We are all familiar with the giants of online marketplaces. Amazon, eBay, JD, Tmall etc. control much of the ecommerce globally. These companies have cemented themselves as the kings of ecommerce, and are going nowhere fast. Indeed, Jeff Bezos (CEO Amazon) is set to become the world’s richest man.
These emarketplaces can be an effective route to market for retailers (and brands). However, they are not the only players in the world of online retail marketplaces. There are other noteworthy subcategories of the emarketplace. While the leviathans of online focus on the masses, some highly successful companies are focusing on the niche. Specialist marketplaces, such as Etsy, have done incredibly well in recent years.
Retailers are also beginning to see the draw of becoming a marketplace. Retailers (both on and off line) are adding marketplaces to their offering. These include big players, such as: ASOS, Tesco, and Walmart.
But why is this shift happening? What makes it so appealing to retailers? And why, as a retailer, should you follow suit?
Brands are moving to direct selling
The recent success of some of the world’s largest brands in selling online means that brands will be cutting out retailers in favour of selling direct to marketplaces. The existence of the aforementioned “giants of online marketplaces” means that it is now easier than ever for brands to sell direct to the end consumer, and take a higher margin for doing so.
Adidas is a prime example of a company who have switched their focus from selling through online retail to selling direct. In 2016, their ecommerce sales grew by 59% year on year, to €1bn. This didn’t result in a cannibalisation of existing sales, as net sales increased by 18%.
Brands are therefore setting themselves up for direct sales, like they have never done before. This is because they can take advantage of emarketplaces as a route to market.
As a brand, it is unlikely they have enough product diversity to reach a critical mass selling solely through their own site. So, they must operate through emarketplaces.
For these brands, a marketplace performs the same function as a traditional high street retailer. Now that this role is becoming defunct for retailers, moving into becoming a marketplace is the only natural step towards ensuring the future survival of retailers.
You can find out more about how strategies for retailers and brands are opposing.
Increase basket size through cross sell and upsell
The other benefit is that becoming an emarketplace gives retailers more opportunity for cross sell of products. Retailers are already driving customers to their websites. This cost is already sunk. If an emarketplace can sell customers £100 worth of items, rather than £50 (assuming it takes 15%) the gross profit of that transaction is increased by £7.50 (or 15%).
Becoming an emarketplace allows retailers to list more items at a lower cost (as there is no stock, warehousing, or logistics costs). This drastically increases then number of products it is possible to house (and therefore sell).
For retailers to stay in the game, they need to be thinking about adding a marketplace to their offering. It is actually easier than they might think, with many options now available for turning existing ecommerce offerings into a marketplace. For more information on how to go about becoming a emarketplace, contact us.