Digital distribution via marketplaces is big business. The choice of marketplaces is large. Selecting the right ones and operational execution are key.
Germany’s Bundesverband Onlinehandel (BVOH) teamed up with the agency p.digital to conduct a study about the state of the e-commerce marketplace industry. The study ‘Marketplaces Across the World’ charts 335 marketplaces in Europe alone and lists over 740 globally.
These findings alone make obvious that e-commerce marketplaces in Europe and globally have become an important channel of distribution. But there is more:
Source: Screenshot Christoph Berendes
Your Distribution Strategy Is Incomplete Without E-commerce Marketplaces
According to DigitalCommerce’s 2017 ‘Online Marketplaces Report’, 44% of all online trade globally takes place on marketplaces. Why are marketplaces so popular? Because with their wide selection, the ability to compare prices, as well as fast and easy shipping and returns processes, they have won the hearts of your consumers and, by extension, access to their wallets.
Marketplaces have gained a significant share of the online market (Graphic: Onquality)
On screening the major global marketplaces it becomes clear that many brands already use this channel. And those that don’t yet are clearly missing out on a large part of the market where consumers buy.
Same Same but (Still) Different
There are bigger and smaller marketplaces, there are generalists and there are specialists for many niches. And there definitively is one that fits you and your brand. All you have to do is to find your perfect match. The good news: this is not particularly difficult as marketplaces differentiate in their DNA, as p.digital has characterized it.
DNA of Marketplaces (Graphic: p.digital)
Just like brick and mortar retailers differ in the type of consumer they target and vary in the types of cooperation models they offer (e.g. regular wholesale, concession, shop-in-shop, etc.), marketplaces also have different ways of operating and doing business with you.
REGISTER (open, closed), for example, describes, whether a marketplace will only allow one seller per SKU at any given time (closed, e.g. Otto.de), or whether it is in principle open to as many sellers as want to sell (open, e.g. Amazon). This is a critical strategic selection factor, driving your brand’s assortment presence (full price, current season or off-price last season) and the general level of (price-) competition to expect.
Other elements of the DNA, like REGION, CORE and LISTING drive the commercial opportunities, but also the operational day-to-day complexities in dealing with them. I will explore these dimensions in more depth in a subsequent article, where I will outline the types of business model available to those who want to do business via marketplaces. What follows here are good starting points for finding your own entry to a marketplace strategy.
Source: Screenshot Christoph Berendes
Questions You Need to Be Asking Your Team
Given the importance of e-commerce marketplaces for digital distribution, there are several questions you need to be asking your sales and e-commerce teams:
- Which marketplaces are right for our brand?
- Is a large one ore a niche player better for us? Would we rather sell on an open (e.g. Amazon) or closed (e.g. Otto.de) marketplace?
- Do we want the marketplace to buy from us like any other wholesale account or do we prefer to sell direct-to-consumer?
- How many individual contracts and interfaces with marketplaces do we want to negotiate and maintain?
- How ready is our logistics team to manage direct-to-consumer shipments and returns processes?
- How fast do we want to be live with our offer?
- Do we also want to expand internationally via marketplaces?
Source: BVOH
These simple questions may lead to a deep strategy discussion and will help you decide how to move forward. Yes, there are complexities in selling digital via one or multiple marketplaces within one country or internationally. But remember that you do this already with your brick and mortar channels and trust me when I say: there is a way to get it right in the digital world too!
About the Author:
Christoph Berendes built his expertise as a consultant and brand manager in the brick and mortar world. His passion and confidence in the changes turned him into a digital manager. He currently assists in growing a digital distribution platform. To discuss this post or your digital distribution needs, you can best reach Christoph by email.
Great post. I’d be curious to see how many brands selling on marketplaces also operate their own online shops. More generally, a mapping of brands digital channel strategies hasn’t been done yet and is getting relevant.
One thing to also carefully consider on marketplaces is who have access to the data generated. Brands might get revenues today but marketplaces might use data to shift revenues away later.
Hi Thomas,
many thanks for your comment – greatly appreciated. I will put your research request on my To-Do list and will aim for 2018 to publish it 🙂
My guess is, that most of the medium to larger sized brands – especailly in fashion – have started in the past with their own websites and some of them then epxanded into marketplaces. Of course, an own website is a must have for any proper “brand” to present itself, so this is for most the logical first step. Whether it is best channel also for revenue generation is a different topic and will probably also heavily depend on the brand awareness of each particluar brand, with the big brands being able to generate traffic towards their own webshop and the smaller brands probably more profiting from the traffic and reach that a digital markeplace can generate.