Why Brands and Retailers Can’t Afford to Ignore Marketplaces
Whilst in-store sales across the globe are stagnating, eCommerce remains a strong growth area globally. Set against this backdrop of impressive online growth, leading marketplaces - the likes of ASOS, Zalando and Amazon - are further outpacing market growth averages.
In the UK, for instance, online sales are growing at an average of 15% per year; whilst ASOS is growing at 28% per annum. Similarly, in Japan the market average for eCommerce growth is 14%; whilst Rakuten is seeing growth of 22% year on year.
Marketplace sales growth vs retail eCommerce sales growth in 2015:
Source: eMarketer (2015), company annual reports (2015)
Marketplaces and the on-demand economy
This above-average growth is largely being fuelled by the on-demand economy. In her 2015 Internet Trends report, Mary Meeker said: “Consumers’ expectation that they can get what they want with ease and speed will continue to rise. This changes fundamental underpinnings of business."
Marketplaces fulfil this expectation through the following attributes:
- Service: Driving customer expectation through constant innovation and investment, with examples including Amazon Prime and local payment options
- Convenience: One-stop shop typically across categories
- Price: Trusted price leaders
- Range: Wide choice of brands in a single place
A prime example of the success of marketplaces is Tmall. In 2015, the Chinese giant made US$14.3bn in just one day - Singles’ Day, the annual celebration popular with young Chinese people. Owned by Alibaba, Tmall has over 16,000 international sellers, as well as buyers from over 200 countries, offering extensive international reach to brands and retailers.
Opportunities and risks
Recognising the change in consumer behaviour, brands such as Clarins and Chanel are using marketplaces to accelerate growth, through:
- Traffic and sales acceleration: Increase brand sales and reach beyond the brand site – for instance, Clarins is a top-five brand on Tmall
- Brand building: Build an internationally recognised brand and be visible among the right brands – for example, seven out of 10 women globally know Pandora
- International expansion: Test online expansion and capture sales in previously underserved markets – Hobbs, for instance, uses marketplaces to drive its international expansion
- Stock clearance: Clear overstock – for example, Links used this technique to clear its 2012 inventory
While the growth opportunities of selling via marketplaces are clear, there are also branding and profitability risks involved, such as:
- Sales cannibalisation
- Existing partner relationships
- Increased search marketing competition
- Lack of control over customer experience
- Price and sales cycle control
- Brand image
The best approach is to first assess each marketplace for its suitability to meet your business needs. We have developed a robust framework for marketplace assessment and optimisation. Our proven approach involves:
- Research: Consumer and market review; consumer trends, market size, success cases
- Assessment: Opportunities and risks; risk mitigation, opportunities acceleration
- Planning: Strategic roadmap and prioritisation (of markets and marketplaces) and a 3-year revenue forecast based on market size and roadmap
eCommera can also help to implement the success factors we think are key to successfully selling through online marketplaces, which are:
- Using a test and learn approach
- Defining KPIs and accountability
- Planning for, and carrying out, eCategory management activities
- Selecting an attractive, strategic range
- Working with marketplace stakeholders and experts
- Gathering maximum data
Contact us to find out more about how eCommera can help with your marketplace strategy.