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Marketplaces playing vital role in retail eco-system

Online marketplaces are proving to be an increasingly important feature of the retail landscape as retailers use them to broaden their reach across channels and territories… View Article


Marketplaces playing vital role in retail eco-system

Online marketplaces are proving to be an increasingly important feature of the retail landscape as retailers use them to broaden their reach across channels and territories while operators – including some retailers – tap into the growing consumer appetite to buy from specialist marketplaces.

Speaking at The Retail Bulletin Marketplace Strategy webinar Jessica Christenson, regional VP for UK & Ireland at Mirakl, suggested: “There was a spike during the pandemic for demand online and this has continued more for marketplaces. They have four-times the growth of overall online retail. Consumers are now more comfortable shopping on marketplaces and they will be a key piece of how retailers grow.”

Creating a new marketplace

This can mean retailers setting up their own marketplaces to sell goods alongside their own selection or selling their range on other third-party marketplaces. These have traditionally involved generalist platforms like eBay and Amazon but over the years there has been the emergence of an array of different specialist marketplaces.

For Marc Vicente, group digital director at Kingfisher, the decision was made to set up a marketplace for its B&Q brand – using the Mirakl platform – having recognised that there has been growing popularity of specialist marketplaces. Vicente cites a number of reasons for the move including: customers wanting more choice; the increased traffic drives additional sales at the core B&Q business; it helps the company test new ranges; and marketplace sales can help drive in-store visits via services like click & collect.

Care must be taken

He was also aware of the challenges of such a move and highlights a few that should be considered by retailers investigating setting up their own marketplace. “You cannot underestimate the complexity. You have to be willing to invest large sums or partner with a specialist provider like Mirakl,” says Vicente. There is also the issue that when adding SKUs by the thousand great care has to be taken to ensure the marketplace retains its differentiation and does not simply look like Amazon of eBay.

Tony Preedy, MD of Fruugo, agrees that care has to be taken: “The fastest growing segment online is marketplaces but it does not follow that all retailers should become marketplaces. You lose some control and take on reputational risk. There are also hidden costs around customer service. It’s not obvious that marketplaces add profits [to the operators]. Some will be successful while others will try it and then walk away.”

Delivering a seamless customer experience

For specialist market operators looking to differentiate themselves from Amazon Glen Stocco, co-founder & MD of Plane & Simple, says it is imperative that from a customer perspective the shopping journey and delivery experience is as “pleasant as possible for the particular product range”. For Plane & Simple the proposition also involves working with local builders’ merchants who people would not necessarily know about.

Delivering an exemplary service on the marketplace has very much been the focus of The Edit LDN that operates a platform for selling sneakers and streetwear. Marina Townsend, e-commerce director at The Edit LDN, says: “We have to consider that we have consumers and we have our sellers. We have to make it seamless for both sides. It’s a high level of service for sellers as well as consumers. It was initially about an education piece to get people to trust the brand because if they are spending a lot of money on the marketplace.”

An important next step was to build a community of customers because Townsend says they spend a lot more than newer customers as they trust the brand. Part of this process involves social media and a strong focus on post-purchase with customer service a strong point.

Social media drives marketplace sales

For Neil Tunbridge, interim MD of Lollyshop, social media is essential for marketplaces to engage with customers and to drive sales. “It’s a way to drive traffic and to prompt new customers that you are out there. Nine out of 10 Gen Z’s buy from brands they follow on social media. Liveselling is an extension of this as consumers want to move away from 2D laptop shopping and have more experiential shopping. Liveselling is either seen as the panacea of e-commerce or a damp squib with Facebook stepping back while QVC saying it is the future of its business. We think it’s the former. The technology is a bit clunky at the moment but it will move on.”

For retailers to sell on marketplaces is a bit of a no-brainer, according to Preedy, who says: “You get reach, with your products in front of more buyers. It is risk-free incremental sales. You only incur costs when the products are sold. As long as the transactions’ gross margin is larger than the fee then every transaction is profitable. It’s rational to use a number of marketplaces beyond Amazon and eBay and through platforms like Fruugo you can reach the world.”

Barry Tong, CEO of Solretail, agrees with the benefits to retailers: “Marketplaces offer depth of choice and good pricing. The [seamless] delivery of goods makes people buy goods. They tempt people to try new things and enable retailers to make their full ranges available. And it’s convenient.”

Small retailers successfully turn to marketplaces

Marketplaces have been especially important for smaller retailers, according to Andrew Goodacre, CEO of BIRA (British Independent Retailers Association), who says Covid-19 was the catalyst for retailers to adapt their businesses to take into account the online channel. Prior to this he suggests smaller operators regarded online as more of a threat than an opportunity. When shops were forced to close they had to engage with customers online and marketplaces played a big role in this journey.

“For small businesses to say let’s go from a store model to an omni-channel approach is a steep learning curve. The marketplaces help them take some risk out of this move. They turned to marketplaces as an easier way to go omni-channel. It makes their products available to customers around the world and although it is less margin they don’t have to deal with things like SEO [to attract customers],” explains Goodacre.

He recommends retailers need to find the most relevant marketplaces to work with depending on the sector they operate within. “We urge retailers to see who has their target customers and then select the right marketplace.” Such has been the success of the marketplace approach by smaller operators that Goodacre says it has given sufficient confidence to some of them to set up their own online storefronts.

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