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Which marketplaces produce the best results?

4 minute read
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Which marketplaces produce the best results? ©iStockphoto.com/masterzphotois

Discuss marketplaces with those who manage brands and retailers based in the UK and USA, and chances are they will immediately mention Amazon Marketplace. Perhaps they will also mention eBay or, if they have an interest in the Chinese market, Alibaba.

But were you to discuss marketplaces at a conference in Brazil, the largest e-commerce market in Latin America, the first name to be mentioned would be far more likely to be Mercado Livre. That’s because its Argentina-based parent company, Mercado Libre (literally “free market” in Spanish), generated $2.2 billion in revenue in Brazil in 2020. In contrast, Amazon in Brazil is essentially a large challenger company that, in 2020, generated $585 million.

Even in Europe, where many countries have comparatively small populations, local marketplaces often outperform American and Chinese e-commerce behemoths. In the Netherlands, for example, it’s predicted that Bol.com, the region’s largest marketplace, will have generated €5.5 billion euros in 2021.

This all acts as a reminder that, while digital commerce is an international business, all markets are ultimately local. While consumers are increasingly happy to shop digitally across borders, they are still very likely to turn to retailers and brands that have a high local recognition factor – or at the very least these consumers will need convincing to shop with a foreign-based company.

For brands that want to sell into new territories, this is a key insight. While marketplaces represent a fast and efficient way to reach new territories, brands need to identify those marketplaces that will bring the best results. Adding further complexity, certain marketplaces are more appropriate for brands operating in different sectors.

So taking these factors into account, how should brands decide which marketplaces to work with?

Start local and then go international

A first point to make is that a brand that has yet to sell on marketplaces in its own home territory seems unlikely to be successful at selling internationally. As we discuss here, different marketplaces make different demands of sellers.

Taking a step back from the idea of trying to drive international sales, a prerequisite for doing this is having control of product data so that it can be fed to where it’s needed in the correct format. Employing a Product Information Management (PIM) system, typically working in conjunction with the brand’s ERP system, means this data can be centrally managed.

Once this is in place, international expansion that might, for example, require translating and localizing product descriptions becomes far more streamlined and efficient. In addition, the product data crucial to this expansion is reliable and trustworthy.

Research both marketplaces and local market conditions

Once brands have done this initial work, there is no substitute for research. To return to the example of Brazil, while Mercado Livre enjoys a preeminent position similar to Amazon Marketplace in the UK, it doesn’t in itself represent a ‘solution’ to selling in the country. Any brands targeting Brazil would still have to consider such issues as the overall economic landscape, local taxes and, a particular issue in such a vast and, outside its major cities, relatively undeveloped country, finding reliable logistics partners.

Turning specifically to marketplaces, brands need to be clear about the fees involved. Marketplaces typically charge a combination of set fees and commissions on sales, but brands also need to consider chargeback or refund fees. In addition, think about reverse logistics: how much will it cost if a customer returns an item? Are there local laws that mean brands have to accept returns within certain time limits? These kinds of factors can impose significant and unexpected costs when entering new markets.

In addition, language is very likely to be issue. Again, a PIM can help here because reliable, locally checked translations can be held centrally rather than brands running the risks of ad-hoc or culturally insensitive mistranslations.

Think about marketplaces by sector

In 2020, it’s estimated that marketplaces accounted for 62% of global web sales. It follows that size is important when it comes to marketplaces. And yet it’s not the only factor to consider. Not only are the largest marketplaces fiercely competitive in that a brand’s competitors may also be selling via this channel, but brands need to consider whether a marketplace is the best place to list.

To illustrate what we mean here, think about the fashion sector in Europe. While many consumers will certainly have bought clothes from Amazon Marketplace, it’s often not consumers’ first port of call. This is not just because Amazon is a comparative latecomer to the fashion market. With Amazon Marketplace, it can be difficult to find items because of the sheer scale of Amazon’s inventory, and much of this clothing inventory consists of white-label items or small brands, which can be off-putting to some consumers.

In contrast, Zalando is Europe’s largest fashion marketplace. Its revenues in 2020 edged close to 8 billion. It has a reputation for carrying a large number of brands – more than 2,000 – and yet there’s a sense its inventory, with a median price of 48 per item, is ‘curated’ for consumers.

For many European clothing brands, it’s far more important to be listed on Zalando.

Think about the expertise the company already has

Many brands list on marketplaces in part because they have little experience of selling direct to consumer (D2C) and they want to gain expertise, but it’s important to realize that B2B skills are transferable. There are now more than 300 B2B marketplaces in Europe. It follows that, even if a brand lacks front-end B2C marketing and merchandising skills, it may already have marketplace experience gained by interacting with other businesses.

A useful question to ask may be: can this experience be employed in different channels?

To return to where we began, marketplaces of all kinds now represent a crucial way for brands to get to market, but to make the most of these opportunities, brands need a clear idea of what they are trying to achieve and a clear sense of where best to target resources. This may mean, for example, focusing on several marketplaces in a single territory, or on one marketplace that operates internationally.

But whatever strategy brands decide upon, it’s key that all of these touchpoints are fed with consistent product data. That’s partly because consumers will soon notice if there are inconsistencies across different channels and grow dissatisfied. It’s also because brands need to be able to assess the effectiveness of different marketplaces and, if the product data feeding these marketplaces is inconsistent or poorly configured, it becomes hard to gauge ROI accurately.

The first step to taking control of product data is to integrate a PIM system into your core  technology stack.