How to Boost Profitability with Digital Marketplace Capabilities
Diversify revenue streams, reduce inventory risk, and win loyalty with a digital marketplace.
Nearly every company sells their goods and services online, whether it’s direct-to-consumer or to assist with B2B sales. But until recently, only a few companies could afford to run a digital marketplace — an experience that connects third-party sellers with buyers either alongside or in addition to a company’s own products and services. In the past, digital marketplaces required large investments in business and technology to develop and maintain. But now, game-changing technology gives businesses agility and significantly lowers the cost (and the risk) of creating their own marketplaces.
And the timing couldn’t be better. In the throes of a snarled global supply chain and rising inflation, marketplaces offer plenty of shelter from the proverbial storm. That’s why more than one-third of commerce professionals — across industries and business sizes — are prioritizing adding marketplace capabilities to their existing ecommerce experience.
Marketplaces make it easy (and fast) to diversify revenue streams, reduce inventory risk, and win customer loyalty. Think your business is ready to take the leap? Here’s everything you need to know about marketplaces.
What, exactly, is a marketplace?
In a conventional ecommerce setup, a brand launches its own storefront to sell products and services. It doesn’t share customers with anyone else, and it certainly doesn't share profits. Marketplaces, however, allow businesses to join forces.
In the simplest terms, a digital marketplace connects buyers to sellers. A marketplace can expand online product catalogs by enabling multiple businesses to sell related offerings under one digital roof (think Amazon Marketplace or Etsy). As a business, you can sell through third-party marketplaces, launch and operate your own, or you can do both.
Businesses that launch their own marketplaces curate products from other sellers alongside their own and sell them all on the same digital storefront. Here are the unique advantages of operating a marketplace (along with our top tips on how to get started).
Marketplaces boost businesses in every industry.
Why are more than one-third of commerce professionals prioritizing their own marketplaces? From financial services to healthcare, businesses in every industry can benefit from marketplace capabilities (and so can their customers). Marketplaces allow businesses to quickly expand product catalogs, diversify revenue streams, and reduce supply chain risk. For customers, marketplaces offer a wide range of choices, the ability to quickly price shop, and hyper personalized experiences. Here’s how commerce leaders across industries are using marketplaces to increase customer satisfaction and boost revenue.
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Financial services organizations have a large customer base, institutional trust, and rich data. A marketplace model is a great way to leverage these resources to grow revenue and help customers find success. For example, if a customer takes out a new auto loan, marketplace capabilities could uncover personalized insurance offers along with other aftermarket product opportunities, like maintenance and theft deterrents.
Consumer goods (CG) leaders report that implementing a marketplace is a top priority in 2022. From food and beverage to household products, customers expect assortment and variety when they shop for consumer goods. Marketplace technology makes it easy to collect first-party data so brands can deliver on this expectation with personalized recommendations, intuitive storefront search, product filters, and more.
Retailers see digital marketplaces as a way to keep up with rising consumer expectations. Shoppers demand a wide selection of in-stock products at competitive prices. On top of that, they want fast shipping. The bar is high, and marketplace capabilities help retailers deliver on these expectations and drive loyalty.
Manufacturers can also significantly benefit from marketplaces. By creating localized supply networks, marketplaces enable manufacturers to respond quickly and efficiently to increasing demand. With valuable commerce tools, access to new customers, and actionable insights made possible with marketplaces, manufacturers are also able to reduce channel conflict across distributors and suppliers. This helps ease the burden that manufacturers often feel as a main piece of the supply chain puzzle.
As more healthcare organizations focus on opening digital front doors to increase patient satisfaction, marketplaces offer a unique opportunity. The consumerization of healthcare has changed how consumers and business buyers shop for everything from healthcare services to insurance to medical devices. Marketplaces can provide consumer-like experiences that make it easier to price shop, compare insurance plans, and more.
Win loyalty with deeper customer insights.
If you want to quickly expand your reach to new audiences, selling through third-party marketplaces is a cost-effective way to get the job done. But businesses that launch and operate their own marketplaces have a major advantage: customer data. Marketplace owners are responsible for onboarding sellers and maintaining the site, but they have the added benefit (and major payoff) of collecting valuable first-party data that provides insights into customer needs and behavior.
Nothing builds brand loyalty and boosts revenue quite like understanding your customers. To give customers the kinds of experiences they want, businesses need data. Here’s how marketplace owners use data to find success:
Uncover opportunities and tap into trends: As a marketplace operator, you collect data from every product search, every add-to-cart, every sale, and more. You can use these insights to uncover opportunities and tap into trends. For example, are customers searching for products you don’t sell on your site? You can use this information to inform your decisions about which sellers you onboard next and what products you add to your catalog.
Almost three quarters (73%) of customers expect companies to understand their unique needs and expectations.
Personalize interactions at scale: Shoppers want a give-and-get relationship with the companies they interact with. In fact, 73% of customers expect companies to understand their unique needs and expectations. Tailored promotions and complementary product offerings customers will love? All powered by data. Streamlined product search that serves customers only the most relevant results? Also made possible by data.
If you’re operating a marketplace with a large catalog, it’s all the more important to implement these personalization features. Customers don’t want to spend time sifting through a sea of unwanted items from the wrong categories. Instead, harness data to give them fast, easy product search and recommendations.
Personalized moments that make customers feel understood can turn a first-time shopper into a loyal fan. It’s no wonder that 88% of businesses prioritize collecting first-party data — and 30% say it’s their highest priority. Owned marketplaces are a proven tactic.
88%
PRIORITIZE COLLECTING FIRST-PARTY DATA
30%
SAY FIRST-PARTY DATA IS THEIR TOP PRIORITY
Drive efficiencies with data-powered automation: As budgets get squeezed and commerce leaders are asked to do more with less, automation can unlock business efficiencies. The one key resource you need to power automation? Data. Marketplace owners can use data to automate many order management tasks, streamline simple support requests, and even simplify returns.
Automated order tracking means that your service team will no longer spend valuable time answering questions about estimated delivery times. Implementing data-powered chatbots for common questions can also relieve service and support teams, giving them more time to focus on more complex cases.
A whopping 94% of shoppers say that a positive customer service experience makes them more likely to purchase again.
Connect commerce with other areas of business: A whopping 94% of shoppers say that a positive customer service experience makes them more likely to purchase again. It’s critical to harness all the data you collect from your marketplace and turn it into stellar shopping moments. The best place to start? Consider a customer data platform (CDP). This will make it easy to gather data in real time and uncover insights from across your entire business. Once you unify marketing, commerce, and service data, you can automate and personalize every single interaction.
Understanding and better targeting segments of customers with unique offers and products is one of the biggest reasons companies invest in marketplaces — and a CDP will dramatically increase your organization’s capabilities to capture data and better segment offers. Ultimately, a customer data platform enables you to deliver intelligent commerce everywhere and create VIP shopping experiences that feel like magic for every customer, at scale.
It’s not just businesses that benefit from marketplaces. Customers win, too.
Better together: marketplaces make it easier to grow — even in a tough economy.
Products and services are consumed together — and working side by side to sell them makes customers happier and businesses more successful. Marketplace buyers and sellers can pool their resources to enhance critical parts of the customer journey — from browsing to final fulfillment. The result? Increased customer satisfaction. According to one survey, marketplace customers cite better product selection, better delivery options, and better overall shopping experiences as the leading reasons for their preference.
Expand your catalog: Whether you sell banking products or apparel, there are thousands of ancillary products and offerings that customers would be interested in alongside your own. Marketplaces create a smooth journey and give customers a one-stop shop. Rather than bouncing from site to site to find complementary products and services, they’re all searchable in one digital storefront. Many customer decisions are based on ease and convenience, and marketplaces offer the type of streamlined shopping experiences that drive conversion.
Weather inflation: Businesses and customers are doing their best to thrive in spite of inflation. Marketplaces can help ease the burden. For customers, marketplaces make it easier to price shop — a particularly beneficial feature as costs continue to rise. Consider the strained customer journey of a shopper feeling the weight of high freight costs. If they were browsing a traditional digital storefront and didn’t see products at a comfortable price point, they would likely exit, perform a quick Google search, and purchase a more affordable option from a competitor. But marketplaces offer a quick way to find similar offerings at a lower cost — without any of the work. From the same storefront, a customer can see specs and prices of a range of similar products, and quickly choose one that meets their needs.
As a marketplace owner, offering a range of products at different prices means you’ll attract more customers. Not to mention, you can analyze data from product groups to see which price points lead to more conversions. This information can help you upsell, retain customers, acquire new customers, and more.
Optimize your supply chain: Beyond convenience and a streamlined shopping experience, marketplaces can help ease the burdens of supply chain issues — for both customers and businesses. The range of sellers means better likelihood that shipping and fulfillment will be localized (read: faster). On your own, you might only have a handful of fulfillment centers, transportation options, and manufacturing facilities to rely on. But if you operate a marketplace, you can tap into the resources of all your third-party sellers. Ultimately, this means out-of-stock products are less likely, and you can get orders to customers faster — a major differentiator in the midst of a global supply chain crisis.
More products, more visitors: Marketplace owners can increase their gross merchandise value through broader SKU coverage and a greater number of visitors. This also allows them to fill in any gaps in their product assortment by leaning on other companies’ offerings. Plus, marketplaces are easier to find through search engines; more SKUs means more search relevance. This creates value and saves retailers from expensive advertising.
Minimize risks and costs — and maximize profits.
Increasing inventory, implementing new channels, and expanding into new markets typically involves both risk and cost. A marketplace strategy can significantly lower both. Marketplaces make it possible to increase inventory without building a new warehouse. You can also launch new products without research and development costs. Ultimately, marketplaces provide relief from operational challenges and the benefit of expanded revenue.
Avoid the risk of out-of-stock products: One of the fastest ways to lose customers and brand loyalty? Out-of-stock notifications. The impacts of low inventory go beyond revenue loss on a single item. Your brand image, conversion rates, customers’ loyalty, and even your future efforts can be affected. Marketplaces offer a solution. By onboarding other sellers that can extend your product range, you are much less likely to suffer dreaded out-of-stock effects.
A full 72% of companies that built a B2B marketplace experienced market-share growth. B2C marketplaces are also realizing major profits.
Boost profits and expand gross merchandise value (GMV): Over the past two years, 72% of companies that built a B2B marketplace experienced market-share growth. B2C marketplaces are also realizing major profits. Last year alone, the top 100 B2C marketplaces generated $3.23 trillion . Owning a marketplace means you get a piece of that pie. As an operator, you collect commissions from sellers while expanding GMV growth.
One third of B2B sellers report that launching their own marketplace is a priority over the next two years.
Strengthen existing relationships: For B2B marketplace operators, the benefits go even further than extending product offerings and reaching new customers. Along with these advantages, B2Bs can also leverage marketplaces to strengthen their existing relationships with distributors. If distributors can tap into your wider range of product offerings, your business becomes exponentially more valuable to them. This essentially locks distributors into your digital ecosystem and gives you much more data about your customers. These benefits are undeniably driving B2Bs toward owned marketplaces. In fact, 33% of B2B sellers report that launching their own marketplace is a priority over the next two years.
Find ecommerce success in a shifting market.
At a time when businesses must uncover not only top-line growth, but do so profitably, marketplaces are the clear path forward. To learn more about how businesses are finding success in a shifting market, we asked over 4,000 commerce professionals in every industry — from banking to consumer goods — about their digital marketplace strategies. See what they had to say in the State of Commerce report.
