History Leaves Clues: Anticipating the Marketplace of the Future
Between the customer and any product sold online, there are a myriad of competing operating systems, software applications, devices, social networks, and marketplaces. All those things combine to create the modern e-commerce ecosystem, and making the right choices about which of those systems to use and where to market your business is vital.
It might feel like there are a million platforms where you can (and maybe should) sell your goods. When considering how to approach marketplace decisions, you may find that the most useful tips can be found by looking in the rearview. If we look at some of the world’s biggest industries and where they’re innovating, we get a clearer picture of what could be coming down the road for digital marketplaces.
Narrowing the Field
At the genesis of the cellular telephone industry, there were quite a few players. From Blackberry to LG to Motorola, the dawn of smartphones brought with it ample choice. These days, however, the entire industry has consolidated into three major players: Samsung, Huawei (China’s largest producer), and Apple.
90 percent of all mobile phones purchased in the world today come from one of these three retailers. The remaining 10 percent is composed of brands that are essentially holding on to the side of the cliff by their fingernails and quickly getting knocked off by the big boys.
We saw it in the telecommunications industry before this: The field of competition quickly narrows on the heels of consolidation. And history leaves clues for the future—it’s not a stretch to imagine that the e-commerce and marketplace trends we’re seeing right now will make the industry ripe for consolidation across the next decade.
Ebay used to be the 800-pound gorilla in the room in terms of online marketplaces. Then Amazon came out of nowhere and turned all things e-commerce upside down. Now, it seems, the chase is on. Walmart is making a quick play, and Target is also showing promise in their efforts.
As more and more ecommerce sites join the race, it’s important to understand what makes something a marketplace. It’s quite simple: As soon as you allow third-party sellers or dropship inventory, you become a type of marketplace. The question from there is how you behave. What standard of customer experience do you hold yourself to? Do different products have different service levels? How much liability do you take on for those items?
When you’re not shipping your own items from within your four walls, you have to rely on milestones, tracking, and monitoring to ensure that shipments happen and payments and returns are processed properly. In a marketplace, all of those vital elements of the commerce transaction are being managed by third-party relationships that you’ve permitted inside your brand’s trust halo.
Marketplaces like Amazon do this quite well. If a third-party seller messes something up, for instance, Amazon refunds the customer instantly. They don’t ask questions of the consumer or put the onus on them to resolve the situation.
They’re able to do this, of course, because they have enough control from a monitoring, financial, and contractual perspective to force these third-party sellers to deliver a quality customer experience. After all, the penalty for not doing so—not being able to do business with them—can be a virtual death sentence in the world of marketplace sales.
So who will be the big players in the marketplace space going forward? Certainly there a few heavy hitters in the United States, but China is also home to some major competitors. As a brand, you may be wondering which of these to select as partners. Nobody can predict the future, but I would suggest that you not put all your eggs in one basket, while also being alert to the danger of spreading yourself too thin.
While we’re waiting for this consolidation to take shape, be diligent. Getting a bad reputation on a marketplace could cost you in the long run. In a future where “Amazon” equals “retail,” and Amazon and Walmart are the only two storefronts in the world—what does it mean if you’re credibility is shot on one of them? You have to play it smart or you could lose meaningful access to a big piece of the market.
I was on a demo recently for marketplace management software that boasts the ability to update your prices on 150 sites, almost instantly. So while we may say that we can’t be “everywhere”, there are actually tools in development that aim to do just that for marketplace sellers. They even do things like intelligent repricing, so that if you’re not winning the buy box, it will automatically adjust and compete based on your thresholds.
While that’s crazy and exciting for revenue, it’s scary for profit margins. If you approach pricing this way, you have less control over the customer experience. You can’t lose sight of how important customer experience is—it needs to be absolutely paramount in your business strategy.
For example, I had my first experience on Etsy recently. I was looking for a Moleskin-type notebook. I use them constantly, but I always end up carrying two or three smaller ones around, and I was on the hunt for a large one to consolidate everything.
With the power of Google, I found it, of course. And I found it on Etsy through the seller BioLogues. I placed my order, and since the seller said he didn’t ship to Canada, I planned to have it shipped to a U.S. address to pick up later.
But then I reached out and asked if there was any way to ship to my Canadian address so that I could get it sooner. I told him I was willing to pay whatever the shipping cost would be. He replied back very quickly and said he would check for me.
Twelve hours later, he had an exact cost for me. We cleared up, and he shipped the same day.
The customer service experience was fast and easy. This is a third-party seller I had zero prior experience with, but I extended that trust to him because I trust Etsy as a marketplace. And now I trust this seller as well.
When the package arrived, it was perfect. The journal has a pen holder, and he included a little cardboard cutout of a pen to illustrate how to use it. There was also a nice ribbon wrapped around it.
I even asked if he could put my name on the cover of the book, and he happily embossed it for me. These extra touches mean that I will forever remember both this brand and this marketplace.
So while automation is extremely helpful—and almost necessary, given the number of marketplaces out there right now—automate with caution. There seem to be two ends of the spectrum: those who resist automation at their own peril because it feels robotic and impersonal, and those who want so much to be ahead of the game that they cede everything to automation, and their customer experience suffers for it.
But here’s the hard truth: Consumers these days want it all! They want everything to be quick and convenient and affordable, but they also want their items wrapped in a pretty bow with their name embossed on it. You have to find a way to strike that balance—to maximize earning potential without losing the ethos of your brand.
This article first appeared on linkedin.com on December 17, 2018