According to DigitalCommerce 360, consumers spent over $2.67 trillion USD globally on online marketplaces in 2020 (Mar2021). Not surprisingly, gross merchandise value (GMV) of the goods sold on marketplaces grew by 29% in 2020. As an example of marketplace excellence, Amazon’s third party GMV increased by over 40% in that same period.
When so much of online shopping takes place within online marketplaces - is there a place for your ecommerce strategy in this equation? Naturally the answer is ‘yes’. Setting up their own marketplace is an incredible growth opportunity for ecommerce merchants. Doing so lets you leverage your existing customer base, curate products that fit your customers’ needs and provide associated services that make sense for your consumers. Not only is this a tremendous opportunity to grow total revenue, and increase loyalty to your brand, but it can be done without taking on added risk. What’s not to love about online marketplaces?
At the end of the day, marketplaces are all about the consumer. They will be the ones to decide if they want to buy product or service, or not. For a consumer, finding a retailer that has what they want can be a lengthy process. As a result, 56% of consumers become loyal to the brands that ‘get them’ and understand their preferences; according to research by FreshLime (Jul2020). So, once a consumer has found a retailer with the style, items, or services they like – they want to stick with that brand. Curated goods or services from that brand will also likely appeal to these consumers.
For the consumer, the brand provides goods and services they like and buy, so they stick with that brand. An online marketplace run by the brand they like means they also get visibility to other products and services curated by the brand that ‘gets them’.
Whether it’s Amazon and eBay, or a retailer-oriented online marketplace, to sell products there are relationships to be established, perhaps monthly fees, listing fees, and a cut of the sale. This isn’t just for the top online marketplaces, either. So, what’s the incentive for third-party marketplace sellers?
What an ecommerce marketplace includes for these third-party sellers is instant access to a new customer base. For the seller, even if it’s not a million active customers, it’s a consumer base they may not have been able to engage previously. From their perspective, this is an opportunity to expand their online sales. It also exposes a new potential audience to their products, services, and brand name. For many such retailers, this client base expansion, and revenue growth opportunity, is well worth paying a fee to access.
Is B2B ecommerce compelling unto itself? Will procurement teams start showing a preference for corporate purchases online, rather than physically from sales teams? Surprisingly, one statistic online suggested that 23% of B2B companies still accept fax orders. Ultimately, will it take another critical situation like the past few years to shake up the industry? Hopefully, we will not find out the hard way.
For online retail, online marketplaces provide a new dimension to your ecommerce sales. As pointed out above, it can:
In addition to the revenue and margin from sales of associated products offered from partners, an ecommerce marketplace engages your client base in new ways. By curating goods and services that cater to your client bases’ tastes, you reduce the need for them to go elsewhere to shop. This expanded portfolio of offerings increases customer loyalty because consumers know they can get their needs fulfilled from your online store and ecosystem – rather than having to shop around.
If you're thinking about firming up your online strategy by expanding to complementary marketplaces, get started now with this free white paper: “Marketplace Fundamentals: A Guide to Building & Running Online Marketplaces”.
Another important consideration that plays into opening an online marketplace is the data a retailer can gain. When partners are selling online through your marketplace, you have the opportunity to understand what sells well and not so well with your audience. So, if a vendor is pitching you on their new products, or adding their services, you have the option of listing them on your marketplace first.
Putting the offering on the marketplace for a few months provides you with data showing whether or not the product/service resonates with your customers. Relative to other vendors on the marketplace, if the offering is purchased frequently, then you know it could be a winner for you. You could consider branding it, adding it to your physical locations, and selling it on your ecommerce store as your own offering. Having a sense of how attracted your client base is to the offering reduces your risk and provides you with the data you need to make better decisions. In effect, selling online through your marketplace first reduces your risk on new products and services.
Besides reducing product selection risk, running an online marketplace also reduces your inventory carrying risk. In other words, the third-party vendors selling their goods through your site, take the inventory carrying costs and risks. These aren’t your goods. Hence, no fears of obsolescence, end-of-life concerns, deterioration, hazards from natural causes, transportation damage, low sales from the market not accepting it, nor return risks. All of these risks are taken by the vendor.
All told, the online marketplace increases your revenue and margins, without adding to your risk profile.
There are many solutions in the industry offering online marketplaces. But if you already have an enterprise-grade ecommerce system like Salesforce, start with a solution that connects to your existing technology. The two should work and interact seamlessly.
While large systems can be expensive, remember that they’re also feature-rich solutions. These systems need to be able to fully integrate with your ecommerce technology stack.
If you haven’t been running an online marketplace, it makes sense to start small and grow your way up. Running a new marketplace means you need a set of core functions that keep you focused on growing this part of the business. But even at this stage, look for an out-of-the-box marketplace product that is natively built on your enterprise-grade platform. That will make sure you maintain the reliability, high capacity, and robust performance of your current ecommerce solution.
In this regard, consider OSF Digital’s Tealkart Marketplace. When your marketplace is growing at 81% year over year, and each merchant brings $110,000+ US GMV to the table – you need a marketplace that can keep up. Harness the power of Salesforce Commerce and Experience Cloud – built for volumes like these - and bring it all together with the only online marketplace natively built on the Salesforce ecommerce engine you trust. Only from OSF Digital.