Marketplace - an opportunity to win new customers in a time of recession

Author:
Anna Meller
Published:
9.12.2022
H

ow to attract new customers in the age of recession? It's simple – start selling as a marketplace. In recent years, there has been a surge in online sales in precisely this form, and trading platforms are developing new solutions to make the 'electronic marketplace' safer and more convenient for customers and sellers. The purpose of this article is to outline the specifics of the marketplace, as well as to give an overview of the opportunities and risks involved in working with these types of trading platforms. 

What is a marketplace and why should it be implemented?

A marketplace is nothing more than a marketplace or bazaar in the e-commerce world, where many exhibitors can offer their products. A single sales platform bringing together thousands of brands and hundreds of thousands of customers. Sounds good? We owe the awareness of marketplaces mainly to giants such as Allegro, Zalando, or Amazon, and the intensive development of this form of sales is compared to the triumph of hypermarkets a few decades ago. In times of recession, customers are particularly keen to look at large sales platforms that offer a wide range of products and ease of price comparison. This trend is causing many companies that have not previously operated as a marketplace to implement this business model to gain access to a wider customer base. One example is the Modivo platform.

Marketplace platforms also minimise the barriers for companies to enter new markets thanks to their large scale of operation and flexible technical and legal solutions. They thus open up opportunities for international expansion and rapid sales growth. For many businesses, especially smaller and medium-sized ones, entering the marketplace is a chance to try their hand at cross-border sales and reconnoitre the market in terms of customer interest and growth potential.

The evolution of marketplaces

The dynamic growth of the marketplace sector is taking place all over the world, including Poland. The world's 100 largest sales platforms account for approximately 60% of the global e-commerce market (Brief, 2022). Polish marketplace platforms, such as Allegro and Morele, rank high in global rankings, chasing giants such as Amazon and eBay. Allegro, with its monthly number of visitors, is positioned as the fifteenth largest marketplace in the world (Webretailer, 2022).

Trend analyses confirm that by 2025, in markets including clothing, travel or book sales, large retail platforms will overtake individual e-commerce, making them the largest market in the entire e-commerce industry (Insider, 2022). Also in the B2B sector, specialised platforms with services dedicated to business have been setting new trends in recent years for efficient e-business. Examples include Xometry, which specialises in metalworking and 3D printing services, Vuulr, a marketplace with film and TV rights, and Poland's Handleo, which targets small and medium-sized enterprises.

Marketplace at home market

According to the Gemius report 'E-commerce in Poland 2021', as many as two-thirds of Polish online customers regularly buy on marketplaces. Platforms, which enforce certain standards of cooperation on companies, are for buyers a guarantee of secure transactions, returns, and complaints. Above all, customers appreciate access to a wide, varied offer available in one place and fast order processing and delivery (GS1, 2022). 

The undisputed leader on the Polish market is the Allegro website most frequently chosen by both sellers and buyers. Other platforms most frequently used by Polish sellers are the international Amazon and eBay. The global giants are being chased by Empik Place, which has seen an annual increase of more than 100% in the number of listings in recent years. Empik Place, which already reaches one in four Polish Internet users, is particularly recognised by people with higher education and a good financial situation. 

Facebook Marketplace, which has been on the market for five years, did not feature in the list of the most popular trading platforms in Poland. Despite the lack of fees for posting adverts, traders are discouraged by the weaker security for buyers compared to other platforms, the lack of integrated payments, and the need to store goods themselves until the sale. Further drawbacks include time-consuming communication as customers have to contact the seller directly to purchase the product. The underdeveloped categorisation system is another drawback, which makes browsing through the offers chaotic. As a result, although Facebook Marketplace is seeing growing sales of primary products such as clothing, children's toys, furniture, or books and is considered by forecasters to be a growth channel, it is currently often overlooked in the sales strategies of the larger marketplace players.

Global trends in the marketplace sector

In 2021, the value of e-commerce retail sales worldwide was approximately $4.9 trillion. Analysts estimate that this amount will increase by 50% over the next three years, reaching around $7.4 trillion in 2025 (OC&C Strategy Consultants 2022). This means that it will then amount to around ¼ of global consumer purchases. For marketplaces, which are the sales channels with the largest and most rapidly growing share of the e-commerce market, this opens up new opportunities.

Already, 56% of European respondents prefer to shop online on a single platform rather than the e-shops of specific online retailers. Sales on marketplace platforms now account for more than 60% of the global retail e-commerce market and are also growing intensively in the B2B sector. According to GS1, by 2024, B2B platforms will account for around 30% of all global online sales in this sector.

Cross-border expansion supported by the marketplace

In the first year of the pandemic, the cross-border market recorded an increase of 35% compared to the previous year. In our report, retailers identify several barriers to entering and operating in foreign markets. Among the most frequently mentioned are the high logistical costs of order processing, including shipping and transport costs, and the complex tax and financial procedures associated with selling to other countries. 

The increasingly popular fulfillment service, a one-stop-shop for order processing by an external service provider, is meeting the international logistical challenges so that shop owners do not have to search for courier shipments and negotiate rates with warehouses on their own. Fulfillment, which is offered by many marketplaces such as Amazon as part of a partnership, makes it possible to offer overseas customers delivery even the next day at the price of a local courier - for example in Romania or Germany. It also makes it easier to handle returns, track sent parcels, and quickly receive cash on delivery payments. 

Test your international potential

Despite significant barriers, domestic companies are increasingly opting to open sales channels abroad, to which the intensive development of marketplaces has made a major contribution. Although cooperation with such platforms means lower margins and the need to integrate sales and bid management systems, it allows entrepreneurs to avoid confronting legal challenges in the form of foreign and international postal regulations or mandatory contractual provisions in other markets. According to the European Commission, more than 50% of small businesses selling via marketplace platforms opt for cross-border trade.

On average, overseas online sales amount to 11-20% of total online trade, and respondents offer their products through external platforms. Among the main benefits of marketplaces, they cite the ability to reach more customers worldwide, the minimisation of the costs of developing their own e-commerce, and the ability to use external infrastructure (GS1, 2022). 

A presence in a marketplace is often the first step in exploring new markets in order to verify the attractiveness of one's own offer, the competitiveness of the sector, and to learn about consumer behaviour. This allows you to gather the information you need before deciding to implement an online shop abroad. Adapting e-commerce to a foreign market involves, among other things, positioning the shop, integrating local payments, and meeting logistical challenges. Selling via the marketplace allows these procedures to be significantly simplified. 

First steps on the marketplace

The relatively low cost of entering a new marketplace is causing their popularity to grow exponentially. Among the greatest advantages of marketplace platforms is quick access to a large number of potential consumers, for whom you do not have to fight alone as in the case of your own e-shop. As a rule, the user-friendly technical infrastructure makes it possible to start selling after the formalities for starting cooperation have been completed. To enter the marketplace, it is sufficient to log on to one's own account in the marketplace system and prepare a presentation of the offer, which is subject to restrictions imposed in advance. 

On the marketplace, there is a trend towards an increasing unification of the rules for listing products for sale. Thumbnails, product images and, in some cases, item descriptions are being standardised. Text fields are sometimes narrowed down to a specific number of characters and for some products, there is a requirement for specific technical data. Amazon additionally forces product codes into the system to ensure proper categorisation. 

Challenges of the marketplace sales

No solution is perfect, and the convenience of marketplaces also imposes certain limitations. Among the biggest downsides is the seller's narrowed branding opportunity. When displaying your product range on someone else's platform, you have to reckon with the fact that the entire purchasing process will take place on their terms, and promotional activities will be aimed primarily at building recognition and a customer base for the marketplace in question, rather than its partners Ultimately, individual online shops are their competitors. Betting mainly on this sales channel may therefore result in a loss of market position and own-brand identity. 

The key factor influencing consumer purchasing decisions in a marketplace is the price of the product or service. In line with this logic, the hierarchy of information on these platforms is designed to expose product information and cost of purchase and delivery from the listing level, rather than information about the retailer's brand. Consumers trust specific platforms for the security of the transaction and can make purchasing decisions without paying attention to the brand, especially if they are dealing with a lesser-known manufacturer. This is why customer loyalty to a marketplace does not translate into brand loyalty to an individual retailer.

In addition, entrepreneurs pay a commission on each transaction to the company managing the platform (in the case of Allegro, for example, this can be between 2% and 15%). In a highly competitive marketplace, it is difficult to win with the quality of communication, so the advantage can be gained by paying for additional promotions or obtaining high feedback from previous users. As traders on the marketplace compete primarily on price, both factors contribute to lower margins and higher sales costs

How do you compete on the marketplace?

As pricing and specifications are key to building competitiveness on the marketplace, when starting a sale of this type, it is worth implementing a PIM tool to manage product information across different sales channels. Optimised product descriptions with well-chosen key phrases will also help to improve the positioning of the offer not only within the sales platform but also from the search engine. 

Another important aspect in deciding whether to purchase a product from a particular retailer is the delivery methods and costs offered. Fast shipping and several different delivery options can weigh on a consumer's purchasing decision even if the seller offers a higher product price than the competition. A high standard of delivery service is one of the conditions for becoming a featured vendor on Allegro or Empik.

A pro-customer return and complaints policy also has a major impact, so in the fight for higher sales, it is worth demonstrating a pro-customer attitude. The terms and conditions for returns and complaints offered by retailers are increasingly responding better to customers' needs than the marketplace's standard, statutory solutions, which include a 14-day withdrawal period or, in the case of Empik Premium, 30 days and, as a rule, a chargeable product return. In this respect, the marketplaces leave room for flexibility by providing on the seller's account the possibility to define individual, more favourable return conditions. 

Marketplace an opportunity to boost sales during inflation

Marketplaces are one of the most important elements of a wider omnichannel strategy. They allow you to reach new audiences and draw on the huge technology base created by the big sales platforms. This is a great solution for companies that want to try their hand at overseas sales and have an attractive, distinctive offer to offer. However, it is worth bearing in mind the limitations that come with such a business model. When selling on the marketplace, you will be one of many brands, so you need a well-designed homepage and a distinctive identity to avoid becoming a no-name and losing the character of your own business. The market forecasts are clear - selling on the marketplace is the future of e-commerce so exploit this potential not only as an exhibitor but perhaps also as the owner of a large sales platform. 

Do you want to launch your own marketplace and start working with other brands on increasing your customer base? Contact us! We'll help you plan your growth strategy and implement the latest technology for your business.

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