The Three Keys to Success in E-commerce Marketplaces
Guaranteed success for brands in e-commerce marketplaces starts with strong definitions, decisions, and drive.
“I’m the #4 bottled water brand in the world, so I should be #4 on Amazon.” – Large global water brand.
Do you agree or disagree with this statement? Why or why not?
This brand wasn’t #4 online—what’s more, they weren’t even on the first page of search results. Most of their products were out-of-stock on Amazon specifically, and what was in stock wasn’t surfacing in search results due to retailer profitability.
Expecting performance online to align with our brick-and-mortar success isn’t always reasonable. What got us here won’t get us there. New tactics are required to be successful online, and online has become more important than ever. Think Nike, whose 2010 DTC sales made up just 15% of the company’s total revenue. By 2021, that percentage had jumped up to 40% as their DTC sales raked in $44.5 billion. This massive shift has left many consumer brands and retailers reeling.
While every marketplace is slightly different, there are consistencies in how to successfully approach category management on marketplaces, and here they are.
Define the Category and Conversion-Drivers
On a marketplace, a shopper isn’t walking down a traditional aisle and choosing products from a highly curated assortment. On the contrary, a search for “bottled water” on Amazon yields 10,000 results. More than 50% of the first page of search results are products that are niche, regional, category-adjacent, or entirely out-of-category.
On an e-commerce marketplace, the “category” isn’t a finite set of similar, nationally distributed brands. Instead, it is a set of search terms shoppers use to find your products.
Conversion, or activation, also has different drivers on Marketplaces. Shoppers may be choosing products based on reviews or other user-generated content (UGC), searchable attributes, such as “Gluten-free”, subscription availability, or more. Auditing the products with the highest search ranking can provide clues into the conversion drivers for your products.
For retailers, this provides an opportunity to innovate beyond search in e-commerce. Amazon’s stuck with their search-driven platform, through which they must sell groceries, fashion, and automotive products. Category-specific retailers have an opportunity to redefine the shopping experience to be about more than search – product curation, influencers, thematic lists, image search, and more.
What are the key search terms for your product(s)—the “category”–on marketplaces? What are the biggest conversion drivers? If you’re a retailer, how can you innovate beyond search?
Determine New Areas of Responsibility
Marketplaces are platforms that bring buyers and sellers together. They’re platforms, not partners. As such, they are often self-service. It’s no longer the retailers’ responsibility to curate the shelf, determine shelf positioning, make sure product is in-stock, and protect their own profitability. These responsibilities all sit with the brands in a marketplace model.
Not interested in taking on some of these new responsibilities? Competitors will, and the marketplace is happy to sell the next best product in place of yours.
For traditional retailers, responsibility shifts occur online, too. What used to be the shoppers’ responsibility—picking products, transportation, determining substitutions—is now the responsibility of the retailer. What’s more, these are expensive activities that require new investment streams to help offset.
What are the new responsibilities you need to own? How will you prepare your organization for these responsibilities? Lastly, how will you pay for them?
Drive the Marketplace Flywheel
There’s a critical hierarchy of success on marketplaces, and consumer brands and retailers that focus on these fundamentals will yield greater results.
First, the brand or retailer needs a sustainable, cross-platform strategy. The strategy should include a thoughtful, cross-platform assortment and promotional strategy, as well as investment and staffing to cover new responsibility areas.
Second, products need to be properly and accurately set up in the digital catalog. Much of the information we provide to marketplaces flows directly through to the product pages, product receive processes in the warehouse, and more. Garbage in equals garbage out.
Third, items need to be financially viable for both the retailer and the brand. Remember, retailers are often shipping single units directly to shoppers’ homes. In addition, they have the ability to re-orient the store to dissuade shoppers from engaging with unprofitable SKUs. Therefore, item-level economics are a critical success driver.
Fourth, items need to be in stock. Again, the marketplace is happy to present the shopper with the next best product, and it’s likely not going to be yours. In addition, going out of stock hurts search ranking, and brands must work harder to build search relevance after a period of extended out-of-stocks.
Lastly, products need to receive qualified traffic through advertising, promotional activity, participation in events, and couponing.
Which part of the Marketplace flywheel does your organization struggle the most with?
Consumers shop differently on marketplaces. They aren’t walking an aisle and choosing from a set of nationally distributed products; they’re shopping by search terms and choosing by SKU. Marketplaces are happy to sell the shopper the next best product, and it may not be yours without proper ownership over new responsibility areas.
With a disciplined focus on the three Ds of successful category management online – Define the category and conversion drivers, Determine new areas of responsibility, and Drive the e-commerce flywheel—brands and retailers alike will achieve great results.