in place. 

Competition is fierce.

Online marketplaces are often home to fierce pricing battles and product competition. Pricing software also enables sellers to monitor competitors and easily offer the lowest price available. Price and distribution are some of the easier selling points to replicate, so you should enter a marketplace with a strong idea as to how you will showcase your brand’s unique benefits. 

Marketplaces can also take ownership of all of the customer, product, and transaction data housed within the platform. So, let’s say if one of your best-sellers is performing well, a marketplace could use that sales insight and incorporate it into its own product line. Within a marketplace, brands have to review the trade-off between reach and the data they could gather through direct customer interactions. 

Ensure you are discoverable.

Marketplaces work like search engines. While some products will be featured within special pages or categories, many shoppers will use the search function to narrow down their options. Rankings need to be prioritised by brands, and while each marketplace will have its own algorithm, products will generally be ranked based on relevancy to search terms, stock availability, and price. 

Strategy is about making choices.

When people shop online, there is a good chance they will explore a marketplace. That’s why marketplaces should be considered if an omnichannel brand truly wants to be everywhere its customer is. However, they do come with their own complexities which need to be explored. Marketplaces expand a brand’s reach and are a brilliant testing ground for new product lines or for moving excess stock. However, they also own all of the user behaviour data about their customers and the privilege to market to them, while brands will only gain the sales insights. 

That means there is a cost-benefit analysis that needs to come into play. You should evaluate the strategic alignment of a marketplace with your brand while maintaining your own strong eCommerce presence.

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