How to win on online marketplaces
Online marketplaces are becoming an increasingly significant form of online trading. Last year, vendors sold items worth $160 billion on the platform of market leader Amazon – more than Amazon itself. It is true that many firms are still hesitant about operating there. But companies should forget their scepticism and actively seize the opportunities.
The vendor KW Commerce from Berlin has demonstrated how to be successful on marketplaces. KW Commerce has been selling electronic accessories on marketplaces since 2012 and hardly operates outside Amazon or eBay. Yet despite spending almost nothing on traditional advertising in the marketing mix, KW Commerce’s performance is impressive, with 250 employees delivering products to some five million customers every year, according to its website. Anker Technologies is another successful example. This electronics manufacturer has shown how even brands can be built up using marketplaces. It has made a name for itself out of Hong Kong with battery chargers and replacement rechargeable batteries. Initially, it sold items solely on Amazon. These days, customers also actively ask other retailers about Anker products – and those who don’t stock them have realized there’s a gap in their range. A strong brand has emerged – almost exclusively via Amazon.
Businesses planning to follow the examples of Anker and KW Commerce should proceed systematically. Basically, this can be done in five steps.
Deciding between ‘vendor’ and ‘seller’
The first step is to decide whether you want to be a ‘seller’ or a ‘vendor’ on the marketplace. Vendors sell ‘to’ a platform like Amazon and the platform then sells to the customer. Sellers sell ‘via’ the marketplace, meaning the contractual relationship comes about between customer and seller.
Only large, established brands can become vendors by being invited by the marketplace operator. Anyone can become a seller, at least with Amazon. Besides the different business model (sale to marketplace vs. sale to customers), the models differ in that sellers retain price sovereignty. In addition, there are differences in the marketing possibilities and the data made available to control the business. Some brands are also active as both vendor and seller for strategic reasons.
Once the decision between vendor, seller or hybrid has been taken, the presentation of the product has to be optimized (what online marketers call ‘content’). It’s similar to a department store: in order for a product to be successful there, it must be easy to find and well presented. In addition, all the relevant information must be provided so that the customer can buy it without the need for additional comparison. In the context of online marketplaces, this of course takes place digitally, i.e. you put the potential search terms in the product title, create a product description that’s both easy to find and convincing, select appealing images, and keep an eye on customer ratings and reviews. Satisfied customers should be encouraged to submit reviews – and dissatisfied reviews should be responded to.
Advertising on the platform
Just two years ago, these steps would have been enough by themselves. But the success of Amazon in particular means vendors now have to compete with many others there, too, and so active advertising is required. Like Google and Facebook, Amazon offers numerous ways to advertise. Amazon is in fact developing into the third major advertising ecosystem on the web alongside the other two. While Google allows customers to be addressed based on their intentions, i.e. what they’re looking for, Facebook is all about personal interests and contacts. Amazon – and this is what makes the platform so attractive to advertisers – can appeal to users on the basis of their specific purchases and buying intentions. They’re offered, say, a replacement battery which fits a camera they already own. Amazon enables advertising inside and outside its platform. Those who use it intelligently can target existing customers of their own products, interested searchers, and those looking for related articles. The goal can be both sales and brand development.
A crucial difference between being a vendor in a conventional online shop and on a marketplace is the time and effort required for ongoing support, also known as account management. When joining a marketplace, you need to constantly know how much you’re selling compared to the competition, how well you’re converting prospective customers into buyers, how competitors’ prices are changing, what the supply situation is like, and how satisfied your customers are. Negligence has a double negative effect, since a bad rating makes customers nervous and also causes you to slip down in the search results. Meanwhile, the wrong pricing can put competitors selling the same product in front of your own offering.
Extensive data optimization
In the final step, it’s advisable to take an integrated approach to marketplace activities and control them across platforms on the basis of data. It makes no sense to think in terms of silos, either regarding sales and marketing activities or individual platforms. The lessons learned at Amazon should be incorporated into planning for other marketplaces and vice versa. A common data pool amalgamating all available information from all marketing and sales activities on all channels is vital. After all, what prompted customers to visit my product page on otto.de may not have been the quality of my content or advertising on the marketplace, but a TV advert or newspaper article.
Working on the company’s marketplace success based on these points can clearly boost both the company’s sales and the company’s brand. Every search on Amazon, Otto, Douglas or Real will then become an unmissable business opportunity.
Jan Bechler is the founder of the digital agency Finc3, which has 70 members of staff and helps brands from all over Europe to be successful on marketplaces. Its clients include companies such as Bahlsen, tesa, Vodafone, Shopify and Mailchimp. Bechler is a partner of Online Marketing Rockstars.