Understanding the marketplace-retailer win-win model

Online marketplaces are the search engines of retail. Consumers are increasingly using marketplaces to research, cross-reference price and quality of products. According to Cpcstrategy research, 75% of shoppers say they look to Amazon for new products and brands to shop from.

Retailers are taking advantage of this emerging trend to stay visible, leveraging the marketplaces discoverability. This proximity creates an ideal environment for fostering the customer-retailer relationship.

Staying in the retail business requires merchants to be omnipresent. This means staying present in shoppers’ lives, being ‘under their thumb’ to tackle shoppers’ indecision to purchase. It requires retailers to be there instead of the competition.

Marketplaces hold the cards here. Retailers who join marketplaces buy a digital shelf on the world’s most visited platforms. It’s equivalent to brands buying a physical shelf to guarantee exposure to the customer. The retailer’s goal is to ensure the maximum exposure of their goods for the highest chance of a conversion.

To help brands gain visibility into customer loyalty and acquisition data, Amazon rolled out a set of four metrics called “new-to-brand” (NTB) to help brands identify strategies that can drive customer acquisition and efficient business growth on Amazon, says Feedvisor’s The Amazon D2C Playbook.

NTB metrics distinguish whether an ad-attributed purchase was made by a repeat customer or a “new” customer, which Amazon define as someone who bought a brand’s product on Amazon for the first time over the last year.

The addition of NTB metrics signals Amazon’s rising focus around brand awareness rather than strictly point of sale. Amazon’s marketplace counterpart, eBay are also accelerating the adoption of brands on their marketplace. This week saw eBay launching North Face storefront to make the brand’s inventory accessible to new shoppers.

This insight reinforces the marketplace’s commitment to work with retailers and brands to drive a ‘win-win’ model for both parties. For marketplaces, it’s the unique branding that differentiates their platforms, for retailers it’s the exposure to the global audience.

However, retailers who embarked to join the marketplace arena must remember that navigating the platforms’ landscape is quite different from managing a retail business. The increased competition, knowledge needed to understand the marketplace’s trading rules and the inability to set forth their own rules must be considered as areas retailers won’t have control over. Here are the set of questions they should ask themselves before jumping on the marketplace bandwagon:

  • Who are your competitors? How are they performing?
  • Will the marketplace of your choice be a good fit for your product, target audience and business model?
  • How many marketplaces are you planning to sell on?
  • What are the key opportunities and challenges you will face when launching a new product on the marketplace?
  • Which fulfilment method makes the most sense for your business?
  • How can you ensure long-term profitability on a marketplace?
  • How are you aiming to outmanoeuvre the competition on a marketplace?
  • Which technology suppliers are you going to choose to automate processes?

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