Marketplaces have become the places where consumers go to research products and, should the price be right, buy. In 2020, it’s estimated the gross merchandise volume (GMV) generated by the world’s top 100 marketplaces was $2.67 trillion.
Three of the marketplaces – Taobao, Tmall and Amazon – accounted for two-thirds of this figure, but this is still a dynamic sector with room for growth as consumers around the world, including those taking their first digital steps in developing countries, discover new kinds of marketplaces. In 2020, the GMV generated by Etsy, which sells “unique and creative goods”, hit $10.3 billion, up from $314 million in 2010.
In themselves, these raw numbers illustrate why all kinds of brands should at the very least consider selling via marketplaces, but:
- How should brands approach this?
- What are the nuts and bolts of selling via marketplaces?
- Going forward, what’s the best strategic approach?
What exactly is a marketplace?
To begin to answer these questions, it helps first to define what we mean by a marketplace. Put simply, a marketplace is an ecommerce platform that connects customers with third-party sellers. In return for allowing a seller to list goods, the marketplace takes a fee, either a percentage of the sale and/or a subscription-style fee.
Alongside the familiar big names such as Amazon Marketplace or eBay, there are marketplaces that cater for different sectors and regions.
Overall, within the multichannel digital retail landscape, marketplaces occupy a space somewhere between a traditional retailer and selling direct. Like a retailer (or wholesaler, for that matter), the marketplace will want certain data related to the products it is listing, but in return brands potentially get far more data about who is buying the brand’s products, if not quite the richness of data typically generated by selling direct to consumer (D2C).
First steps in selling on marketplaces
Initially, it can be tempting for brands to see this demand for specific kinds of product data as an administrative burden, but a more useful way to frame the work needed is by acknowledging that every sales channel now makes these kinds of demands. Commerce of all kinds is now driven by data. It follows that brands should think about how to streamline the process of providing this data.
One answer is to use a Product Information Management (PIM) system that holds all the product data that’s distributed to different channels. In part, this is about efficiency. The PIM becomes the system where a brand builds up and enriches its product data. It’s a place where images, videos and product specs live, although different brands configure their PIM and ERP systems differently.
Some of this data will be syndicated across channels. Other data, a specific kind of image or a product description of a particular length can be calibrated to the demands of a channel such as Amazon Marketplace or Etsy. Typically, there are off-the-shelf ‘connectors’ available to further streamline the syndication of product data.
It’s also worth noting in passing that brands can forge different business relationships with marketplaces, which may change the data needed. This is a subject we covered by looking in detail at working with Amazon Marketplace in a previous blog.
The data brands receive back
But improving workflow is not why brands use marketplaces. Rather, it’s because successfully selling via marketplaces generates both income and insights, which is where the strategic case for using marketplaces truly begins. Marketplaces, as we have previously noted, hold the promise for brands of getting data back, data that will help brands to answer the following kinds of questions:
- Which items sold most strongly?
- Are there any patterns suggesting who bought these products – and when and why?
- What items didn’t sell?
- Which items were returned and why?
- What made a product stand out from a brand’s competitors?
- What kinds of problems did consumers report?
This is the kind of rich information about consumer behavior that, in previous years, was most often held by retailers and wholesalers, and it’s potentially immensely valuable and revealing. Take something as comparatively straightforward as the data generated by customer reviews on different marketplaces. Collate this, perhaps cross-referencing the data with the reviews on retailers’ sites, and brands can gain rich and nuanced insights into how their products are performing with different groups of consumers.
On one level, this might be as straightforward as realizing that a dress is being returned because it is described as ‘royal blue’, but customers disagree. Or perhaps a product is being returned because an image was misleading. More positively, the data coming back can offer information that helps with product development.
Gaining these kinds of insights can also reveal unexpected patterns of consumer behavior, for example, when a brand appeals to very different demographics for very different reasons. In Britain, Clarks (C. & J. Clark) are often viewed as the shoes you buy schoolchildren – dependable footwear. In contrast, Clarks in Jamaica are viewed as dependable and of high quality, but also associated with the rebellious spirit of reggae and dancehall music. Recognize these kinds of patterns and regional differences early, and brands can calibrate marketing to make the most of emerging opportunities.
Marketplaces as a step to selling direct-to-consumer (D2C)
One factor we haven’t so far mentioned is speed to market. One of the great advantages for brands of using marketplaces is they offer a quick way to reach consumers. That’s particularly important for brands that may not have e-commerce expertise within the company.
For these brands, going D2C and setting up an e-commerce operations from scratch can be a huge undertaking. In contrast, by using marketplaces as a step along the way, brands can develop expertise that can later be applied to an in-house-developed e-commerce site or even a more imaginative offering such as a subscription service. In this way, brands can gain a share of a D2C sector valued at $111.5 billion in the United States in 2020.
Here lies perhaps the main strategic reason for using marketplaces. It’s not that marketplaces are an end point in themselves, it’s that mastering the skills needed to sell on marketplaces equips brands to sell across channels – and key to this is ensuring that product data is being managed and used effectively.