Four principles for finding success in digital commerce marketplaces

Launching a digital marketplace has become a popular strategy for B2B and B2C brands alike. While marketplace businesses grew at double the pace of traditional digital commerce businesses last year, their complexity often creates unforeseen challenges

Date published
June 09, 2023 Categories

When consumers think of digital commerce, their minds often go straight to a marketplace. Whether it is Amazon or eBay in the US, Rakuten in Japan, Alibaba and JD in China, Shopee in Southeast Asia, Zalando in Europe, or Mercado Libre in Latin America, marketplaces seem globally ubiquitous.

In fact, according to a recent study conducted by Merkle, an estimated 2.5 trillion of the $4.7 trillion global B2C digital commerce market passes through a marketplace.

But it might surprise you to learn that, increasingly, it is mature companies – across B2C and B2B industries – that are finding success implementing and operating marketplaces on their own terms.

Brands as varied as Airbus, Eli Lily, Walmart, and Toyota have implemented successful digital marketplaces to solve a wide variety of consumer needs.

Unlike wholesale (B2C) or distributor (B2B) models, with marketplaces, the financial responsibility for inventory – and often some aspects of site merchandising – typically lives with the seller (“merchant”).

For some brands, such as Target or Wayfair, marketplaces offer an opportunity to extend their existing assortment and stay on top of new product trends by onboarding additional sellers quickly. For others, like Macy’s, augmentation of their traditional department store model with a marketplace model can enable greater near-term profitability.

B2B industries are particularly well-positioned to capitalize on marketplaces. While it is commonly observed that B2B organizations have been historically slower to adopt digital commerce, marketplaces can enable them to bring their distributors together in one place or extend their value by convening brands in adjacent categories to provide one-stop-shopping.

Merkle, a global leader in customer experience and digital commerce, has partnered with numerous brands to successfully launch and grow marketplace businesses.

This work has included supporting Saks Fifth Avenue’s evolution from a traditional department store toward a digital marketplace business. With solutions generating over $2 billion in gross merchandise value yearly, several principles have emerged to ensure growth.

1. Start with trusted partners

Even the most well-thought-out strategy and flawlessly executed implementation will need continued refinement.

Marketplaces are living businesses, and the initial stage after launch is pivotal to success. Ensure that any firms you may work with to help define your strategy, implement your vision, or optimize your operations have marketplace experience and understand the complex dynamics of your operation.

Similarly, the merchants who initially sell on your marketplace should be well-known to you, as existing relations can ensure faster remediation of any issues, tighter feedback loops to evolve the marketplace, and a willingness to work through any commercial or operational growing pains. Furthermore, the marketplace needs to adhere to different financial protocols, depending on the geographic location in which it’s based.

You may be wondering if there is a ‘right’ number of merchants to launch a marketplace, but there is no one-size-fits-all approach.

For some businesses – say, an already successful multi-brand retailer looking to augment its existing digital business model – the customer experience strategy may be seamless, with the marketplace being part of he core shopping experience. In that scenario, a brand may want to launch with low-single-digit partners to test the model, ensure its primary business isn’t impacted, and learn where to scale.

For a net-new ‘greenfield’ marketplace, the equation might be different. A minimum supply is necessary to support initial demand generation, but in many cases, onboarding one initial merchant with a compelling product catalogue can be enough to create momentum.

2. Be crystal clear with consumers

While marketplaces are excellent value drivers, they still must follow digital commerce best practices. Whether B2C or B2B, consumers have exacting standards for marketplaces.

In particular, experience leaders such as Amazon have set a bar for delivery, return, and customer service convenience, operating almost like a ‘mono-brand’ or wholesale retailer by taking responsibility for everything from reverse logistics to delayed orders.

Unsurprisingly, Merkle’s study revealed that 74% of consumers say it would negatively impact their perception of the marketplace if they had a poor experience with a third-party merchant. And 85% expect the marketplace they buy from to handle all delivery and shipping issues.

This does not mean your marketplace needs to do it all. But it does mean your user experience design – from the way you integrate the marketplace experience with an existing digital commerce platform to how you merchandise and message marketplace products – needs to be top-of-mind as you develop your marketplace strategy.

3. Prioritize your merchant experience.

A flourishing merchant community is the bedrock of any marketplace. While it is essential to start with trusted partners, it is also important to offer merchants a seamless onboarding, payment, and management experience.

Giving them easy-to-use tools and integrations to manage product, content, pricing, and availability – while also supporting customer inquiries – not only makes them successful, but it also reduces your operational load.

The easiest way to ensure a high-quality merchant experience is to treat it like your customer experience. Model the end-to-end journey, test functionality prior to launch, and continuously connect quantitative (e.g., site analytics) and qualitative (e.g., surveys and feedback forums) data to help refine and evolve your capabilities.

4. Plan for long-term monetization initiatives

Marketplaces provide many levers for monetization beyond product sales (e.g., media functionality to offer advertising opportunities). Leading marketplace technology platforms like Mirakl have made this particularly seamless by releasing their own ad functionality that integrates with their core marketplace platforms.

But the opportunities go beyond commerce media. Value-added services offer a pathway to additional profitability for marketplace operators. For example, providing access to your own customer service capability or offering forecasting, demand-based pricing, or supply-chain services to your merchants can strengthen your business partnership, improve performance, increase utilization, and boost return on investment for your existing logistics network.

Taking these principles into account, brands are poised to seize the opportunity represented by marketplaces. With the help of a trusted strategy and implementation partner, your marketplace offering can seamlessly meet the demands of customers while also providing the tools merchants need to be successful on your platform for years to come.

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