Should you build an eCommerce platform in-house or opt for Marketplaces? Or maybe a Hybrid model?

Nivedita is very confused! She runs a boutique for Hand-bags that she retails under a brand she toiled hard to create over 7 years. Demand completely dried up in the 1st month of covid. But as people got used to the new way of life, business has been booming for her!

But she is unhappy with the hefty fees that she has to pay to Marketplaces where she retails her bags. She has been contemplating building her own ecommerce platform but is not certain if it will be sustainable!

Like Nivedita, there are millions of entrepreneurs who grapple with this question. Even Large organizations have yet to get their act right when it come to eCommerce

Covid propelled Ecommerce to the forefront of strategic initiatives for every organization.

From Kirana stores accepting orders on whatsapp to large retail stores pivoting to digital to display their new collections - everyone is gunning for eCommerce!

Digital in 2020 was already an integral part of most organizations but Covid has put that growth on steroids & this won't disappear like wallets which got a shot in the arm due to demonetization but fizzled out when cash was back in the market!

According to a paper published by Deloitte, 'Covid-19 will permanently change eCommerce'

If you remember how China's ecommerce ecosystem was kick-started largely in 2003 amid the SARS break-out, a very similar change is happening albeit globally this time in 2020!

Hence the question a lot of businesses I see struggle with is: Do we build Ecommerce capabilities in-house or do we simply rely more heavily on the aggregators, marketplaces, affiliates that were earlier driving my ecommerce business

The answer for most SME's is a tough one. They have to rely on marketplaces because they cannot attract the traffic they need by hosting an independent ecommerce website. Even though they end up paying heft commissions, they need the traffic that is coming in from Market places. Most SME's don't get customer data to be able to market to their customers directly

But what is surprising is that retail chains with over 150+ outlets are also dependent on marketplaces for selling their products! They have a healthy footfall in their brick & mortar stores & yet they have to be at the mercy of marketplaces for online sales! This is something that beats me

Then there are QSR brands with over 1500+ restaurants who are dependent on food apps for sales &

There are financial services companies that rely on comparison/aggregator portals to sell their insurance/banking products

In every industry that I have worked with, I have always championed the in-house ecommerce engine vs. an outsourced strategy because here is the truth "The consumer wants to buy YOUR product & the marketplaces, food apps, aggregators are only providing a superior experience of doing so only because YOU did not create it"

While its true that marketplaces help with discovery and traffic but if you are an organization with a healthy footprint of customer data, it's not rocket science to be able to migrate customers to your own platform & save the firm the fee that you bleed to marketplaces every month & also not allow yourself to be arm twisted at the negotiation table

As a consumer if I want to have a thin crust cheese pizza, I know which restaurant I want it from. If I want that Swarovski suit from a particular brand that fits me well, I know where to order it from. If my colleague bought a term plan that has terminal illness benefit and a good claims ratio topped with a great buying experience from a particular brand, I know where to look for term insurance

Then why do larger organizations continue to pay huge commissions to aggregators, marketplaces, food apps for retailing their products?

Because they did not invest in creating a sound digital platform that their customers would be happy to shop from. And what they create is more often than not, so lousy that it just does not deliver the experience, customers are used to on the apps from marketplaces, financial service aggregators or food delivery aggregators

I remember a discussion with the new CFO of a food delivery app who demanded that we start paying 4X commission of what we were paying them, else they would stop working with us. I told them we will not pay more than what we are. They shut down APIs.

We braced for a dip in numbers but as days went by we did not see any dip in revenue! Consumers who wanted a cheese burst pizza came looking for the product to our digital platforms.

This was the PULL of the product. In 2 months the food app came back pleading to re-activate integrations at a lower fee!

Here the power of the product was so impactful that not having our restaurant on their food delivery app was a bigger loss to the food aggregator than to the restaurant! Consumers saw the delivery app as being inefficient or incomplete!

But for this to have happened, our own digital assets had to be in peak condition - The APP, mobile web and desktop - All 3!

SME's and smaller brand cannot do this because they may not have that sway with their 'product' yet but I have seen larger brands with over 150 retail outlets too play to the whim & fancies of marketplaces & aggregators!

Building your ecommerce business is not easy. It never will be. Having built India's fist ecommerce platform for retailing Term Insurance, I can tell you for a fact that there will be so many people waiting to write you off!

The ROI on ecommerce will never be a swoosh curve. It will always take a while depending upon the industry you are in, to break even. But what I will also tell you is that in 4-5 years time, your ecommerce business will be saving you tonnes of money and your cost of acquiring a new customer in year 4 will always, always be lower than if you continued acquiring customers only through marketplaces or aggregators!

It will not just be expensive but it will also be very dangerous for your business survival online! The marketplace can easily shift your share to a competitor for a slightly higher fee!

Reasons for launching your Ecommerce platform:

Besides the obvious financial benefits aside there are other reasons why brands should definitely launch their own ecommerce channel:

1) Its relatively much cheaper: today than it was 10 years back. There are abundant options from Shopfiy to magento, wooCommerce that can get your ecommerce business off the ground with minimal investment

2) Acquiring customers for a business with Offline footprint is relatively much easier & cheaper than it is for a pure online store. The advantage of luring existing users who visit your brick & mortar stores towards your online platforms comes at a very low cost - IF you know how to do it. There are plenty of ways to do this. (A detailed post on this soon)

a) Exclusive APP only offers !

Use existing customer data to target your customers online & offer discounts for APP transactions! Simple yet effective! Few will take discounts & disappear but the CLV from the ratio of users who stick around will out weigh the cost of deserters!

b) Convenience as the pitch: At a bank we identified customers who walked in for opening FD's, for updating pass books, for checking account balance! We targeted them to educate them on conducting these transactions online & once they were educated they realized the convenience of not having to visit a physical store!

c) Exclusivity: Roll out products that are available only on digital platforms. At a food company we rolled out pizzas available only on the app. At an Insurance company we launched products only available on the online platform and you couldn't buy it offline. A retail company showcased it's new collection every month exclusively to APP users for 1st 3 days before others could see it in Stores!!

3) The abundance of talent today is a very big reason why you should be able to pull in traffic directly to your platform. (But hiring the right talent in the initial team is critical to its success)

The biggest reason why businesses with a PRODUCT will succeed where marketplaces, aggregators have posted losses (It took Amazon 14 years to post its 1st quarterly profit) is because You are selling a product whereas marketplaces are selling a service & the money is in always much greater in the product than the service!

Organizations already have 'Users' already want their product. Marketplaces have devised a splendid way of retailing these product digitally in the absence of organisations doing it!

Bigger Brands are steadily waking up to building their own eCommerce platform & selling directly. In 2019, Nike & Ikea are 2 global brands that have moved away from selling on Amazon & focused on building their own eCommerce juggernaut!

Digital should not be just looked at as a coping strategy for covid times but also for growth in future! The crisis also presents an opportunity for companies who are bold enough to invest in a digital future!