The Changing Face of Retail: Why online marketplaces are a step into the future
As consumers, we’re all comfortable with the big online names such as Amazon and Etsy but we are also seeing a growing number of new online marketplaces appearing, as more traditional bricks and mortar retailers dip their toes into becoming third-party marketplace vendors.
Of course, this isn’t accidental. Many high street names have been forced to compete with the big marketplace players because of decreasing in-store footfall and the demand for greater choices from online shoppers. Household names such as Marks & Spencer, Next and John Lewis are all now not just own-brand retailers, but online marketplaces for several third-party brands.
A growing sector
Research published in 2022 by OC&C Strategy Consultants has predicted that we will see marketplace revenues continue to grow at 15% per year in the Western world, making it as large as direct e-commerce by 2025, when it will account for circa 45-50% of all online spend.(1)
And it’s a big piece of revenue that these new online marketplaces are competing for. According to Insider Intelligence, the global eCommerce market will reach $6.3 trillion in 2023 and continue growing over the next few years.(2)
It’s no wonder that we’re seeing such rapid growth when it comes to online marketplaces.
A personal service
At first thought, for consumers, the luxury of having so much choice feels compelling, but how much choice is too much? How do you know which products are good, and which ones aren’t, when there can be hundreds of almost identical products on offer? Should you trust the reviews? What makes something top-rated, or buyer’s choice? Why buy it from here, when you can also get it from there?
As a result of this overwhelm, there is a growing number of niche marketplaces where curated content is tailored to the end user, styled in a way that matches the online marketplace’s own brand aesthetics, to resonate with the target audience.
Some are turning to technology to differentiate their marketplace. Sourcerie,(3) for example, is an online beauty brand that harnesses technology to make personalised reviews and product suggestions through collating and curating real-life customer reviews from multiple sources. Other online marketplaces are employing their own in-house reviewers to give impartial objective opinions on the third-party products they sell.
Community-driven marketplaces are also seeing strong growth, such as trading site, BrickLink, which trades Lego, and BandCamp, which allows retailers (bands and musicians) to trade their music and merchandise, while indy marketplaces Etsy and notonthehighstreet continue to grow their audiences (and revenues).
Where does brand ownership start and end?
As part of a wider mixed-model retailing strategy, one of the key challenges has always been aligning the supply chain. If customers expect a certain delivery time and packaging from their trusted brand, ensuring independent retailers can meet these expectations can be a huge challenge.
Another challenge faced by big-name online marketplaces is the question of reputation. What do customers expect of a brand? What if a third-party product falls outside of that? Who handles customer care and returns?
At a recent roundtable event hosted by Retail Gazette, many online retailers agreed that personalisation for consumers was a fundamental key to success. That includes the product itself having synergy with the marketplace brand, and a brand-led delivery and packaging experience. Otherwise, with a marketplace business model, there is nothing to stop the customer from finding the same product elsewhere and shopping with them instead.(2)
While no two marketplace owners will handle their own and third-party branding and fulfilment identically, it seems agreed that customers still demand the brand experience they have come to expect from that retailer.
What about when things go wrong?
It sounds like with online marketplaces, everyone benefits, right? But there is a note of caution to consider. In the event of faulty and potentially dangerous goods being sold, it’s not just the manufacturers’ reputation that’s at risk.
It’s an issue that has been identified by the UK’s Minister after the Office for Product Safety and Standards (OPSS), who has identified that some marketplace sellers are unwittingly selling a number of unsafe products. This has led the UK government to create several directives for online marketplaces to follow, to help ensure that consumer safety remains paramount.(4)
Online marketplaces are here to stay
For the manufacturer and retailers, online marketplaces provide the opportunity to see considerable uplift in sales. Traditional bricks-and-mortar retailers find marketplace business models give them the opportunity to reach new people and become associated with certain third-party brand names, with the potential for additional credibility for their own brand.
It also frees manufacturers and product sellers from potentially needing to set up and run their own online sales platform and can bring customers to them in numbers they would find otherwise impossible.
And perhaps most importantly, it gives customers an immersive buying experience with greater ability to purchase everything they need under one, virtual roof.
References:
1.https://www.retailgazette.co.uk/blog/2023/04/roundtable-getting-your-cx-right-2/
2.https://www.webretailer.com/marketplaces-worldwide/online-marketplaces/
3.https://sourcerie.co
4.https://www.gov.uk/government/news/business-minister-hosts-online-marketplace-round-table