Comma Consulting Senior Strategist Greg Randall explains the Marketplace hype and what makes a marketplace a winner from the consumers perspective.
A common buzzword creeping into a retailer’s vernacular is “Marketplace” and how this should be part of a retailer’s overall growth plan. It’s no wonder it’s a hot topic: 63% of global online spending in a 12-month period occurred on online marketplaces (includes Amazon sales data).
B2C marketplace sales worldwide could reach an estimated $3.5 trillion by 2024.
By way of definition, a “Retail Marketplace” takes on two different forms.
Form #1 – “Hybrid”:
The Marketplace “Host” (owner of the Marketplace brand/platform) offers its own products and builds out product ranges through third party “Sellers”. This Hybrid version starts with the “Host” first being a successful retailer: think Amazon and Walmart.
Form #2 – “Department Store 2.0”:
The Marketplace “Host” offers no products and takes on the role of creating a platform for third party “Sellers” to make their products available: think Etsy and eBay. Forbes calls this the “Department Store 2.0”.
Marketplaces launches are being seen everywhere. According to Gartner, by 2023, 15% of medium-to-large retailers will deploy their own marketplaces.
The following retailers have recently gone this way:
Forever 21
Urban Outfitters
J Crew
Best Buy
Macy’s
Bed Bath & Beyond (USA)
In retail, it’s common for buzzwords (or buzz concepts) to take a life of its own, creating a self-fulfilling prophecy. Meaning, because it’s a “buzz”, retailers latch on to a concept and rush to build something similar.
Forbes agrees…
It is common in the retail industry for new retail concepts to explode and proliferate the way marketplaces are now. What is also common is that after a time, there’s a shakeout and only the most successful survive. (“What Are Online Marketplaces and What Is Their Future? - Forbes”)
The bigger issue is, the PR behind each launch is positive (as you would expect) contributing to the buzz and the prophecy.
But will this “Pandemic-Powered” behaviour of buying on marketplaces translate into a realistic approach to growth?
The only way to answer this is to diagnose what consumers want of a Marketplace.
What Consumer’s Want of Marketplaces:
The true benefit of a Marketplace comes down to one word, “Convenience”. Forrester’s research on Marketplaces breaks this down and identified what’s “really important” to consumers. At the top of the list are…
“Competitive pricing”
“cheaper and faster shipping options”
“variety of products”
“easy to use navigation”
“great customer support”
“cheap and easy returns”
Getting these “factors of convenience” right is the foundation to Marketplace trust building and is why the “Hybrid Marketplace” grow faster, trust is established with an existing customer database.
This is the value of being a successful retailer first before embarking on a Marketplace strategy.
Forrester found trust in a Marketplace, resulted in repetitive buying (customers shopped 3 to 5 times per month) and strong loyalty behaviours: 40% of surveyed consumers had an issue with a purchase, but they remained with the Marketplace and avoided the “Seller”.
The Marketplace Building Blocks:
Knowing the size of the opportunity and what consumers want shapes the building blocks needed of a Marketplace solution. Below is a summary of the top four needed to create the right foundation:
#1. Logistics and Order Management:
Marketplace business models can bring complex inventory and order management dynamics.
While Marketplace owners think about order management and logistics from the scale perspective, consumers think about what’s shown above: fast delivery options, easy returns etc…
This ability to design a scalable method to manage a high volume of orders across multiple Sellers and inventory locations is unique to every Marketplace and is far more complex than any typical retailer model because of the “Seller” dynamic.
Scalable, automated workflows must work both inside and outside the Marketplace “Host’s” technical infrastructure.
#2. Curation – Quality over Quantity:
Getting “curation” right links to the “product variety” need (above). “Variety” is offering a strong selection of products across multiple ranges.
Consumers no longer want to sift through thousands of SKU’s on product listing pages. They want the curation of the “best” products.
Google confirms there is an 80% increase for searches where the term “best” is used with product searches: “best face moisturiser”.
Google found...
"Searching “best” helps save time by returning a curated list of fewer options or aggregated rankings, ratings, or reviews from consumers and experts" (“What consumer searches for ‘“best’” really mean - Think with Google”)
#3. Support:
The “Department Store 2.0” version is not known for its support. It focuses on presenting the “Seller” community and allows them to lead the support function.
This risks the integrity of the Marketplace brand and is another reason the “Hybrid Marketplace” is more successful, there is vested interest in driving the support function.
#4. Platform - the Marketplace Experience Enabler:
The Marketplace platform connects the presentation layer to the myriad of business systems, playing a key role in creating engaging experiences.
Because there are a high volume of products coming from a variety of “Sellers”, there is a need for specific platform features to operate to a high standard.
The top four are….
Site Search:
There is a direct correlation between the number of products available and the occurrences of site search behaviours. Consumers are more prone to conduct a site search instead of working through a high volume of categories and category layers. Have you ever tried to navigate through Amazon’s categories!
Filtering:
It’s common for categories to hold thousands of products on Marketplaces. Empowering consumers to refine a large selection of products to a small selection based on relevant product attributes is known to drive engagement.
Rating and Review Systems:
To control the “content destiny” of “Seller products”, a Marketplace requires a product review system that makes it easy for customers to write a review.
The opportunity is real, consumers are looking for online experiences that bring high standards of convenience. But from a Marketplace perspective, Amazon has set the bar. If a business is focussed on creating a Marketplace offering, take heed to the research mentioned above.
Viare, an eStar company, has developed its technology over twenty years and helps facilitate more than $1.5B in annual sales online. Viare scales to manage high volume of orders across multiple Sellers and inventory locations and allows retailers to make all store stock available for sale enabling store-based fulfilment to be a retailer’s competitive advantage. Its intelligent order management has been recognised by Gartner as one of the leading distributed order management systems in the world. www.viare.io