Is a marketplace the best way to keep brick-and-mortar brands alive online?

The CX Network Weekly is the LinkedIn Newsletter from CX Network. Each week we share our take on a key development in experience management, with links to CX Network resources that can inform, inspire and help your organization’s response.

This week’s edition looks at the rise of the online marketplace. While some of the biggest names in this space started life this way – think Amazon and FarFetch – a growing number of brick-and-mortar retailers are ramping up their ecommerce proposition with a marketplace model.

The shift to a marketplace model has saved many physical retail businesses from the usual constraints of converging their traditional shopping experience online. Furthermore, it allows smaller brands to trade through established platforms and brings consumers endless choice – as well as infinite scrolling.

British DIY heavyweight B&Q launched its marketplace model DIY.com as recently as 2022, with 400 partner sellers. At the time its supercharged ecommerce proposition was generating 13% of all online sales.

As of this year, B&Q lists more than 1.2 m products from more than 1,000 sellers and its marketplace represents 38% of the brand’s total online sales. Furthermore, the marketplace move saw B&Q expand the customer base 50% in 2023 alone. Now selling everything from cladding to cushions, B&Q caters to every stage of a home improvement project in a way it would never have been able to accommodate on its own.

Superdrug, part of the global A.S Watson Group, has taken a similar approach. Launched in September 2022, its marketplace move was part of its wider digital transformation, which includes its online/ offline omnichannel strategy.

After its marketplace launched with 7,000 products from 300 brands, Superdrug’s marketing and ecommerce director, Matt Walburn, told CX Network the shift was “the natural next step” in Superdrug’s digital transformation.

“Our intention has always been two-fold; to promote diversity by supporting entrepreneurs and small businesses within the industry and to double the number of product offers available via Superdrug.com,” he said. “We wanted to broaden and strengthen our beauty and health offering for our customers and also step outside of these categories to include wellbeing and lifestyle products that give our shoppers more.”

These benefits are pretty solid, but what are the risks of allowing hundreds – sometimes thousands – of sellers to trade under a brand whose reputation was built over decades, sometimes centuries?

The department store Debenhams was founded in 1778 as a high-end fashion retailer with a reputation for quality. Originally launched in London, at its height it operated 200 stores across 18 countries and boasted partnerships with what were then some of the world’s best-known designers including Jasper Conran and Julien Macdonald.

But it struggled to keep ahead of the times and in late 2020 entered administration. Debenhams was bought by the now struggling Boohoo Group and its customer proposition switched to fast fashion, even faster delivery promises and constant, heavy discounts – across all products, not just clothing.

To say the traditional Debenhams customer has been alienated by its marketplace transformation is an understatement. In fact, as of this week, 49% of Debenhams’ 15,000 Trustpilot reviews are 1-star ratings, vs 40% 5-star ratings. There’s almost no middle ground for the modern Debenhams customer.

B&Q’s DIY.com marketplace is facing similar issues, although the customer complaints here are related more to unconnected online/offline experiences, operational issues – ?including insanely high minimum quantities on things like timber – and unanswered phones. On Trustpilot, as many as 59% of its 15,000+ reviews are 1-star ratings, while 26% are 5-star.

The inability to monitor product and service quality as seller numbers soar is only part of the problem. Scaling too fast without providing the correct level of support is clearly a turn off for customers.

Some of the most frequent problems Debenhams customers encounter include lost deliveries, faulty products and bounced customer service emails. One complaint states how a faulty product was shipped and the customer refunded, but the seller refused to collect the faulty items.

Of course, if you expand your product catalogue 10-fold you can expect profit to trend upward at least in the short term. But if the service and product experience you’re known for does not follow, the gains will be short-lived at best.

This week’s links include a case study on Superdrug’s digital transformation, the downside of trusting a third-party with delivery and the story of how marketplace native FarFetch uses VoC data to monitor and improve seller performance.