Developing a Marketplace Strategy for Competitive Advantage

Marketplaces have raised the bar for what consumers can expect when shopping online. Brands operating marketplaces can gain useful insights on customer experiences, data that can be adapted into their other e-commerce channels. Retailers that start a marketplace now may be better equipped for the future.

In fact, according to Forrester, two-thirds of global B-to-C e-commerce sales are now captured by marketplaces, representing a significant strategic opportunity for retailers.

The best e-commerce marketplaces offer a wide assortment of products and services at competitive prices with the means to boost customer loyalty, increase average order values, and build trust.

Below are five key insights brands should consider when developing their marketplace strategies:

1. Careful Curation for a More Meaningful Customer Experience

Among the many reasons a marketplace can help B-to-C or B-to-B brands stand out is the ability to carefully curate products. While Amazon.com, for example, has the sheer volume, scale and awareness, its very nature makes its less discerning. Industry-specific marketplaces can use this to their advantage, and some businesses are doing this already. Instead of a broad “land grab,” they're hand-picking great sellers and products to ensure they can offer customers something distinctive and valuable.

2. It’s Not Just Sales, But Also Brand Recognition

Brands know they will probably sell more on Amazon, but they often feel their brand has more opportunity for growth elsewhere. They see the value of breaking into niche marketplaces that attract customers because of something deeper than convenience or necessity. This may be a marketplace that provides content and community that benefits shoppers beyond the purchase. A deeper customer connection typically goes hand in hand with loyalty — and an ability to turn customers into fans.

3. The Dynamics of Marketplace Team Roles

Selling products from other suppliers/brands/retailers often means that business processes will become intertwined with the companies providing the products. This spans from responsibility and automation regarding onboarding products; enriching and publishing product information; and managing campaigns and promotions, inventory, and the order and fulfillment process. Where a new marketplace team sits within an organization shouldn't be sticking point, but it's important to set the right expectations and align responsibilities with the risks and opportunities.

The important thing is to have this team be empowered and have the right resources to succeed.

4. Understand How to Identify the Demand for Marketplaces

While the benefits of marketplaces can be easily identified, what might be a bit harder to determine is whether the demand exists for a brand to create a marketplace.

The answer should ideally lie in the data the brand already has in the business. Is there a product line that always sells out faster than any other? Where were the growth areas? Which products offer the biggest supply and demand challenges? There are all kinds of answers residing in the data — a brand just needs to ask the right questions.

Furthermore, consumers might not demand marketplaces directly; rather, they're simply on the lookout for the right products, brands and experiences. If a marketplace improves these offerings, then it could make sense for your business.

5. Marketplaces Extend a Brand’s Customer Database, Which Requires a Data Strategy

A common concern about marketplaces is the potential to “cannibalize” a brand’s own product offering — i.e., to lose sales and profits as a result of introducing new, rival products into the ecosystem.

Industry-specific marketplaces drive much more traffic to a brand, but how a retailer manages the traffic must be carefully balanced between promoting its own brand and selling competitor products. It’s important for retailers to keep its sellers happy, while also reaping the benefits of increased online traffic.

In short, eating into product sales doesn't necessarily mean eating into profits.

What retail verticals can start a marketplace? The answer is all verticals. Developing a solid marketplace strategy is all about thinking through the most potential angles to grow a business.

Johan Liljeros is general manager and senior commerce advisor, North America, at Avensia, the global driver of modern commerce.