Making your marketplace a success by delivering on its promises (episode 1 of 8)

And this model isn’t exclusive to pure players and the non-food sector: Carrefour, for example, launched the first marketplace dedicated to food products, taking advantage of the local trend, which has also given rise to specialized marketplaces such as Pourdebon and Epicery. The B2B sector is also embracing the trend, with significant growth. Amazon and Alibaba, in particular, have adapted their marketplace model to cater to businesses, and more recently, Alstom launched a marketplace dedicated to selling spare parts for the rail sector. Professional buyers are thus transferring their personal habits into their professional lives, seeking the speed and efficiency offered by the marketplace model, which facilitates and accelerates the digitalization of processes.

 

With the rise of e-commerce, the demand for marketplaces has intensified. Their growth has outpaced that of traditional sites, while Amazon, for example, has seen an increasing share of its sales coming from third-party sellers. As for traditional retailers, many have survived by accelerating their transition to online sales through local marketplaces.

 

The success of marketplaces can certainly be attributed to their ability to meet consumer expectations: simplifying and speeding up the decision-making process by concentrating the offerings in one place. In Europe, nearly 50% of online buyers now use marketplaces. And importantly, their behaviors are evolving: when searching for a specific product, they no longer turn to Google but directly to platforms like Amazon or eBay, which guarantee a vast selection and quick delivery.

 

All these signs point to a new gold rush for brands that have not yet made the leap and are exploring the potential of a niche marketplace. Becoming the next ManoMano, which turned into a unicorn by multiplying its revenue, is an aspirational model. But the promise of the “one-stop shop” goes beyond just an abundance of choice.

 

To succeed with a marketplace model, a subtle balance must be achieved between the requirements of different players.

 

The success that we have seen of the marketplace model is proof of its many advantages, but it is important to weigh up the risks of transforming your e-commerce site into a marketplace. The success of a marketplace really depends on a subtle balance of promises between three stakeholders: the brand, the sellers and the end customers.

 

In this tripartite relationship, the role of the existing website is essential. Brand recognition, established customer base and visibility bring value to its sellers. Its product selection and buying experience bring value to its customers. The expansion of its product range can offer the brand a way to attract new customers, test market trends and increase its revenues.

 

However, for the marketplace to attract sellers, it needs to anticipate the barriers that they may encounter, such as competition for share of voice, the need for profitability, and their dependence on the marketplace. It must also establish an optimal way of managing the supplier experience. For the consumer, increased choice is not enough – the search experience is fundamental and becomes more complex as the product range expands. The marketplace must not lose sight of its role as a retailer and needs to adapt its merchandising while keeping a close eye on the selection of its own product offering.

 

Without taking these risks into account, a brand could see its management costs increase, its performance diminish and the promise of increased revenues disappear.

 

 

The marketplace model brings benefits to everyone involved: marketplace sellers, customers, and of course the marketplace itself, even if it’s an e-commerce site with its own catalogue. But it’s important not to ignore the risks that lie behind the promise of the model.

 

 

The first obvious consequence for a brand creating a marketplace is the expansion of its product range. With this broader catalogue, the site will attract more visitors and build loyalty among existing customers, who now find a richer offering and new product categories. It’s also an easy means of trying out customer appetite for new products. Another advantage of the model is that the brand doesn’t buy the merchandise or manage the logistics (unless it wants to provide its sellers with a complementary offer). Commission recovered from each sale is therefore mostly pure margin.

 

Finally, the importance of data must not be ignored: all the data collected will enable a deeper understanding of the customer which helps to refine the e-commerce strategy.

 

 

 

To enjoy these benefits, it’s nonetheless essential to ensure that the sellers you recruit keep their promises: providing quality products, meeting delivery conditions, offering attractive prices, etc. This is where the brand must play its role as a retailer: product range is at the heart of its business and it must also ensure that suppliers will guarantee a quality of service that is at least equal to that originally offered by the site.

 

The brand acts as a trusted third party in the eyes of the customer. Even if it’s only a simple intermediary that cannot be held responsible for a poorly executed sales contract, it’s still the site where the customer found the product and made the purchase, and so it will suffer from any resulting disappointment.

 

It’s also necessary to anticipate the growth of the catalogue and of the order flow with an infrastructure that can manage the load. Investment in technology should be planned in order to maintain the performance of the site and this will obviously eat into the desired margin. However, this is not as significant as for traditional e-commerce activity.

 

Another sizeable difficulty for existing e-merchants is guaranteeing a minimum volume of transactions for sellers, without cannibalising your own product range. As it is easier for comparisons to be made between products, balancing the interests of all parties becomes a subtle exercise along the many stages of the purchasing journey.

 

The arrival of new brands on the site can also damage the online retailer’s image. Care must be taken to ensure the brand’s DNA is not diluted with the introduction of these new offerings.

 

Finally, multiplying your catalogue by 3, 10, or 100 can’t be done without careful consideration of how to adapt your merchandising in order to guarantee an excellent customer experience. Because all your efforts to remove the risks outlined above will be in vain if the customer doesn’t buy anything. In the end, wouldn’t that be the greatest risk?

 

In the next episode, we will explore the advantages and risks for sellers on marketplaces, including how they benefit from access to new markets while minimizing their investments. But beware, this model also comes with risks: reduced margins, dependence on the platform, and increased competition. We will also detail the benefits for consumers, who enjoy a wide selection and a seamless experience, but also the risks associated with poorly ranked offers or disappointing delivery service. And to top it all off, we’ll analyze the success of ManoMano, a niche marketplace that has managed to stand out through its innovative approach and impressive growth.