What is the online marketplace opportunity for retailers?
with Adam Simon
Through a special arrangement, presented here for discussion is a summary of a current article from the IMS Results Count blog.
Online marketplaces are predicted to drive much of e-commerce’s robust growth in the decades ahead. And while Amazon.com and Alibaba are retailers and formidable competitors, they have also created the most robust collaborative marketplaces in the world. Amazon’s Marketplace in the U.S. offers unparalleled choice of over 480 million products online.
There are many reasons over two million brands and resellers have chosen to participate in Amazon’s Marketplace including:
- A turnkey solution to online e-commerce at a massive scale;
- A marketing system, plus Amazon brand value, with traffic from 250 million customers;
- Amazon’s inventory management and replenishment;
- Integrated order and shipment tracking with real time visibility for customers;
- Fulfillment to the last mile with automated reverse logistics for returns.
As a retailer seller, Amazon achieves a huge benefit of only having to stock less than 10 percent of the actual inventory for all the products listed for sale. The Marketplace sellers also subsidize Amazon’s infrastructure and systems costs across many partner sellers in the Marketplace.
Whether it be Amazon, Alibaba, eBay, Walmart, etc., their hyper growth is built upon a collective collaboration ecosystem designed to list, sell and deliver hundreds of millions of products to the consumer’s door.
So, why not close stores and just sell on the marketplaces?
There are major financial and consumer reasons why people choose other strategic collaborations and ecosystems:
- Sellers have to absorb the high marketplace costs — typically 10 percent or more of revenue;
- While you can get online quickly, your product is just one of over 400 million;
- As a marketplace seller, you follow the same algorithms as the other 2+ million sellers;
- The quality of customer experience/engagement online is severely limited;
- The online marketplace owner owns the customer relationship.!
The smart brands and retailers are selectively participating in Amazon, Alibaba and eBay marketplaces. In addition, they are also strategically collaborating with other partners where they can differentiate their value, services, experience and engage customers directly.
DISCUSSION QUESTIONS: To what extent should brands and retailers participate in the big online marketplaces? Will online marketplaces continue to expand or do you see their penetration of overall retail sales plateauing in the years ahead?