Building and running an online store was always a major undertaking for SME brands, unless they were small enough to use a simple Shopify WordPress widget or whatever. The likes of Shopify, or Squarespace (etc.) work great for low-volume niches, but let’s say you’re food brand selling thousands of units via brick-and-mortar retailers, your e-commerce options have to be more robust, and more complex.
SME e-commerce options usually mean an industrial-strength shopping basket system, credit card banking (not just PayPal), and potentially a bunch of automated systems to link inventory with warehousing and deliveries. Meanwhile, there’s an ongoing cost in terms of search engine optimisation (SEO) and paid search listings. Plus, of course, as you might have noticed, there’s the headaches of privacy regulations (GDPR anyone?) and so on.
This approach to e-commerce doesn’t stack-up like it used to. So here’s five really compelling reasons to ditch your online shop, and do something smarter with your e-commerce budget: Spend less of it and boost your sales performance at the same time, by going 100% marketplace.
1. Over half of online sales, globally, happen in marketplaces.
If that doesn’t make the marketplace argument well enough on its own, the challenge marketplaces represent to Google in terms of product search does. Approximately 55% of product-specific searches take place on Amazon as opposed to Google, and sales conversions for Amazon pay-per-click listings are reported to be up to 10x higher than the average 2% Google PPC conversion rate for product sales (because if you’re Googling, you might be browsing, but if you’re on Amazon, you’re probably shopping).
2. Online sales are slowing
We saw a peak in online sales in 2020 due to the pandemic, however, since April 2021, there has been a slow decline of 5.6% month-on-month. Slowing sales are influenced by a range of factors, however, it makes it all the more important to maximise your bang-per-buck by putting your products in the places where user buying intent is highest: marketplaces.
3. Google is going marketplace
This is an interesting development. Google is busy signing major deals to partner with marketplace brands like Walmart, Chinese giant JD.com, and French supermarket chain Carrefour to develop new ‘retail ecosystem’ models (i.e. marketplaces). The search engine giant is also enhancing its shopping listings.
Building on the higher conversion rates of Google Shopping product listings over traditional paid search text results, Google Shopping Actions is a new programme that will introduce cost-per-sale pricing (beating their low performing PPC sales conversion rate compared to Amazon) and build intelligent shopping baskets around users (which Amazon already does something similar with its built-in suggested items, buy-it-again features etc.) Well, they say imitation is the sincerest form of flattery, right?
4. 44% of retail brands are going marketplace
Retail Week research suggests 44% of e-retailers are developing a marketplace model to replace their current e-commerce offerings, where they will either ‘dropship’ (buy third party stock and fulfil via their own warehouse and delivery) or adopt a true marketplace model of taking commission sales via their front end while the third party fulfils the order themselves.
Our shopping habits are complex, but one thing we do know is when someone visits a marketplace (on the high street, app or online) they are further along in their shopping journey and more likely to convert into a sale. So by becoming a marketplace, you’re effectively increasing the chances of attracting those higher conversion-rate shoppers, and by being in a marketplace, you’re more likely to expose your products to them.
5. The bottom line: Marketplaces offer increased ‘mental availability’
Mental availability is a term coined by marketing sciences Professor Byron Sharp, to describe the ease with which a product becomes available to a shopper while they are intending to purchase. It’s a complex way of saying you need to pop-up at the right time and place in terms of brick-and-mortar point of sales, and within those digital places (websites and mobile apps) where people are shopping for your category of product.
Those mentally available digital places are increasingly Amazon, eBay, Etsy, ASOS etc. (Yes, marketplaces… not branded standalone webshops). In fact, mental availability is the driving force behind moves by both Google and Amazon to enhance the shopping capabilities of their voice assistants, because if you can order same day grocery deliveries by simply asking Alexa or Okay Google, anywhere, anytime… that’s about as mentally available as it gets.
Okay, so ready to go marketplace? No wait…
There’s a lot of strategic advantages for SME brands when they ditch the expensive e-commerce store and start pushing harder into the marketplace world, either by developing their own online marketplace (which isn’t realistic for many brands due to the costs) or investing in a serious marketplace strategy (which is how most SMEs will go marketplace). Except for one obvious problem… you’ve sunk a lot of capital into an e-commerce store, and so what do you do with it?
The opportunity to reduce spending and increase sales is real, however, in the real world, it’s a little more complex than just ditching your web shop and going 100% marketplace overnight. The challenge is transitioning from a standalone e-commerce sales and marketing strategy to a multichannel marketplace strategy.
In fact, you might not even need to ditch your shop, just integrate it more effectively with marketplaces, or adapt your SEO and ad spending to address more effective marketplace options. Some brands have done this very effectively, using their e-commerce stores to direct traffic into marketplaces for their own products, and leveraging a commission from the marketplace on the traffic redirect, as well as making a sale via the marketplace. Cunning.
There’s no one-size-fits-all-approach, however, there is a one-size-fits-all takeaway from current digital retail trends: The conventional e-commerce wisdom of an e-shop and SEO is delivering diminishing returns. Expect to see most SME brands go marketplace, most e-retailers become marketplaces, and Google search will increasingly become a marketplace experiencefor product searches.
Every brand, especially SMEs without the deep pockets of a national chain, will need a proper digital marketplace strategy and skilling-up in marketplace operations, internal ad tools and the strategic insights into different platforms to creating an in-depth, expert marketplace strategy. It takes a different kind of approach, and usually an agency partner with strong connections inside Amazon and eBay, to ensure your brand gets the most out of their commercial offerings. It’s a big shift in conventional e-commerce wisdom, but it could also make the difference between low growth and reduced profits, and smashing it out of the park.
(Btw… that last bit… that’s where we come in ).
Thanks, btw, to all the online sources we referenced to write this article… I can’t list them all but here’s a couple if you want to read more about the marketplace boom:
- Stats roundup: the impact of Covid-19 on ecommerce
- Amazon Grabs 55 Percent of Consumers’ First Product Search, Set to Dominate 2016 Holiday Shopping
- Forrester: Half of online sales occur on marketplaces
- Amazon Prime Has Room to Grow in the UK
- Amazon PPC Vs. Google AdWords: Bridging The Gap In 2019
- Mental availability is not awareness, brand salience is not awareness