Are Digital Marketplaces the next big thing?

14 Nov 2019


Marketplaces are to be considered one of the disruptive forces in the retail industry at the moment. Shoppers are already spending half of their eCommerce spending through marketplaces and increasing to two-thirds in five years, according to a Forrester Research study

Mainly millennials and consumers that want to “beat the system” are interested in using marketplaces like Amazon or TradeMe. Some might think that consumers are overwhelmed by this breadth of choice on online marketplaces, but in fact, they are attracted by the wide selection they offer and for serving up the most relevant/personalised products for them. 

Online marketplaces have started in the ’90s and even then, their goal was to sell goods through common marketing and payment platforms, providing significant value for all parties involved -  consumers, sellers and the online marketplaces themselves. 

But what are the benefits of using a marketplace exactly?


SEO


Marketplaces are placed in the top positions by search engines and attract high traffic and millions of customers, so they offer high earnings potential as you gain access to new markets and new customers with minimal incremental investment in marketing. 

Marketplaces also keep customers on their sites longer. TradeMe has now grown into 800,000 visitors per day to browse listings from more than 140,000 kiwi’s and businesses and buying over $2.2 million worth of items every day on the TradeMe marketplace alone. As visits and revenue increase, they provide an incentive for even more sellers to join, creating a virtuous cycle. 


Lead generation


80% of people who use the internet are using it for shopping. Listing your products on a marketplace, you are guaranteed to get your products in front of your customers. It also leads to any additional sales that may occur by having a marketplace presence. For example, a customer stumbles upon your landing page in the market place and then chooses to navigate to your website. 


Cost savings


When using a marketplace cost can be saved on increased sales for limited prices. There are going to be fees associated with using marketplaces to list your products but they are generally low, and they can cost less than holding excess inventory.


Increase sales


As a seller, you can increase cross-selling and make extra profits by using online marketplaces (55% of people selling on a marketplace, have a profit margin above 20%). The range of choices offered by marketplaces, especially when combined with their superior understanding of consumer’s purchasing patterns, provides significant advantages over other retailers. 

One is the ability to customise offerings to microsegments of consumers. Further, with pricing algorithms that take into account trade-offs between gross margin and commissions or levels of inventory, marketplaces can decide in real-time whether to match or undercut the best prices proposed by other retailers on the market place.

You will also be able to offer your customers the possibility of buying some products, which are related to the one they are searching for yet are not the one they initially wanted to purchase. 
You are also able to provide innovative loyalty offers. For example, Amazon Prime offers free shipping in return for an annual subscription (US $79).


Which brands are already using online marketplaces? 


Some examples of world-renowned retail brands using online marketplaces are Adidas, Nike and J-Crew that have all partnered with Amazon. Through this partnership, each brand has access to a vast consumer base that consists of both Prime and non-Prime members.
Although each brand does not sell its full range of products on the eCommerce platform, it can more carefully control its brand storytelling with Amazon Stores.

Additionally, TradeMe is already working with brands like Kathmandu, Glassons, Pagani, Beme and Hallensteins etc. Also, The Market (part of the Warehouse Group) which launched this year,  is offering a diverse range of brands.

It’s clear that brands can no longer ignore online marketplaces as an independent and wholly unique sales channel in their overall business strategies. It may come as a surprise that more than 55% of product searches start on online marketplaces, not Google. As a result, online market places offer a vast consumer base and incredible exposure for any brand that wants to capture new revenue or continue to solidify its brand presence in the digital world. 

Would like to learn more about how your organisation can benefit from online marketplaces? Contact us today.

author:

Jessica de Heij

date published:

14 Nov 2019