Marketplaces provide a flexible business model for a changing world


The retail sector has transformed over the past two decades in a once-in-a-century shift from offline to digital and at the centre of that story has been the rapid rise of the digital marketplace model. During a time of significant pressure on traditional bricks-and-mortar stores, the platform economy offers unprecedented opportunities for retail companies to establish new revenue opportunities, scale with true agility and meet the ever-evolving expectations of customers for a fast and seamless shopping experience.

Platform companies are twice as profitable and more than twice as valuable as their conventional counterparts, according to analysis by MIT Sloan Management Review. Research by Adobe found that of the seven in ten UK shoppers who regularly shop online, more than half use marketplaces, with the average online shopper between March and June making eleven purchases on marketplaces compared with just three directly with retailers.

“That’s the ultimate endorsement that the platform model is here, it’s mature and it’s going be around for a long time,” says Brendan Walsh, UK general manager at Mirakl, which powers platform strategies by enabling companies to launch and grow an online marketplace with products from third-party sellers. “The platform model offers a much faster rate of growth. If you look at Amazon, for example, 60 per cent of their share of revenue is really down to their marketplace and the products and services sold via third-party sellers.

“We often talk about the ‘divinely discontent customer’, which was an expression by Jeff Bezos a few years ago. Platform companies and marketplaces aim to meet the customer wherever they are and for any product or service they wish to buy. This is something we’re very excited about for our customers and also any other companies that are thinking of embarking on this journey towards creating and growing a marketplace.”

The platform model is here, it’s mature and it’s going be around for a long time

Marketplace makes it easier for retailers to expand into new categories. The trend is already sweeping the United States. In August, Kroger announced it was launching a marketplace featuring third-party sellers, allowing it to offer more than 50,000 additional items across multiple categories, including natural and organic, international food, speciality items, housewares and toys

The model not only provides an opportunity to offer their customers a wider range of products and services, enhancing their revenue growth opportunities, but also the ability to learn a lot more about consumers. Mirakl has discovered from the data that passes through its SaaS Platform that the rate of growth on marketplace products outstrips the traditional growth of first-party products. This means marketplace companies have much more opportunities to learn about the behaviour and preferences of consumers.

These kinds of insights are also important when it comes to dealing with peaks in demand. Retailers plan well in advance of peak seasons such as Black Friday and Christmas to ensure they are able to cope with the spikes in demand. However, they also have to be ready for unexpected peaks, such as that experienced in the first wave of the coronavirus when physical stores were closed and online activity soared. The deep capability and intelligence gained through a marketplace model is vital here.

“With a marketplace model, it can be very easy to not only offer new products and promote inventory where stocks are high, but also to do things like stockouts and A/B testing, with low commitment and upfront capital investment,” says Walsh. “Retail companies can achieve the agility and flexibility to manage a lot of A/B testing around pricing, for instance, as well as testing new products and services with customers. In response to changing consumer demand spurred by COVID-19, we have seen customers successfully, and quickly, introducing new product ranges outside their core offering thanks to their marketplace.

“Marketplaces are much more effective than going through the traditional retail model of companies buying a bunch of products up front and then just hoping they can sell them at a significant margin. Connecting consumers directly to third-party sellers reduces the cost and need to store large quantities of stock in a warehouse. When we look at how the marketplace interacts with retailers’ traditional organisation, it should be complementary to the fantastic businesses they’ve already built, and that includes supporting each other during times of peak demand.”

A marketplace may be a simple concept, but it is difficult to execute successfully. The Mirakl Marketplace Platform automates the more challenging aspects of marketplace management, such as seller onboarding, service quality control and order distribution, with a turnkey solution that can be integrated into any ecommerce platform. With Mirakl Catalog Manager, it is easy to manage product data quality at marketplace scale.

As well as technology, Mirakl has built a rich ecosystem around its platform, Mirakl Connect. Both on the frontend, where it has numerous product connectors into different ecommerce sites, and on the backend with different payment gateways, it takes a long-term view to marketplace success by adopting a partnership approach with its clients. Through all of this, Mirakl considers two journeys: the customer experience and the seller experience.

“It’s really important to get both of those journeys correct to create the network effect,” says Walsh. “We focus on enabling the win-win-win situation of creating value for the three: the marketplace operator, their customers and their sellers. The profitability of a marketplace is 35 per cent higher than traditional first-party ecommerce sites. A lot of that comes down to that network effect we see from building an ecosystem around our digital platform, which helps marketplaces to scale and grow revenues over time.”

Mirakl, whose clients include the likes of H&M Home and Harvey Nichols, has built a team of hundreds of marketplace experts who have been working within the platform economy for up to 20 years. Mirakl-powered marketplaces are well on track to achieve $5 billion in gross merchandise volume (GMV) over the next 12 months and the company plans to treble the size of its team in the next year.

“We are growing very substantially in the UK,” Walsh adds. “We see highly significant organisations embarking on this journey, with big launches planned for next year across some of the key retailers. Traditional retailers are creating company-wide initiatives to establish a marketplace model that complements everything they’re already doing. As consumers move more and more to digital, the imperative is for retailers to make sure they are in the right place at the right time with the right offer via the right channel, ultimately ensuring they can be successful interacting with their customers.”

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