Marketplaces are increasingly dominant in the e-commerce spectrum. Amazon.nl, for instance, has grown by 40% in the Netherlands (source). According to Peak Capital, the number of (niche) marketplaces is growing and will keep on growing in 2021.
Do you want to scale up your marketplace strategy and execution next year and tap in on this trend? Follow these 5 steps:
If you are already active on marketplaces like Amazon, Rakuten, or Zalando, the first step is to do a holistic analysis of these past and current efforts. Within this analysis, you need to answer the following questions:
Learning from your mistakes, competitors, and success stories will give you a head start each time you scale up to another market or marketplace. With the subset of your biggest successes (products, price, proposition, advertising), you will proceed to step 2.
Suppose you want to scale up your marketplace activities. In that case, you broadly have 2 options: Enter new geographic regions within the same marketplace (i.e., Amazon.nl and Amazon.de) or enter new marketplaces within the same geographical area (i.e., Zalando.nl and Otto.nl.)
Small (or big) sidenote: you have to take language differences and costs of translating content and (if applicable) customer service into account when calculating your business case in step 3.
Write down the pros and cons of your specific situation of the two options above. Then decide if you see the most potential in option 1, option 2, or combining the two.
Before scaling up, it is always wise to calculate a business case. Take your options from steps 2 and 3 into account when writing up your business case. Make use of the ranges you want to use in your offering and make sure you know the fee structure of the marketplace you want to expand to. Even though marketplaces' benefits are that it's relatively easy to scale up or experiment with scaling up with relatively low costs, you should not skip this step since there are often many hidden costs. One of the underestimated costs is that you have to divide your resources over more market(s) and/or marketplaces. One example is in advertising, where you need to make sure you have enough individual budget per advertising channel within the marketplace to create impact. If possible, do some small experiments to validate your business case before scaling up.
Simultaneously with or just after a positive validated business case, you have to make sure all the needed processes and systems are in place. With new markets and marketplaces, new processes come into place. Your logistic-, advertising- and customer service processes change or become more complicated. And as you might already know, as easy as it is to become a seller on a marketplace, just as easy it is to get kicked off the same marketplace. Often this is due to bad management of processes like customer service or logistics. Systems and tools like ChannelEngine should help you standardize your processes and scale up efficiently and effectively. By integrating Channel Engine, you will be able to scale and manage your new marketplaces faster and less prone to errors. Ensure you take your Total Cost of Ownership into account when selecting and integrating the right system for your processes.
To set-up new and assess and improve your marketplace processes, you should make a service blueprint. With this service blueprint, you visualize the customer journey, strategies to support those processes, and the technology you need to keep those processes. With this visualization, it is relatively easy to spot weaknesses and efficiency opportunities in your processes and systems.
Figure 1. Service blueprint example (source).
The last step is to go live on the new platform, either with or without an experiment, before fully scaling up. For every new market(place), make sure everyone knows when you are going live and pay extra attention to all the relevant KPIs in your marketplace’s dashboard. Then it’s time to optimize and scale up again. Therefore, don’t forget to write down your learnings before you start at step 1 again.
In sum, marketplaces are booming and will be growing both in volume and amount. Therefore you should scale-up to tap upon these opportunities. But be aware, success in one marketplace does not mean success in the next one. By experimenting and taking the right steps, you will scale up fast and have a successful 2021 full of (marketplace)growth.