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How to benefit from the third-party marketplace ‘revolution’

While we hear a lot about the behemoth marketplaces like Amazon, eBay or Alibaba, a huge trend emerging globally across all levels of retail is the third-party marketplace, otherwise known as the ‘niche marketplace’ or implementing a marketplace strategy. Seventy-five per cent of participants in a recent eCommerceGuide report purchased a product on Amazon in 2020, but around 55 per cent bought products from ‘other’ marketplaces – and the ‘other’ is where the business transformation is occurring right now.

We are on the cusp of a third-party marketplace ‘revolution’ that will change the eCommerce landscape for good. Businesses, including global retailers and outfits like J. Crew, Urban Outfitters, Netflix and SurfStitch; for-purpose initiatives like ‘Buy from the Bush’ and ‘Global Sisters’; and even industry innovators like celebrity chef Shane Delia with Providoor and Sean ‘Diddy’ Combs with SHOP CIRCULATE; are jumping at the opportunity to be ahead of the curve, and here’s why. 

Third-party marketplaces can grow and scale your business like never before

Implementing a marketplace strategy is not about becoming the next Amazon. It is about investing in the IP to enable you to sell other companies’ products without taking the risk of buying the products yourself and putting your neck (and your wallet) on the line. In other words, you can sell what you don’t own. 

Nor is this about putting your business in direct competition with an Amazon or an eBay; there are still retail strategies that brands and businesses can run on those marketplaces concurrently with adopting their own marketplace strategy – they are not mutually exclusive.

For example, Netflix recently announced an online shop of “curated products including apparel, toys and games” to sell merchandise tied to its programming; Instacart announced an extension of its marketplace with third-party product fulfilment through ButcherBox™, a well-known meat delivery subscription service in the US. In Australia, the likes of SurfStitch have seen exponential growth by selling other companies’ products on an owned marketplace. 

Third-party marketplaces give you the ability to expand your market share, expand your existing supplier range, introduce new suppliers, and shift from a merchant site or a direct eCommerce site to a marketplace housing everything under one, big virtual roof – all quickly, easily, and with minimal disruption.

Key benefits: Why your business needs to be selling what you don’t own

Third-party marketplaces are in such hot demand because they are the quickest avenue for growth with minimum risk. 

While private labels offer the advantage of higher margins, they come with the logistical burden of manufacturing and fulfilment.

With third-party marketplaces, retailers don’t carry the inventory or development costs but can still expand their market share by growing their existing supplier range and introducing new suppliers. The profit is not necessarily realised through large basket sizes (as with traditional sellers) but through speed, efficiency and volume via a commission model for each product sold.

However, arguably the greatest benefit of third-party marketplaces is that they are a destination that will hold consumers’ very divided and sought-after attention.

The truth is, there is only so much one brand can offer. Shoppers will dip their toes in for what they need, but there is a limit to how extensively they engage with a single brand. 

By contrast, a marketplace eCommerce strategy is critical for future growth. It brings together many brands and their loyal followers under one roof, united not just by a product or category but by a sense of community. By offering memberships, exclusive offers, premium content, and curated selections, a third-party marketplace becomes a unified destination that customers can return to repeatedly, all the while gathering vital data that allows a business to understand their customers on a much deeper level.

Marketplace strategies also enable social and unified commerce not possible with traditional, creating seamless solutions that support and bring together franchise and multi-store networks despite varying stock levels, price points and location.  An example is Shop MyLocal, a marketplace led by Independent Brands Australia (IBA) through its member brands, including Cellarbration, Bottle-O and Thirsty Camel.

The technology exists now – and businesses need to take advantage of it 

The emergence of third-party marketplace strategies is not a sudden stroke of genius on the part of retailers; the opportunity has been brewing for a long time. Its rise comes down to technology, which previously was complex and only for the domain of the ‘big four’ marketplaces, leaving others on the periphery.

That has changed thanks to advancements in ‘headless’ commerce and API-driven platforms that create plug-and-play frictionless experiences for marketplace operators. In particular, two new modes of marketplace technology deployment – ‘connected’ and ‘headless’ – make implementation a mere extension of existing eCommerce capabilities.

‘Connected’ is an implementation model that connects a marketplace platform’s core back-end to a retailer’s existing ecommerce engine. For example, Marketplacer’s recent partnerships with Adobe Commerce and Salesforce Commerce Cloud allow their users to continue to function as normal while adding the power of a marketplace to their existing eCommerce offering, without the need to create a new platform.

In the ‘headless’ model, retailers use their own custom-developed front-end or ‘head’, which provides the user experience. However, in this model, the marketplace platform delivers both the core back-end plus the shopping cart, search and checkout functionality that sits behind your customer experience. For example, HMD Global (Home of Nokia Phones) recently worked with Marketplacer to develop a headless API that supports the checkout journey on the global nokia.com/phones/en au site, allowing the Australian arm of the business to simply ‘turn on’ its local eCommerce shop. This solution generated ROI in just nine weeks. 

It’s incredible to see the revolution of these specialist online marketplaces emerging to provide consumers with the most comprehensive range and a frictionless user experience in one place – from cheese to undergarments. The possibilities to grow as private sellers, scale small to large marketplaces and drive profit and attention to underrepresented communities are endless, and the revolution has only just begun.

Read more: Rural small businesses give boost through PayPal and Buy from the Bush ecommerce platform

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Jason Wyatt

Jason Wyatt

Jason Wyatt, Co-Founder and Executive Chairman of Marketplacer, a global technology Platform as a Service (PaaS) company that builds successful and scalable online marketplaces.

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