The marketplace boom – why retail and consumer brands need to sit up and take notice
It took years for many leading Australian retailers to realise the importance of an online presence. With COVID accelerating the adoption of eCommerce, retailers appetite to invest has never been higher. But as the "Great Retail Migration" rolls on – retailers as well as consumer brands are now turning their attention to online marketplaces to grow their slice of the online pie and tap into new audiences.
As eCommerce growth accelerates no one can deny the rise of marketplaces. According to a recent report by Wundermann more than 40% of all post-pandemic online spending globally is taking place on marketplaces. For retailer’s, marketplace opportunities vary from leveraging established marketplaces to engage and reach new audiences through to establishing a marketplace of their own.
Understanding the different types of marketplaces that exist
When it comes to retail product marketplaces, there are broadly two core business models that are typically adopted, those that facilitate the discovery process and purchase of products (think eBay) and those that are more holistic that manage stock, payments, packaging, and shipping (think Amazon for the most part). Marketplaces tend to operate vertically or horizontally. Vertical marketplaces are those that are focussed on a particular category like food or homewares whilst horizontal marketplaces span across various categories.
Competitive threat or core component of an eCommerce strategy?
Whilst some may consider marketplaces a competitive threat (and in many cases they are) they have become such a large and permanent fixture of the online shopping ecosystem that ignoring them as part of your strategy is at your own peril.
Marketplaces like Amazon, Catch, eBay and other specialist vertical marketplaces are now becoming the first place consumers go to search for products. In fact, according to research by Feedvisor, 66% of consumers now start their search for a new product on Amazon. Marketplaces are effectively product search engines, and with a multitude of sellers listing on these platforms, consumers will find what they are looking for regardless of if you are listing your product there or not. As consumers increasingly turn to these platforms to make purchases – having a presence becomes increasingly important.
Amazon is by far the largest player in market and whilst its dominance in the Australian market isn’t quite as pronounced as it is in the US and UK, Australian shoppers are rapidly adopting the platform to get their online shopping fix.
The Amazon Australia Shopper Report 2021, which was published in May 2021 by Pattern found that Amazon has maintained the big jump in customers it achieved during lockdown with 49% of online shoppers reporting they’ve bought from Amazon.com.au in the past 12 months. Not only are more Australian consumers shopping with Amazon, but they are reporting they are shopping more frequently. Much of this is driven by the substantial uptake of Amazon Prime. Research showed 24% of those who shop online have a Prime membership, up from 16% nine months ago.
With large captive audiences and market share, marketplaces are therefore increasingly becoming an important component of a retailers eCommerce strategy as well as a vitally important distribution channel for consumer brands.
Whilst marketplaces boast sizeable captive audiences, simply being there isn’t enough. Each marketplace has its own unique requirements, category focus areas and audiences, this means the potential upside for brands will differ vastly based on your industry and product offering. Retailers and consumer product brands alike should therefore consider:
Which marketplaces are best placed to support their eCommerce growth strategy and objectives
The investment required to appropriately extract value from the marketplaces of focus
The enterprise marketplace
A growing subset of the marketplace market is the enterprise segment which is essentially made up of traditional retailers who are increasingly expanding their eCommerce platforms to sell their own products and services alongside those of third parties. In fact, according to Gartner, by 2023, 15% of medium-to high-gross-merchandise-value digital commerce organisations will have deployed their own marketplaces, thereby creating an entirely new digital ecosystem.
In a bid to deliver better range, choice and experiences for customers whilst simultaneously growing their online share, established retailers are launching their own marketplaces to accelerate growth in their online audience, keep customers sticky within their eCommerce ecosystem and take Amazon on head on.
Forever 21, Urban Outfitters, J.Crew, Best Buys and Walmart are just some of the many global retailers who have launched or are planning to launch marketplaces. Closer to home we have seen Bunnings and Woolworths also launch their respective offerings.
For retailers, marketplaces not only afford online revenue growth and market-share, but they enable brands to accelerate data capture to power their core business as well as fuel new business endeavours like retail media.
Setting up a marketplace for success however is not for the faint hearted. Whilst the potential upside can be significant not all will succeed. Retail brands considering a foray into the marketplace arena should consider:
Why and how the brand should establish a marketplace
What would make the marketplace unique in amongst a sea of rising alternatives (for both buyers and sellers)?
What scale is required (both products and sellers) to deliver a great experience?
What capability is required to effectively build and scale an offering and if that exists internally today?
What investment is required now and over time (both in resources and funding) to make it successful?
For consumer product brands, enterprise marketplaces also provide new avenues to distribute products online to new audiences. As outlined earlier the key is to establish which marketplaces provide the right strategic fit and how to effectively invest to derive value.
If you are looking to develop an online marketplace strategy within your organisation, get in touch to chat about how we can work together. We'd love to help!