Marketplaces: the Antidote for Amazon
On July 11, 2017, Amazon decimated ecommerce competition again with a record setting $2.2 billion of online sales during Prime Day. In a global retail industry, Amazon has proved to be the single most disruptive work—and is all set to make the best in an industry where revenues of US$ 22.6 trillion (2015) have risen from US$ 28 trillion (2019), with average annual growth rate of 3.8%. Amazon has grown into a propulsive force in at least five different giant industries: retail, logistics, consumer technology, cloud computing, and most recently, media and entertainment. So, can anything be done against this market dominating juggernaut?
This year, Amazon ran Prime Day promotions across 13 countries, disrupting the retail business worldwide. Prime Day 2017, according to Amazon, was the biggest sales day in the company’s history with purchases clocking in at 6,000 items a minute in 13 countries. The last two Amazon Prime Days saw sales of $1.25 billion (2015) and $ 1.80 billion (2016) respectively.
Capitalizing on the runaway popularity of its “Prime” subscriber model, Prime Day has become a barometer of change in the retail industry. About 50% of Amazon’s products and revenues come from their marketplace. Most of their profits come from their marketplace. They also gain substantial analytics about which products to stock themselves or even brand as their own. Amazon is the biggest disruption in the retail world since Walmart transformed US retail with its ‘always low prices’ business model in the early 1960s.
Prime Day’s “Halo” Effect on Digital Commerce
Amazon has established the most successful marketplace model in existence. Since its inception in 1995, it has become its prime disruptor of industries, distribution chains and retail operations across the world. The results indicate a shifting landscape filled with uncertainty. Data from Salesforce.com Inc. Commerce Cloud reveals that online sales for non-Amazon retailers increased 44% on Prime Day this year, demonstrating that this single-retailer’s shopping event has a dramatic collateral effect across many online commerce verticals.
Amazon, the Destroyer of Industries
Amazon’s success isn’t all rainbows and sunshine for retail operators, however, as their rise has seen entire market segments decimated and large segments of customers have vanished for retailers worldwide. First, the book publishing and retail industries were disrupted with large once-juggernauts like Barnes & Noble and Borders forced to scale-back operations and close down, respectively. Currently, the retail industry is feeling the pain with news breaking every week about how another retailer is either scaling back or closing entirely. Amazon’s purchase of Whole Foods, recently entry into the prepared meal kits space (ala Blue Apron, Plated), and rumored real estate play (ala Zillow, Redfin) demonstrate that they aren’t going to stop disrupting any time soon.
Here’s the simple truth: the success of Amazon’s marketplace model and ever expanding ambitions are both a threat to your business and an opportunity to improve your market position:
With Change Comes Opportunity…If You Act Boldly
This disruptive change you are experiencing around you is real and if it hasn’t effected your business yet, it likely will in the near future. One way to capitalize on the popularity of the marketplace model that Amazon executes so effectively, is to start one of your own.
By launching your own marketplace and fighting fire with proverbial fire, you put yourself in position to call the shots and become even more of a leader in your space. Adding third party sellers to your commerce property broadens the products being offered, attracting more buyers, improving search engine rankings, and ultimately increasing customer satisfaction and loyalty. The intelligence gathered about the third party seller products essentially amounts to free research that can be used to direct the future of the site operator’s core offerings.
To meet the needs of customers, marketplaces today address trends such as ubiquity of marketplaces (lower entry for small players and lower search costs), radical transparency (ratings, prices and location based details), more for less (inexpensive options) and services as a retail adjacency (on demand solutions for shopper needs). That is why marketplaces today are a ‘win-win-win’ situation for your customers, your partners and your company.
At the IRCE event this year, an organization analyst quoted $200 billion of goods sold on marketplaces, with $120 billion of that coming from 3rd parties (i.e. excluding the marketplace operator’s sales). In this light, you will better understand the results of a Forrester Consulting Thought Leadership paper commissioned by Mirakl and Thought Advisor:
The Forrester’s study revealed these findings about creating your marketplace:
› Adding a marketplace will enhance your customers’ shopping experiences
› Building trust is a central part of marketplaces
› Consumers are able to differentiate between the retailer and marketplace seller
› Marketplaces create deep customer relationships
Reflecting this is the fact that 30 niche marketplaces launched have received $2.3 billion in investment over the last 5 years (2012—2017).
Monetizing the Marketplace Opportunity
At McFadyen Digital, we’ve seen this change on the horizon. As digital commerce operators worldwide look to gain more value from their properties, marketplaces have proven to be reliable, consumer preferred methods of driving both additional revenue and loyalty.
With a marketplace solution McFadyen can help you quickly deploy a robust marketplace with an increased catalog, better insights into customer interests, and easy drop-shipping/fulfillment by third parties. Our partnership with Mirakl Marketplaces is a direct response to this unprecedented opportunity, as Mirakl allows a marketplace to be easily and quickly added to any platform.
We would be happy to talk to you more about creating your own marketplace. Drop us a line in the comments below and let’s discuss how we can help your organization capitalize on this exciting opportunity.
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