Selling on Marketplaces: Are Your Processes Ready?

Marketplaces are the largest digital D2C distribution channel. Get ready for the KPIs in digital marketplace distribution that measure whether your brand is ready to meet today’s demanding end-consumer needs.

Latest market data published by Germany’s BEVH indicate that digital marketplaces are still the largest, and depending on product category also the fastest-growing, digital distribution channel. Digital marketplaces’ obsession with and focus on customer satisfaction has won them the hearts and wallets of shoppers. Naturally, more and more brands are trying to secure their piece of the pie and sell direct to consumers (D2C) via digital marketplaces.

Selling Direct to Consumers Is No Small Task

Digital Marketplaces are winning at consumer centricity. To keep your own customers as happy as they hopefully are, it’s crucial to wrap your head around the most important KPIs in digital marketplace distribution.

KPIs in Digital Marketplace Distribution

(Source: Zalando)

While marketplaces themselves do a lot of work to keep the direct consumer interface (i.e. the online shop or mobile shop) up to date and end consumer ready, there are a number of KPIs that you will need to perform well on to succeed with your products on a digital marketplace. While there are of course differences in the particular KPIs measured across various digital marketplaces, I’ve identified a few common themes:

Customer Feedback

There’s of course an element of direct end-consumer feedback used to evaluate your brands performance. Customers who have bought your products will be asked to rate their overall experience with your product and service. The marketplace will then typically compare your ratings with averages across all brands in your product category. This is used to calculate an overall measure on how much you are contributing to end-consumer satisfaction, compared to others. If your customers are getting in touch with customer service, this will also be monitored closely.

Speedy Delivery

The majority of KPIs, however, relate to your operational capability to permanently and quickly supply your goods to shoppers. With consumers now used to instant gratification and 24h delivery, scoring well there is fundamental to your success on any commercially relevant marketplace such as OTTO, Zalando, Amazon and others.

For this reason, there are KPI’s in place to measure the time your products take from an end-consumer placing an order, to the moment the mailman first rings at the customer’s door. Seamless integration of your own system landscape from order intake to warehousing and logistics is therefore critical, including systems integration with a fast and reliable delivery service for end-consumer delivery.

speedy delivery kpis in digital marketplace distribution

(Photo: Zalando)

Cancellation Rate

So, speed of delivery is obviously important. But what if you don’t have the product your customer just ordered online in stock? Oops, not a good look. Consumers don’t like to be disappointed, and your marketplace of choice most certainly does not like to disappoint them. As a result, your order cancellation rate will be under very close scrutiny. Specifically, you’d be well advised to keep your cancellation rate in the very low single-digits. This means that managing your stock pretty much in real time, forecasting customer demand, and/or taking unavailable products off the marketplace so that consumers cannot order them, are all critical processes that you will need to manage exceedingly well.

Remember, we are talking direct-to-consumer (D2C) here, so it’s not like in wholesale where you can pretty much ‘sell and forget’. The additional gross-margin you gain by selling at consumer prices (minus marketplace commissions) is earned through hard work, and by taking up stock risk.

Handling of Returns

Online shoppers, especially in markets where they don’t pay delivery charges, love to order multiple products so that they can select the one that best fits their need. Once they have made their selection from the comfort and privacy of their home, they will return the ones they didn’t like. Rest assured, that your products too will be amongst those returns around 50% of the time (this applies to fashion in Germany, return rates may vary across industries and markets).

Keeping customers happy is always the primary objective. The time from when a customer hands over their return to the carrier, to your confirmation of the return to the marketplace is also closely monitored, and often referred to as ‘reimbursement time’. Again, your logistic capabilities will play an important role in achieving the targets here and avoid consumers complaining about outstanding payments for their returned items when they call the marketplaces’ customer service hotline.

Returns Handling KPIs in Digital Marketplace Distribution

(Source: Zalando)

Time for the Grades in Digital Marketplace Distribution!

Well done you for connecting to a marketplace of your choice and starting to do business. Were you looking forward to a year of peace and quiet until it’s time for your annual goal setting session with the retailer? Nope – you’ll be evaluated on the KPIs mentioned above on a quarterly basis instead. And, as you might expect from the ‘masters of data’, there won’t be much arguing with validity or reliability of the data you’ll be presented with.

What happens if you failed to meet the benchmarks that your marketplace expects you to reach in order to keep the end-consumer happy? That will largely depend on the degree and frequency with which you miss the KPI targets.

So far, the more common measures I have observed are:

  • Downgrading the visibility of your products on the search pages of consumers.
  • Or taking all your products offline temporarily, until you have presented a set of realistic measures to resolve the issues.
  • Up to taking your products offline permanently if you have shown that you can’t reach the level of operational excellence, required to keep demanding shoppers happy.
KPIs in Digital Marketplace Distribution

(Photo: HutchRock)

Get D2C Ready with Digital Marketplace KPIs

The additional reach that digital marketplaces offer is huge, and so is the potential for revenue increases. But being a reliable product provider in a D2C business model is a complex task. The implications of the system side, particularly for warehousing and logistics should not be underestimated. The KPIs in digital marketplace distribution discussed here can help you stay on track.

To help their suppliers with these challenging processes, marketplaces often offer their own fulfilment services, available at an extra cost. However, once you start connecting to more than one marketplace, you’ll need to manage multiple contracts and interfaces, and things become complicated once more. In cases like this, it can make sense to work with specialised providers that allow you to connect to multiple marketplaces, while maintaining just one commercial relationship, one contract and one interface. These providers tend to offer all imaginable logistics solutions, so that you can manage the requirements of serving multiple marketplaces, including cross-border.


About the Author:

Christoph Berendes has a passion for building brands and helps businesses grow their digital distribution. If you’d like to dig deeper into what it would take for your brand to sell on digital marketplaces, reach out to Christoph via email, connect with him on LinkedIn, or comment below.

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