As part of a deeper dive into the future of marketplaces, RETHINK Retail sat down with Jesse Wragg, co-founder and managing director at eCommeleon. Based in Germany, eCommeleon is a software company designed to help retailers take advantage of global marketplaces without becoming overly reliant on Amazon.
In the following Q&A, Jesse reveals how brands and retailers are approaching marketplaces, along with strategic insights for the now and predictions for the future.
RR: Nearly 60 percent of e-commerce sales last year came from marketplaces. Why do you think the demand for marketplaces is growing so rapidly and what are some the best marketplace experiences?
JW: We know that 52 percent of product searches begin on Amazon. So, people are not even going to Google to find what they’re looking for anymore—they’re going directly to Amazon. And I think that’s pretty scary and it obviously says you need to be selling on marketplaces. But you shouldn’t be just another Amazon seller, you should have good customer service, nice packaging, and provide a good experience to the consumer.
JW: But there are a number of other marketplaces that offer very exclusive direct access to exactly the kind of buyers you’d want to reach. A great example of these niche marketplaces in the United States is Chewy.com which, as we know, is a go-to place for pet food and pet supplies. If you’ve got a pet, you might go to Chewy.com and find what you’re looking for quicker—or maybe better quality than— what you’d find on Amazon. This is also true in pretty much every niche category. There are new marketplaces popping up for most niches around the world. This is true even on marketplaces like Etsy.
JW: As we continue to move into a marketplace dominated arena of e-commerce, there are more and more niche marketplaces popping up. This gives retailers an opportunity to be where their consumers are without having to necessarily sell just on Amazon, or just on eBay, and be stuck in a loop of becoming too reliant on them.
JW: I think one of the things about Amazon is, of course, it’s a marketplace where you should definitely have a presence on it. But the thing is, I really don’t like the way [Amazon] operates. I don’t like the way that they run their business. I don’t like the way that they treat their employees. I don’t like the impact it has on the environment or the fact they basically dodge taxes wherever they operate. The fundamental part of my motivation for eCommeleon is to make it easier for [retailers] to sell on marketplaces that aren’t Amazon.
JW: In addition to the other reasons I just mentioned, by getting on to non-Amazon marketplaces you’re contributing to something that’s more than just individual business success. You’re contributing to that marketplace and all the other marketplaces that you’re selling on and, basically, giving Amazon a bit of a stick in the side. As I said, my personal motivation is to try and take some of those sales which might otherwise be happening on Amazon and let them happen on a smaller marketplace that isn’t just going into funding Mr. Bezos and his latest hobby.
RR: Wow. And I am sure the fear of becoming too reliant on Amazon is something that’s on a lot of retailers’ minds right now. When it comes to marketplaces, how do you differentiate between the role of a brand and the role of a retailer?
JW: I think it’s different depending on the marketplace. If we begin by looking at Amazon, brands have a lot more opportunity to market their products if they use A-plus content. If they are successful enough as a seller, they become a vendor to Amazon and unlock even more advanced marketing options. But just as a brand, there’s a whole slew of potential marketing options that can be used to promote products. And I think where a lot of brands get stuck is that they think they also have to add inventory to that. Something that I encourage retailers to do it simply use Amazon as a marketing channel, but not necessarily as a sales channel.
JW: We see a lot of retailers getting concerned about brands cutting them out and going directly to the consumer. And the best way they can avoid that from happening is by doing a good job of selling the products on marketplaces and collaborating with the brands rather than competing with them. Talk to your representative at the brand and see if you can get an exclusive deal to be the only person allowed to sell this particular product or product range on Amazon or somewhere else. But let them provide good marketing content. The reason a lot of brands are starting to go direct-consumer is because marketplaces make it difficult for a retailer to market the product in a way that is consistent with how the brand is marketing it.
JW: I was talking to someone at Adidas and they were telling me about this specific pair of shoes that Adidas creates. It was basically designed to be worn with another particular really high-end pair of socks. Basically, they were struggling with the fact that the retailers were selling the shoes without notification that they should only be worn with these specific socks. And they were selling the socks without notification that they should only be worn with those shoes. And it meant that people were buying the shoes and not getting what they expected because they weren’t pairing them with the correct socks.
JW: When you look at a brand, whether it’s a behemoth the size of Adidas or just a small Mom and Pop brand, there’s usually somebody who’s taking the time to carefully think about how they want to market their product. And this goes all the through to answering questions like, “Do we want to call our product blue, marine blue, navy blue, light blue or dark blue?”
JW: The problem that a lot of brands don’t realize is that if they’ve agreed on marine blue, Amazon only allows navy blue for this particular feed product type. And so the retailer won’t be able to create a listing on Amazon that uses marine blue—they would have to use navy blue. What happens then is a disconnect between what the brand wants, how the brand wants its products to be marketed, and how the retailer is being forced to market it in order to be able to sell on Amazon. This ultimately causes friction where the brands go, “Oh, we don’t like marketplaces, because they cheapen our brand. We don’t like the way that our products are represented there.”
JW: Brands and retailers should be collaborating on the creation of listings because everyone is going to benefit: the retailer is going to make more sales, the buyer is going to be able to find the products they want and, best of all, everyone’s going to make money off of it. It’s, a win win-win.
Brands and retailers should be collaborating on the creation of listings because everyone is going to benefit: the retailer is going to make more sales, the buyer is going to be able to find the products they want and, best of all, everyone’s going to make money off of it. It’s, a win win-win. – Jesse Wragg.
RR: You said brands and retailers should be collaborating. Would you say the burden falls equally on both of them, or more on one than the other?
JW: Typically, in a traditional brand-retailer relationship, the retailer is the one who has the experience with actually talking to the consumer and presenting information to them. But obviously, in the 21st century, brands have an online presence, they have content available, and they have information about their products. Often, the only thing that’s missing when it comes to marketplaces is a know-how about the marketplaces. This is where eCommeleon comes in. This is one of the barriers that we’re trying to break down: how to make it easier for people to sell on marketplaces.
JW: But when it comes to a brand or retailer, and who should be creating the product listings, it really comes down to the individual relationship. Personally, I am a fan of having the brand create it because the brand creates fantastic listings with great A-plus content with so many graphics and images. And then the retailer simply has to add their price and shipping rate. And they’re off—they’re starting to sell it. And they’re going to sell way more than they would if they were creating the listings themselves.
JW: And obviously for the brand, if they then want to make changes to the listing, they’ve got Brand Registry and can simply make the change. In most cases, they don’t have to then argue with Amazon about what is allowed to be said about the product as long as they say, “Yep, we are this brand. We are the company that produces this product.” They can change the listings however they want.
RR: From your experience working with retail clients, what are some challenges that they face when they’re entering a new marketplace? Do you have any examples of this from the work you’ve done at eCommeleon?
JW: Absolutely. I think the biggest challenge is probably justifying putting the work into selling on a new marketplace without any evidence of an ROI. And it’s kind of a catch 22, where, obviously, you’re not going to get the sales from a new marketplace until you put the work in to actually getting started selling on it. But in a typical situation, a lot of retailers that we speak to will be getting anywhere from 60 to 95 percent of their revenue from Amazon. So, it depends a little bit on their overall business strategy. But if they’re only an online business, or if their only online presence is on marketplaces, it’s quite a dangerous position to be in because all they have to do is miss one delivery or forget to mark an item as dispatched before running the risk of Amazon shutting down their account.
JW: So, there are a number of reasons to expand into other marketplaces. But at the same time, none of these other marketplaces are Amazon. There’s a reason that nobody’s talking about Etsy in the same way as they talk about Amazon. And Walmart is growing well in the U.S., and there’s a marketplace in the UK called OnBuy, which is also snapping at the heels of Amazon. But when you look at marketplace diversification, you have to go into it knowing that none of these are going to be the next Amazon for you. But that doesn’t mean they’re not worth selling on.
JW: If it’s going to take five hours to create listings on Amazon, and five hours to create listings on eBay, and five hours for OnBuy, the ROI is definitely better on Amazon. But if you can find a way to create a process that works for all of these channels—and reduce the amount of time it takes to sell on each of those channels—then it’s absolutely worth being on all of them.
RR: Final question: What do you think is ahead for marketplaces in the next five to 10 years?
JW: That’s a really good question. Obviously, I don’t have a crystal ball. But what I can definitely say is that my forecast for marketplaces and also e-commerce in general hasn’t necessarily changed because of COVID-19. It’s certainly been brought forward by about four years. One thing that we’ve already been seeing a lot in the last three or four years is the growth of new marketplaces—whether that be niche marketplaces, category-specific or country-specific marketplaces—that are holding their own against Amazon.
JW: If you go back 50 years and look at where we used to buy things, we’d go to the greengrocers to buy vegetables or we’d go to the fishmonger to buy fish products or the butcher to buy meat. And then along came the supermarket, and you just had one place to go to buy everything. And I think that’s sort of the circle that we’ve entered into now with marketplaces. Amazon, Walmart, or wherever it is that you want to buy your products, you have these places where you can go and buy everything. But what’s happening is that we are seeing niche marketplaces pop up—the Chewy’s, Etsy’s, etc—and they’re succeeding.
JW: This is where we’re heading toward, but at the same time, it is going to be a never-ending circle, where you’re going to then see all of these niche marketplaces eventually kind of amalgamate back into whatever is the next step for Amazon or the next step for Walmart. And we will begin seeing slightly larger niches where it’s not one for dog food, but one for everything to do with pets, for example.
JW: Marketplaces are exploding. And it is because that’s where consumers are going. And by that same metric, it’s where brands and retailers are starting to offer their products. So marketplaces are definitely here to stay, they’re going to continue growing, and they’re definitely worth being on—especially going into the early 2020s. ♦