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TheNTWKSummit22 | Retail the Transition from E-commerce to Marketplaces

Speakers: Alejandro Fresneda, Thomas McFadyen, Victor Del Pozo & Santiago Sanchez

Like any big disruption, the transition from e-commerce to marketplaces is regarded by some with skepticism. However, NTWKers Fresneda, McFayden, del Pozo and Sanchez agree that it is a natural evolution and that marketplaces are not here to replace e-commerce but to complement it, the same way e-commerce never replaced traditional retail. To offer diverse points of view on the industry, they sit at a round table to discuss some of the most addressed topics.

To be or not to be

Is having a marketplace strategy currently a necessity for all companies? In the most recent years, big companies have moved to marketplaces. Some examples are Walmart, in the U.S. or Carrefour and Fnac in Europe. Interestingly, several brands have also opened their online stores to third parties, like Mango or Scalpers. Moreover, new startups have appeared in the market to help companies sell through marketplaces such as Shopify. Sanchez responds to that by simply stating that “marketplaces need traffic and more traffic.”

According to a study carried out by Veepee and ESA Business School regarding the trends of e-commerce buyers, offering aggregators is one of the main reasons why retailers move to a marketplace model. Del Pozo states that they are trying to be more appealing to the customer.

Integrating other brands means attracting more traffic because they are generating more opportunities to solve a customer problem.
It’s becoming more difficult to be profitable in B2C. The cost of acquisition is going up. […] I would say that it’s easier to find product market fit in a marketplace than in your own B2C.

In terms of user experience, marketplaces are also more appealing to the customers, not just because of an integrated offer but also because of the infrastructure and logistics. “They already have their log-in, their credit card details saved, they trust the site and they get the goods one or two days later”, says Fresneda. According to McFadyen, Amazon presently has more product searches than Google, for example. Which would mean that “if you’re not on Amazon and people are searching there for a product, they are never going to find your brand.”

Being a seller in a marketplace, though, would mean closed commission and FBA fees, so the company would be getting a big volume of traffic at a fixed cost. Being a vendor on a platform like Amazon would also be a good starting point for companies that want to learn as they scale to be able to operate their own in time. This would allow them to understand the metrics of the model better.

It’s a learning journey and the sooner you dip your toe in the water and start learning, the better you’ll be down the road.

Nevertheless, scalability is not a safe bet either. To compete with organisations that have the scale and also the network effect and a flywheel already spinning, that marketplace should have a value addition. McFadyen suggests “becoming a destination - or a service, like Veepee - in a niche where you have a content, a community, unique search capabilities and stock, etc.”

Risks and opportunities

From a retailer's perspective, e-commerce means owning the whole value chain and switching to a marketplace model implies losing a big part of that control. “You go from a fully integrated value chain in which you know what is happening in every event to an environment in which sellers must do pretty much everything”, states del Pozo. Which is why incorporating other forms of revenue, such as advertising, is an interesting opportunity for companies to regain some control.

From a seller’s perspective, selling in a marketplace means constant competition. Companies like Amazon work with the ‘buy box’ tool, which is aimed at benefiting the final customer but can damage the visibility of a brand or product if not well positioned. Moreover, competition is not just against other sellers but, in some cases, even with the marketplace itself, as some of them have developed a brand of their own that replicates best-selling products. On that line, bad practices such as reviews tampering from competitors could mean exclusion from the competition.

This is why McFadyen believes that being too dependent on one platform is too high of a risk and proposes selling on different channels or simply using the marketplace as a consumer acquisition tool.

A lot of organizations then redirect the transactions to direct consumer platforms where they can have a more intimate, one-to-one relationship with the customer.

This would allow them to build up brand engagement from data collection, something marketplaces do not contribute to, even if they offer options like having a brand website within their platform.

The environmental impact of marketplaces

As we are evolving towards a greener industry, there is also a general concern over marketplaces generating an environmental impact. When asked if platforms can help reduce the carbon footprint, the answer is unanimous. “Not only they can be good for the environment but also more efficient in terms of economics”, states Fresneda. Marketplaces have the data of the orders, so the logistics of the transportations are organised in areas and time slots, which dramatically reduces costs and carbon emissions.

On that note, McFadyen remarks that “the platform business model and the marketplace concept can be used not just for selling products or services but for corporations and organizations trying to do good.” Some companies, for example, plant trees in exchange for carbon credits that other companies can buy. Other marketplaces, like Veepee, are built around the idea of a circular economy, as well as boosting initiatives for other brands to integrate such a model into their brand.

A lot of companies never thought that they would be selling used or refurbished goods but this new category is really picking up.

A glimpse into the future

It is a fact that during the Covid pandemic, the growth of marketplaces skyrocketed, displaying the highest peak in 2020. But it seems like the numbers have gone down in the last quarter. All the round-table participants agree that this is due to a stabilization after a circumstantial period of time.

There are several players that disappeared during Covid. Others survived but didn’t have the financial stability to keep their stock and others did so but were affected by the supply chain disruption.

For Veepee, as well as other companies, this year is about strengthening the basis of their marketplace.

Besides that, McFadyen believes that there is still a big opportunity in the B2B world. Statistics show that B2B organizations are growing marketplace GMV seven times faster than e-commerce compared to B2C, where the numbers are in 2x or 3x.

There are a lot of niches which have inefficiencies where the marketplace model can transform and bring efficiency.

On the same line, some companies are also leveraging D2C by offering their logistics, something for new players to take into account.

Despite the risks and considering all factors, what seems clear to all four NTWKers is that whether a company or organization intends to adopt the platform economy model as a marketplace operator or a seller, the moment to do so is now.

Written by: Gisela Giralt


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