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03/16/2021

Joining the Marketplace Revolution Starts with the Right Platform

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Traditional digital commerce structures limit your selling potential — a fact that thousands of B2C and B2B sellers have discovered as they’ve moved e-commerce operations to modern marketplace platforms and experienced dramatic growth. The marketplace revolution has started, but do you have a plan?

Traditional first-party commerce is essentially a pipeline of sequential activities, like finding suppliers, selecting products, merchandising (creating images and text), setting prices, acquiring inventory, marketing, fulfillment and handling customer support. Many of these functions fall to you, the business, to manage.

With marketplace platforms, thousands (or millions) of sellers can perform these functions in parallel as a network. Once you become a marketplace site operator, you have a community of sellers connecting with customers on your platform creating a digital commerce ecosystem where your only task is facilitating the sale.

Outsourcing traditional e-commerce tasks allows you to focus on the customer experience — which is becoming increasingly critical as consumer spending habits shift online. Customers are accustomed to shopping on marketplace platforms and buying products through third parties: Apple, Google, Amazon, Alibaba, Airbnb and Uber are all platform businesses.

As marketplaces become more of a standard retail practice, you need to not only join the online marketplace economy, but choose a platform that will keep your marketplace operations fresh and competitive.

3 Criteria for Selecting the Right Marketing Platform for Your Business

With so many competing platforms, it can feel like a risky, complicated decision-making process to determine which platform is the best fit for your business needs. While there is no “best” marketplace platform overall, there is a best fit for your business’ needs and goals.

Derived from our Marketplace Suite Spot report, the following three criteria can serve as a starting point to guide your decision-making.

1. Capability

Your business isn’t stagnant, and your marketplace platform shouldn’t be, either. Consider enhanced features that allow your business to evolve, such as advanced analytics, data-driven automation, the ability to offer both products and services and the option to add additional modules and advanced functionalities after initial setup.

If your business is more niche, look for platforms that offer highly customized workflows rather than those that only offer a general one-size-fits-all template. The industry standard Marketplace Maturity Model groups features into five different levels of platform capability.

2. Scalability

The second major consideration is the ability of marketplace platforms to scale. Just as you would use a car to travel on the highway and a plane to travel across the ocean, different platforms are better suited for different business journeys.

For example, a marketplace with a budget under $100,000 that needs support for only several thousand SKUs requires a different platform than an enterprise-level marketplace with a seven figure budget and hundreds of thousands of SKUs. In particular, the enterprise-level business will likely need a cloud-based platform that can more quickly scale gross merchandise value (GMV) across thousands of third-party sellers.

3. Cost

Finally, there are costs to consider: the initial capital cost as well as ongoing operational expenses. Pricing models vary across platforms and could offer a combination of one-time fees, fixed recurring fees or a percentage of GMV as a revenue share fee. Other platforms are licensed via one-time fees or via recurring subscription fees.

For larger, enterprise platforms, the cost is often negotiated, while lower-cost, simpler platforms and modules usually have a fixed cost. There are also ongoing costs associated with additional functionalities and extensions you may need as your business grows. While some add-ons are less than $1,000, others require advanced technology such as API integrations and can significantly add to the overall cost of platform maintenance.

As customer shopping habits and e-commerce trends continue to shift, participating in the marketplace revolution is essential to staying competitive and ensuring future growth. Transforming your business for the next generation of commerce will require shifting strategies across the entire organization. But for now, these criteria are the first step in launching your journey into the marketplace economy.

Tom McFadyen is CEO of McFadyen Digital.

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