With marketplace sales outpacing eCommerce growth averages, and Amazon expected to make up 50% of all US eCommerce sales by 2021, brands and retailers are increasingly keen to develop and optimise their marketplace strategy.
As well as selling through existing marketplaces, many organisations are also looking into launching their own marketplace. To find out more about the opportunity for brands and retailers, we recently caught up with Kelly Gow, Head of Strategic Alliances at leading marketplace platform provider Mirakl.
What are the benefits for a brand or retailer of launching its own marketplace?
Even outside of the retail sector, the fastest-growing companies are often essentially marketplaces – think Uber and Airbnb. So it’s not surprising that increasing numbers of brands and retailers are looking into launching their own marketplace.
As well as growing revenue and profits – electronics retailer Darty, for instance, found that it was around three times more profitable to sell through its marketplace than selling products that it stocks directly – marketplaces allow brands and retailers to offer new products and categories, without the risk of actually holding the stock.
In addition, research – such as a recent study we did with Forrester – shows that marketplaces can help to strengthen customer loyalty and retention, by offering an improved customer experience. Running your own marketplace also gives you direct access to the customer and means that you own the customer relationship and data.
When does it make sense for a company to consider launching its own marketplace?
There are really no specific criteria or attributes needed to consider it, and it should be on every brand’s and large retailer’s radar. In particular, as soon as a brand’s footprint and mindshare are great enough to make it a destination in itself rather than just a retailer, a marketplace should come into consideration.
For multi-brand retailers such as department stores, a marketplace may also make sense as a means of adding complementary products and/or categories without the need to actually stock and fulfil the products. B2B manufacturers are also increasingly leveraging marketplaces to build on their brand equity and offer products from other distributors that complement their own.
How long does it take to launch a typical marketplace, and what are the key stages involved?
It really depends on your strategy and the scope of the project, but with a partner like Mirakl, a new marketplace can be launched in as little as three months. The technical part can actually be very quick; the lion’s share of the time is usually spent on ensuring business readiness.
Any marketplace launch should be built on a solid strategy that ensures you stay true to your brand. Of vital importance is ensuring integration of your marketplace into your existing eCommerce infrastructure. If a marketplace is set aside as a separate offering, it will offer a poor customer experience and be much less likely to succeed.
As well as ensuring you work with the right partners, defining the required internal human resources to manage your marketplace activity is crucial, as is ensuring early buy-in from all key stakeholders. Targeting the right third-party sellers is the next step in running a successful marketplace. Invest early in marketing to build awareness in order to attract the right partners and ensure they align with your brand values.
And once your marketplace is live, continuously monitor and optimise performance to ensure you are offering the optimal customer experience.
How can organisations measure their marketplace success?
Aside from the obvious metrics of marketplace sales and GMV, brands and retailers already selling online should closely monitor marketplace sales versus total online sales. As a general rule, organisations should target at least 15-20% of sales to be through their marketplace within the first year.
Launching your own marketplace should also provide a natural SEO boost, resulting in an organic increase in website traffic. Other key metrics to monitor include the number of net new clients, as well as average order value, with marketplaces typically resulting in an increase in this KPI. Brands and retailers are also advised to keep a close eye on sellers’ ratings and reviews, alongside the volume of customer service queries – where ideally you shouldn’t see an increase.
Find out more about the marketplace opportunity by downloading our latest article, How (and why) to design a marketplace strategy.
And find out more about Mirakl on their website.