Why are more and more retailers adopting a marketplace mindset?

May 10, 2018

 

Last month we launched the first study of its kind, a comprehensive deep-dive into why and how many of the UK’s leading retailers are turning to the marketplace model to weather the current turbulent retail tides. As fears over how Brexit will impact the industry continue to grow, analysts are predicting that online sales growth will slow to single digits for the first time. The overarching message from Retail Week Live was that UK retailers can’t afford to stand still, transformation is on the cards and those unwilling to adapt, risk losing relevance.

But it’s not all doom and gloom! An increasing number of retailers are looking at effective methods to grow their product range, provide better choice and service to their customers whilst maintaining profitability. Say hello to the Marketplace Model. This model allows retailers to offer a greater range and depth of products, direct from supplier without having to commit to product units. Extensively used by many of France’s largest retailers such as FNAC, Galeries Lafayette and Darty, over the past couple of years, retailers from across the Channel are beginning to see the benefits.

Through interviews, surveys and case studies, this report produced with Retail Week seeks to debunk some of common misconceptions of what developing your own marketplace entails. In this latest post, I’ll share with you four of the key takeaways from the research and hopefully prompt you to join the platform revolution!


#1 Choice Remains King

86% of retailers say their customers now expect more product choice, even in the same category…. And it’s not just breadth customers are looking for but depth. What good is that amazing collection if you don’t have the items in my size?

Our own consumer research (hot off the press, to be launched very soon!) reveals that 82% of consumers have experienced an out-of-stock when shopping online with 71% going on to complete their purchase by going to a different website and finally, 33% said they will likely stop shopping with that retailer in the future as a result.

Retail Week's interviews with 50 retail directors found that 90% confirmed that product range plays a vital role in company strategy.

#2 Marketplace is taking on dropship

22% of retailers surveyed say they currently utilise a dropship model, yet 44% are already using or planning to look at marketplace. However our study found that the difference between dropship and marketplace is not fully understood.

Dropship agreements are negotiated on a one to one basis which still requires the retailer to commit to a certain number of units upfront. The marketplace model negates these costs, not requiring commitment, and instead the host retailer takes a commission from every sale with the brand or supplier storing then fulfilling the order. (If you want to learn more about this distinction, check out our blog post on this very topic here).

Only 48% of the retailers we spoke to recognised that hosting a marketplace means there is no need to negotiate costs and margins with suppliers. It seems there's still some work to be done to help the industry understand these crucial distinctions.

#3 The Halo Effect

Mature marketplace operators are seeing a huge increase in their core product lines as a result of their marketplace activity.

As one eCommerce director commented: “Certainly, encircling the consumer is a benefit. The hardest thing is to get the consumer to engage with you. The more product groups or categories you can credibly sell, the more likely you are to win share of wallet.” [Chief Executive of a Lingerie Brand]

Since launching their marketplace, French Electronics and White Goods etailer Darty, increased their number of SKUs by 400% and the company now estimates that 20% of the visits to Darty are as a result of its marketplace items.

#4 It’s for everyone

Sometimes we hear people say: “Marketplaces are just for generalists” - but this is simply not the case. From layering in services, to expanding into complementary product lines, ensuring you never give your customers that annoying out-of-stock experience or just trying some new stuff! There is a marketplace for everyone!

GENERALIST RETAILERS: Scale your assortment expansion profitably without upfront investment and the risk of holding unwanted stock. React to trends and shifting consumer demand.

CATEGORY SPECIALISTS: Become the online category leader by adding both breadth and depth to your range, complemented by relevant services.

LUXURY RETAILERS: Carry all options within your curated selection, deliver the long tail within a controlled and brand-centric experience.

Right, that’s all I’m saying! If you would like to discover more about both this study and how a marketplace could be a growth catalyst for you, download the report for free.

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