Multichannel retailers launching online marketplaces: what's that all about?

By Ben Sillitoe

Decathlon, John Lewis, Joules, and Next are among the multichannel retailers effectively now running their own online marketplaces, but why are they doing it?

They are all run slightly differently – some using their own logistics, fulfilment and tech stack, a la Next, and others which rely on infrastructure specialists, such as Joules.

And each retailer has slightly different rationale behind offering marketplaces too. Lord Wolfson, Next CEO, said at the onset of the pandemic that “the proliferation of choice” is the most important advantage the web brings consumers. It is partly this thinking that led Next to build out its Label marketplace, bringing rival brands under one roof.

“We have little doubt that the presence of competing brands increases the competition for our own (higher-margin) Next-branded products, but we believe that longer term it is the only way to survive in the online world,” he noted in March 2020.

“There is nowhere to hide on the internet; one way or another our customers will find the brands they want. If they can find what they want on our website they are more likely to come back to us, furthering our ambition to be our customers’ first choice for clothing and homeware online.”

It’s an interesting perspective, and judging by Next’s pandemic performance, the retailer knows what it is doing. Nevertheless, we felt this trend was worth a bit more analysis.

The next frontier

Wunderman Thompson Commerce’s recent ‘Future Shopper Report 2021’ questioned 28,000 consumers across 17 countries. It found 42% of all online spend is via marketplaces.

Hugh Fletcher, global head of consultancy and innovation at the digital consultancy, says: “A one-stop-shop for all their online purchases is seemingly what consumers want, with 64% of global shoppers saying they were excited by the prospect of buying all their products from one retailer.

“It stands to reason, then, that retail giants would be keen to launch their own marketplace equivalent in order to cash in on the burgeoning demand.”

Ciaran Bollard, CEO of eCommerce platform provider Kooomo, thinks the aforementioned retailers are simply asking themselves “what’s next?” and “what did we learn from the last year?”.

“With the likes of Next and their “Total Platform Service”, they can benefit from a percentage of profits that are not made in-house,” he says.

“They will also provide a level of security for other brands who may have felt the tremors of Covid 19 and want to reinforce their online presence. Similar with Decathlon, they are creating a space that’s tailored to their audience, but completely open – helping them regain some control from Amazon.”

Decathlon’s UK marketplace launch came last month following a similar move in Belgium last year – it opens up the Decathlon platform to additional third-party and like-minded brands. Decathlon is calling on accessible and quality brands to jump on board.

Rory O'Connor, founder & CEO of Scurri, a delivery management software provider, says it is a case of appealing to an international audience and adapting its business model to “the ever-changing retail landscape”.

“Its marketplace platform allows a tailor-made environment that easily adapts to the specific characteristics of each local market,” he notes.

“By integrating new sports and onboarding new specialised brands and products, the marketplace will enable Decathlon to respond to growing demand from sports fans while staying true to their brand DNA and also expanding the current customer base.”

For Kamran Iqbal, commerce strategist at eCommerce solutions provider PFS, it is crucial retailers strike a balance between being innovative and “experientialism”. Digital marketplaces fit the criteria of the former, he says, helping meet the requirements of consumers’ increasingly propensity to shop online.

Amazon App

Taking the battle to Amazon

The retailers I talk to tend to agree it’s not necessarily wise to battle Amazon head on. Many acknowledge its power in the market and look to work with the tech behemoth in places, while distinguishing themselves with product and service.

But there’s no denying lots can be learnt and replicated with regard to the marketplace model Amazon has honed over decades.

Recent consumer research from Linnworks, an eCommerce management software provider, found nine in ten customers regularly start their product search on a marketplace.

CEO Callum Campbell says this positions established marketplaces like Amazon as “the search engine for shopping”, giving its sellers an advantage over other retailers for customer traffic.

“For department stores and specialist retailers to take a total commerce approach by expanding their eCommerce footprint into the marketplace model is a logical next step to serve their customers in the way they want to shop,” he adds.

“These retailers already have a well-established logistics model to deal with multiple suppliers and fulfil orders, and a brand reputation as a one-stop shop for certain shopping categories, so scaling to a marketplace model is a relatively safe strategy which offers the benefits of sharing the risk with their marketplace sellers of bringing new products to customers quickly, and potentially higher average basket values from offering a wider range of products.”

Fletcher says that Amazon is “top of the pecking order, with 52% of UK consumers using it as a platform to pinpoint which products to buy”, but explains there are ways to work with Amazon and against it at once via a “more balanced channel strategy”.

Such a model, he says, “utilises the likes of Amazon, but also owned channels, enabling brands and retailers to consolidate those efforts into evolving a marketplace that puts your own products front and centre”. At the same time, this type of manoeuvre can ensure retailers build relationships with smaller retailers and create a community of customers and sellers who are “always on and – when done right – always buying”.

Another key to running a marketplace successfully, according to Campbell, is in identifying and onboarding “complementary brands that round out their product offering”.

This is exactly how Joules sees its marketplace, evidenced by its name: Friend of Joules. The retailer says it wants to attract individuals or small businesses that sell products “perfect for a contemporary country lifestyle”, which is in keeping with the Joules brand.

It is also what John Lewis is currently in the process of doing, having announced in June it will allow circa 100 new fashion brands to sell directly to customers through its website over the next year.

Echoing Next, executive director Pippa Wicks said it was about “giving customers more of what they love”. It is also an extension of what John Lewis has done for home brands.

Marks & Spencer is also increasing the number of fellow fashion brands it sells online and in store, as part of a wider refresh of its women’s clothing offering. Whether a retailer calls its platform a marketplace or not, the concept of opening up websites to other brands as a way of driving more traffic is certainly a popular choice right now.

Checking Fashion Brands

Other pros and cons

Andrew Marshman, head of business development for merchant retail payments & fraud at ACI Worldwide, a payment software provider, says marketplaces allow the retailer to drop products quickly as the seller holds the stock and responsibility for despatch.

But he notes there are challenges to consider.

“Retailers need to be careful that they don’t risk damaging or diluting their own brand by moving too far from their core offering – what their customers know them for – or by selling products that don’t deliver on quality,” Marshman warns.

Ultimately the way people shop for items has fundamentally changed. It’s not just a coronavirus era thing – it’s been building momentum for years and the ability to shop at the click of a button online has enabled it.

Brad Houldsworth, head of product at Remarkable Commerce, an eCommerce platform provider, says: “Consumers now increasingly buy with a ‘product first’ mindset and building customer loyalty is becoming harder for retailers.

“Therefore, new customer acquisition has become a key pillar in many retailers’ strategies – and a popular driver for this, is to increase the product range and catalogue size. This means a marketplace proposition is very attractive to both small and large brands.”

Summary

We’re certainly not saying all multichannel retailers should launch an online marketplace, but there is space for more – arguably in niche sectors, which could experience benefits from that one-stop-shop model.

As O’Connor says, “it is not about joining as many channels as you can, it’s about joining the right channels for your business and your audience”.

By Ben Sillitoe

Published 15/07/21

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