5 Things You Thought You Knew About Online Marketplaces

There was a time when retail was relatively straightforward. Sure, a business would need to be concerned about inventory and supply chains, competition and financial management, and more. Yet, retail was about opening your location and making sales. 

Today, retail isn’t so clear-cut. There are brick-and-mortar stores, catalogs and online. There’s a need for omnichannel selling. What channels are you using? Are they profitable? Are they part of your long-term goals? Are you global? Do you plan to be? 

Companies face these and a million other considerations constantly. It likely feels as if your business is constantly standing at the threshold of change, and you need ways that help you accelerate innovation without complicating your existing projects and while expanding your market and your profits.

This, of course, requires the need to be flexible and take advantage of benefits that don’t add to your existing load while opening up new avenues for revenue. Even just a few years ago, this meant launching your own eCommerce presence. There are more options now, and more opportunity, thanks to online marketplaces.

What is an Online Marketplace?

Online marketplaces are storefronts that give customers access to many different retailers all at once. Similar to a traditional brick-and-mortar mall, a consumer can do all of their shopping in a single, virtual location.

Unless you’re a brand that pulls in shoppers based on your name alone, marketplaces can be incredibly useful and profitable. They offer the chance to leverage the massive search traffic that exists on a marketplace’s site, as opposed to Google alone. For instance, research from CivicScience in 2019 showed that 22% of users start their shopping journey on Google, but a whopping 49% start their search on Amazon.

Don’t be fooled into thinking that “online marketplace” must equal Amazon, however. There are both large competitors to Amazon, like Walmart, as well as specialized marketplaces and ones tied to social media as well. This is just one misconception about marketplaces that exist. There are likely more things that you thought you knew about them that will surprise you.

5 Common Misconceptions About Marketplaces 

Marketplaces are only for B2C sales.

It’s easy to assume that marketplaces are for individual consumer audiences only. In reality, though, 87% of business buyers make purchases online at marketplaces. In fact, 26% of respondents to an Oracle Commerce survey noted that they prefer shopping on marketplaces, second only to a preference for RFPs. 

Marketplaces create challenges for online sales control.

It’s easy to view online marketplaces as the enemy to channel management — virtual locations where unauthorized sales can take place and that can even cannibalize sales from your other channels. Without a level of planning, marketplaces can turn into the wild west for your brand. 

Instead of seeing a marketplace as a competitor, see it as an opportunity to expose your products to new audiences. It’s possible to leverage a marketplace to advance sales without losing control. Start with defining your authorized sales channels; you don’t need to be on every marketplace, and neither do your distributors or customers. This will limit the management needed and will clearly differentiate any unauthorized sales that may be occurring without the brand’s permission. 

It will also make it easier for you to hook channels directly into backend management systems, like ERPs, accounting and CRMs. Instead of accumulating additional technical debt by embracing multiple channels, the focus can stay on single, successful marketplace integrations and transaction management.

There are already too many marketplaces for a new player to be profitable.

Looking at the big players in the marketplace space, it can seem like there is no room for new platforms. However, evolving consumer behavior, improved customer experiences and innovations, and extended payment options are driving more and more people to shop online. And while Amazon and eBay are still the biggest sharks in the sea, they aren’t the only ones.

The top 100 online marketplaces accounted for $1.86 trillion in global sales in 2018. And while the biggest marketplace brands were on that list, nearly two-thirds of the top 100 were started in 2010 or later. 

Marketplaces are only for broad audiences.

It seems like every marketplace out there offers everything from shampoo to car parts. So it’s easy to get the impression that marketplaces are only intended to serve a broad audience looking for one-stop shopping to get everything they need. Just as local grocers still thrive in a world with Costco, there is a place for targeted marketplaces in an online world filled with Goliaths. 

Specialized, vertical marketplaces provide highly targeted shopping experiences in niche areas  — something that is appealing to B2B buyers, where making a purchase is just one more thing on their to-do list. Instead of wading through irrelevant products, consumers and business buyers can choose from a wealth of products highly focused on a particular need. 

For instance, it's easy to assume that the personal care industry is saturated in the online space. Yet the 2016 launch of Landing International proved that there was room for not only a marketplace in the beauty industry, but one that is targeted at retailers, not end consumers. Landing International has helped launch more than 200 independent wellness and beauty brands into large retailers like Ulta, Nordstrom and Target with automated sales and logistics tools for sellers.

Marketplaces make it difficult to manage inventory.

Adding additional channels — whether that be from social media marketplaces, giants like eBay, or smaller, specialized platforms like Landing International — can add complexity to inventory management and fulfillment. While the goal is to increase revenue through additional sales, it can be daunting to consider the work and effort involved with keeping inventory levels high enough without incurring significant risk.

Integrations into your existing inventory management solutions can certainly help. Importantly, the data gathered through additional channels provides a clearer picture of the need for your products beyond your historical customer demand.

All of this, however, can be a challenge if your internal systems are siloed. While not an all-or-nothing proposition, adding a marketplace channel is a driver toward transformation of your ecosystem away from monolithic solutions to more agile and composable architectures, like MACH (Microservices-driven, API-first, Cloud Native, and Headless).

Beginning to move toward a more agile architecture can start with a marketplace to inventory management integration. This creates a win-win, where the business can see the tangible benefits of transformation through expanded channel management and higher revenue. Instead of being a blocker to marketplace adoption, inventory management can be the spark that brings stakeholders to the modernization table.

The Move to Marketplaces

Embracing marketplaces should be done with the care and planning of any other major undertaking within your organization. The time to do so, however, is now. As Pablo Pazmino, Senior Client Partner at DMI explains, "Marketplaces are the present — not just the future."

Getting there, however, means putting in motion a clear plan that supports broader eCommerce sales and optimizes efficiencies across multiple operational areas of the business. Not only do marketplaces serve as a revenue opportunity, but they create a path toward more agile, innovative and future-proof solutions. 

If you’re interested in finding out how you can incorporate marketplaces into your strategic organizational goals while expanding the landscape for digital transformation, DMI can help. We’ve supported large and medium enterprises in moving their ecosystems forward to create opportunities and embrace innovation and change.