Online marketplaces continue to grow in prevalence, and we are seeing the likes of Topshop, Dyson and Next using these lucrative eCommerce platforms to grow their brand and online sales, internationally.
Essential Retail talks to Joe Tarragano (pictured), managing director of marketplace specialists We Are Pentagon Group, who will discuss – in this sponsored article – why he believes marketplaces are an essential part of any retailer's international strategy.
Essential Retail (ER): Which retailers are best suited to using online marketplaces as part of their international expansion?
Joe Tarragano (JT): For most, marketplaces are a component of a wider strategic plan. The strategic intent can vary significantly, for example BMW's use of eBay serves a different purpose than Dyson's, and Next and Sports Direct act quite differently on Amazon. But all successful retailers and brands on marketplaces share a common commitment to such channels, and invest appropriate resources behind the customer proposition on those marketplaces. Retailers looking to sell domestic brands internationally will unsurprisingly find success comes slower than for already known global brands, especially if the international expansion is not supported through additional marketing. However, for all retailers, marketplaces can offer fast, effective routes to new overseas customers.
ER: What are the key benefits of using online marketplaces when entering new territories?
JT: Most obviously, marketplaces are where shoppers shop. In markets as diverse as Poland, India, Japan and China, marketplaces can represent more than two-thirds of all eCommerce in some categories. So, retailers need to be selling on these platforms to access the traffic.
Marketplaces also take away the pains of understanding and executing local consumer expectations; from providing same day delivery, local language customer support, mobile responsive stores and preferred payment methods, marketplaces are already set-up to best service the local consumer.
ER: How has the popularity of online marketplaces changed in the eyes of retailers, in recent times? And why do you think this is?
JT: When I led eBay's earliest conversations with retailers ten years ago, we had to educate retailers around ecommerce generally, and deal with concerns around brand, cannibalisation, IT complexity and stock management. Today retailers are much more sophisticated, are adopting omnichannel and are more open to working through third parties, like ours, who can simplify the process.
They've seen the tens of millions of pounds that Argos, Tesco, Superdry et al are making on eBay, and have seen both mainstream and premium brands piling into Amazon. And they're very aware of how Asos and Wiggle have led an export phenomenon. With retailers increasingly challenged to maintain growth and ever more open to international and to other channels, they’ve naturally followed others in going onto marketplaces.
ER: What would be your top three tips for establishing a presence on an international marketplace?
JT: Firstly, be very clear on your strategic objectives – the marketplaces differ in the positioning and propositions, so being selective is important, and therefore upfront thinking on the business case pays dividends.
Secondly, recognise that marketplaces have huge traffic, but it won't flow to you unless your proposition is compelling and unless you invest in stimulating demand.
Thirdly, understand that while marketplaces do much of the work for you, and third parties such as Pentagon can make it even easier; marketplaces still require a level of management focus and engagement in order to maximise the opportunities.
ER: What would you say to a retailer considering going it alone in a new territory, with a localised website and own stores?
JT: Very few retailers' local websites are proving to be successful. Asos pulling out of China but retaining its marketplace presence is a key indicator here. So, while I'm very supportive of localised offerings as an initiative, I'd say to the retailer that their ROI projections will likely be over-cooked: the cost of getting the offering truly right will be far higher, and the revenue build will be far slower.
ER: Brands may be reluctant to give up part of their sales to a third party. How can marketplaces help brands make money?
JT: Marketplace fees can seem high when contrasted with affiliate fees or direct online marketing costs. However, the marketplaces do a great deal for their money, and a fairer comparison is to the economics of concessions, department store wholesaling or even to physical stores in malls. Putting it most simply, the marketplaces' spend on customer acquisition and on customer experience development might be hundreds of times greater than any one individual retailer, and that is why consumers love them.
ER: How does a retailer select the right marketplace for its brand, in an increasingly crowded space?
JT: The first step is understanding the strategic alignment – is the marketplace off-price focused? Is it a niche fashion proposition with a young demographic and great existing brand adjacencies? Or is it a behemoth focused on all categories for all consumers?
Having identified the proposition fit, retailers then need to carry out a sales analysis of understanding what the marketplace can do for you – what demand does it already have for your products? What would it take to win in search? Can you buy advertising space? If the fit is there and the numbers stack up, it's then about operationally how easy is the marketplace to work with. Companies like ours exist to minimise all such pains.
ER: What is the best way to find out more about how global marketplaces operate and how to be successful on these platforms?
JT: We are of course happy to share our experiences and insights and can answer many of the questions retailers would have. On 23 March, the fourth annual Retail Without Borders conference will take place, bringing together more than 16 leading global marketplaces, as well as eCommerce experts to help accelerate brands' online success.
You can find out more about Retail Without Borders and book your place by visiting the conference website.