Marketplaces: How they are changing the way we shop

I have a deep understanding of consumer behaviour. Some of which is intuitive, some based on big data, and plenty derived from the considerable time I spend interviewing consumers to understand their likes and dislikes in shopping online, offline and across multiple channels.

This provides me with an almost real-time view of consumer behaviour and their needs, wants and aspirations.

It also arms me with the insight and knowledge to help retailers and brands re-prioritise their roadmap for growth. This is where a marketplace solution comes into play.?

Retailers are always looking for the next big thing. And a marketplace solution may well be it. After all, there aren’t many levers to pull that can offer the same exponential growth opportunity offered by significantly broadening and potentially deepening your range and offer. The effect of doing so will be that you drive up both spend and frequency of engagement with existing customers. However, it also provides the opportunity to reach new cohorts of customers who may not have previously included you on their wishlist. As your broader selection could well include brands and products that appeal to an entirely new customer.

You might also consider consumer choice as being a core driver for building customer lifetime value. Because broadening the range will increase the frequency of consumer engagement and is driven out of a new ROI to focus on: ‘Return on Involvement.’ The more you interact with consumers, the more they spend. And the more relevant the choice of products, the more chance you have of encouraging this behaviour. This is also a core driver for creating loyalty.

Driving frequency is hugely important, particularly when you consider that only 28% of consumers across all retail sectors make a second purchase.

The breadth and relevance of the range of products on offer, coupled with a great customer experience, the stickier a customer becomes. The frequency with which they buy from you increases. As does the amount they spend, and they are worth more to your business over a longer period of time. And when they become loyal, they also become advocates and help to acquire other like-minded customers to your business. Subsequently, this can help to reduce customer acquisition costs as you rebalance the percentage of sales that derive from existing customers as well as recruiting new customers courtesy of your brand advocates.

Even the biggest retailers and brands are becoming marketplaces.?

Next, M&S and Gap would previously never have dreamt of offering anything other than their own brand for sale. However, they have moved with the times. They all recognised that range extension is an opportunity to not only increase engagement with existing customers but also to attract new segments of customers.

If you look at Amazon, one of the core reasons for its success has been continual range extension. Every time they add a new product category, they make it harder for consumers to choose to go elsewhere. Even more so if they’ve already paid for Amazon Prime and the convenience of delivery that provides. This is the Amazon flywheel.

To summarise, here are some of the core benefits of having a marketplace solution:

• You will extend the reach of your brand by attracting a broader cohort of customers overall due to the new relevance to consumers you once may have thought were beyond your reach.
• You will also extend the lifetime value of existing customers and drive-up their retention and loyalty.?
• You will be able to reduce customer acquisition costs.
• Purchasing frequency will increase, driven by a broader range and deeper selection of options in your product mix, with the subsequent opportunity to convert a larger audience.
• A marketplace strategy enables you to offer a different way for customers to discover new products, and accessories, where customers ‘click and ship’ marketplace items, with no need for you to hold inventory onsite or to fulfil directly.
• You can adopt an ongoing test and learn approach to the addition of new products, brands and categories without the risk of up-front investment in stock.?
• The insight you’ll glean can be leveraged to continually improve the relevance and sell-through of the range on offer. In doing so, you will Improve cash flow, and increase margins and profitability.
• You will have to discount less frequently as a sizeable percentage of your range on offer will be sitting in a third-party seller’s warehouse.?
• Because there is no traditional COGS (cost of goods sold) in an integrated

marketplace model, revenue generated translates directly to profitable growth.

• Careful curation of products can enable you to offer a differentiated proposition to customers.

Considering all these benefits, it is no surprise that Forrester forecast that 68% of B2C e-commerce will come from marketplaces.?

Forrester also forecast that in 2023, third-party sellers will drive more than 75% of B2C online marketplace growth.

A marketplace solution will enable you to create a closer relationship with many customers, and this will lie at the heart of you turning them into fans whereby they move from a purely transactional relationship to something more involved with some degree of emotional engagement.

Find out what my consumer panel say about how marketplaces are changing the way they shop in my latest episode of Consumer Focus. Listen here .