If you believe the forecasts then marketplaces will account for a staggering 40% of total worldwide eCommerce revenue in 2020. If that figure seems disproportionately high to you then you only have to look at the trends in ’emerging’ eCommerce markets like China, where marketplaces now account for over 90% of all eCommerce sales, to see the direction things might be going.
Even in the UK it’s likely that you’ll have noticed yourself, as I have, increasingly starting your online shopping search at Amazon (or eBay) rather than in Google given that there is a pretty good chance Amazon will have what you want at a competitive price. Of course that’s different for fashion, in the UK at least, but that’s likely to change too in the coming years.
Whilst buying fashion through online marketplaces in the UK hasn’t really taken off yet, you could argue that Asos, which continues to deliver exceptional UK growth, is effectively a large marketplace (even though they do hold the stock, unlike a pure marketplace who just lists products but don’t hold stock) and already fulfill that role from a customer perspective here. Slightly further afield in Europe, Zalando are increasingly talking about moving towards being a technology platform (read marketplace) rather than simply selling fashion, recognising the power of that model and ability to further scale the business without needing more of their own costly warehouses.
Whilst even a couple of years ago most fashion brands, notoriously protective of their brand image and where their brand is sold, wouldn’t have even contemplated selling online on a marketplace like Zalando or Tmall in China, the tide is very much turning and from conversations I’ve had this year international marketplaces is the hot agenda item on most fashion retailers hit lists. If they’re not on marketplaces already they’re seeing how quickly they can launch onto them, if they’re already on marketplaces, they’re looking at how they can expand into new, untapped markets via marketplaces.
The traffic visiting these marketplaces today is enormous but I believe one of the key reasons for the change in mind-set is the ease with which retailers can now access not one but multiple international marketplaces through one API integration with an integrator like NetEven, Pentagon or Anatwine. The business models of the marketplaces themselves have also evolved over the last 12 months to facilitate launching internationally through the cross-border model, with Alibaba’s launch of their Tmall Global platform (specifically for international) brands selling into China) the best example of this.
That cross-border, commission-only business model is hugely attractive for retailers who effectively have zero stock risk with all stock still sitting risk-free in their UK warehouse, available to buy for customers around the world – first come first served.
International marketplaces put your brand in front of millions of eyeballs of new customers, which you’d otherwise find very difficult or expensive to reach through digital marketing in complex new markets with the challenges of language and different platforms. The marketplaces have very effectively done the work for you by building huge, engaged audiences with an ever-increasing appetite for buying directly from international brands on these platforms. Your brand teams might not be biggest fans of marketplaces but the potential brand exposure and awareness gained through putting your products on these sites is enormous and ultimately very cost-effective brand marketing.
Whilst it’s likely that the majority of the sales will be incremental (especially if you’re not operating in those international markets today) one downside is that you won’t be able to acquire new customers directly through marketplaces – they are very clear that they own the customer in this transaction. However if you have a brand that international customers love (and will buy from again) and manage your product selection carefully ensure your brand website always has the biggest range then there’s a good chance you’ll migrate a strong percentage of marketplace customers over to visiting and hopefully buying through your own brand website.
As international fashion brands continue to embrace the marketplace model, so the choice for shoppers increases and the model becomes self-fulfilling. Shoppers trust these marketplaces, they are familiar with the user experience and often earn loyalty points for shopping on them – if they can then buy everything they want on that platform (including fashion and international brands) why would they ever look anywhere else?
As I’ve argued previously this then brings into question whether it’s worth launching your own localised website and operations for Germany when you can reach 10m visitors a month through Zalando, France on a platform with 95% brand awareness (the LaRedoute marketplace) or China when you can sell cross-border through Tmall Global without the need for any local entity or stock in the country, as was required just 2-3 years ago. If you’re looking ever further afield there are also solutions now that enable you to launch on marketplaces in India, South America, Russia, South East Asia and even New Zealand – plus the giant marketplaces in Japan and South Korea (Rakuten and Gmarket) will surely open up to the world in the next couple of years.
As well as potentially replacing the need for a local website I’ve heard talk of marketplaces potentially replacing the international franchise model and even partly replacing the wholesale model, and you can see the attraction. With low start up costs, more (if still relatively limited) control of the brand, low stock risk and a commission-only cost model it’s obvious why the marketplace model is quickly becoming the default option for international retailers.
Having said that, the marketplace model will give you a lower margin than you’d like, by the time you’ve paid commission to the marketplace, the integrator and potentially the partner agency – as always as long as you go in with your eyes open, you should be fine.
One thing is for sure: international marketplaces are only going to become bigger, more popular and more powerful as online shoppers, increasingly for fashion, as well as other household goods, turn to marketplaces as their one stop shop.
As with most elements of eCommerce evolution you can either choose to bury your head in the sand and rely on the old models of growing your international business or you can embrace the ‘new’ opportunity with international marketplaces – for me it’s a no brainer and we’ll be trialing launching on at least two international marketplaces this year.
crossborderecommerce 