THE EVOLUTION OF MARKETPLACES
In just 15 years, a whopping 52% of the Fortune 500 companies have disappeared.
That list includes household names such as Borders, Blockbuster, Blackberry and Kodak. Commerce has changed substantially and with the resulting tectonic shift in the retail landscape, companies are constantly seeking new strategies to remain relevant to their customers and competitive within their industries.
One result of this shift is the evolution of the marketplace. They’ve been around for a long time – in fact, ever since there has been something to sell. But throughout their progression from a village market square to an online destination, their purpose has remained the same; to provide an easy and convenient location where multiple sellers can gather and offer customers a curated range of products or services.
In the beginning, marketplaces were based around satisfying customers’ basic needs.
Why did people go to the local produce market? Because they could find everything they wanted in one place. Customers could compare varieties of fruit from different sellers and try new fruit and veg. It was an experience that satisfied the need for hunger.
But in commercial terms, it also satisfied the three main principles that customers are guided by in their shopping needs: ease, relevance and convenience. That is, the ease of having everything in one place, a relevant selection of offerings, and a convenient shopping experience which includes comparisons, the buying process and delivery.
Shopping centre marketplaces
The shopping centres of today are still guided by these three basic principles – from your local shopping strip to the enormous Westfield, they’ve built an economy around ease, convenience and relevance for their customers.
Chadstone today is known as Melbourne’s “fashion capital”. It draws customers because it offers everything fashion, and it provides facilities that make it convenient; parking, access to public transport etc. So the shopping centre has now evolved from being a traditional marketplace into an experience centre.
Rather than purely a shopping destination, Chadstone boasts play areas, restaurants, convenience food and entertainment for everyone. For young families, Chadstone can become a day out.
And so other retailers are now asking themselves how they can become more than just a shop, to improve customer experiences and keep people in their stores for longer. For instance, Lululemon stores hold yoga sessions to build added value, a sense of community and extend time spent in store. The marketing director of Westfield might now consider themselves in the entertainment business, under the shopping category.
The future of shopping centres will likely extend beyond merely bricks & mortar. In this case, a marketplace strategy that facilitates third-party selling will be the way forward.
Classified ads once existed only in print. If you wanted to buy or sell anything, you went through the major newspapers who all had substantial classified sections. Those ‘rivers of gold’ underpinned the success of the newspaper.
The classifieds formed one of the two main revenue streams from newspapers, along with advertising. The American business Craigslist began as an email distribution list to friends of the founder Craig Newmark, advertising local events in San Francisco Bay area. Similarly, what is now a marketplace for virtually everything, Gumtree began as a classified site for property in London.
Publishers then leveraged major sections of the classifieds to create their own marketplaces for those categories, such as houses, cars and jobs. Hence the emergence of Zillow, Car.com and Monster.com. BikeExchange, the leading global marketplace for the cycling industry, also began as a classified marketplace and has gradually transitioned to a specialised marketplace. These classified marketplaces have become the one-stop destination for customers in their category.
From a listings-based classified marketplace, a few power players have built themselves into mega marketplaces.
Mega marketplaces are a prime example of ecommerce that provides everything for everyone and have largely been responsible for major innovation in the online marketplace industry. Back in its early days, eBay started as an auction house but has slowly pivoted to more of a marketplace and less of a personal auction site. Out of eBay, Gumtree, Craigslist and Amazon emerged.
Amazon is now the clear leader in this field because it has become “the everything store”, able to satisfy the needs of any customer. You can buy virtually anything you want from anywhere you want with ease, convenience and choice.
A major reason for Amazon’s success is the “membership experience” they created with the introduction of Amazon Prime, granting access to Amazon TV, the equivalent of Netflix, free and faster postage and discounts on Amazon products. The appeal of its added value means it is able to charge $100 a year to its 98 million members. It now underpins their business, and Amazon has created true value for their customers beyond the transactional experience offered by eBay.
Unlike mega marketplaces that aim to serve everyone’s needs, businesses can build a niche marketplace that allows them to own a particular category and be the first port of call for customers – a one-stop shop providing content targeted to the customer and a selection of curated products.
As a niche marketplace Airbnb has reinvented the accommodation category, evolving the notion of a short-term spare bed into worldwide coverage of the budget or luxury markets, both short term and long term. It competes with hotel-aggregating sites and brings together customers with private sellers, and has enabled a whole new income stream for those sellers.
Twelve years ago when BikeExchange was just an idea, more people were buying bicycles than cars. There were more than 800 different types of bike brands in the Australian market but the industry was highly fragmented. For a consumer looking to purchase a bike, it is a high-involvement exercise; the buyer is likely to spend time researching and looking for advice regarding model, make etc. We realised that a need existed for an online destination that provided service information, products and parts with the ultimate goal of becoming the one place to buy and sell everything bike. We wanted to transform the experience of buying a bicycle, and so BikeExchange was born.
The Marketplacer portfolio includes a selection of these niche marketplaces, such as Outdoria, the marketplace for “everything outdoors”, and TIXSTAR which is the “destination for events”. We’ve developed a thorough understanding of what it takes to create a niche marketplace – to be something for someone, rather than everything to everyone.
Out of the competition between mega marketplaces and niche marketplaces, we have seen a new model emerge: large niche marketplaces. The Myer Market is a prime example. An iconic Australian brand with 6.5 million fashion-oriented MYER One members, the Myer name comes with a sense of heritage and brand loyalty for Australian consumers. While Myer’s loyalty program helps drive in-store and online sales, the organisation has struggled to scale beyond their physical stores. But since launching their curated lifestyle marketplace, The Myer Market has been able to introduce 4 incremental categories, 200 new sellers and 30,000 new SKU’s to their range, courtesy of the marketplace’s dropshipping solution
As well as large niche marketplaces, Marketplacer has identified a huge marketplace opportunity for brands. In the past 10 years, some brands have created a degree of challenge for customers to buy from them.
In the car industry for example, brands have historically insisted that customers cannot buy online and must instead go in store. Part of this can be attributed to a lack of trust among their sellers. The maker wants to try to hold price; they fear cannibalisation of their retailers and dealers, which could ruin their brand equity.
Through our years of experience creating marketplaces, we have learned that if you can unite the buying experience it creates an attractive proposition for the customer. You position yourself as the place for your brand, an online destination where sellers can list their products, including what’s in their warehouse and what their retailers have in stock.
The customer has one destination for the brand and a seamlessly integrated buying experience, enabling them to browse products, find store locations, ‘click and collect’ in store or shop online and have it shipped to their house.
Out of this, brands are beginning to place greater value in their audience. Jayco, for example, traditionally just sold caravans. But now, through an affiliated partner, RV Parts Express, they’ve been able to provide one marketplace where interested customers can both browse for caravans as well as buy any accessories they could want for their new Jayco.
We know marketplaces
Without a doubt, the world of commerce is expanding and ever-changing. And one of the crucial things we have learned in our years of creating and implementing online solutions is that brands can turn – easily and successfully – into marketplaces and membership economies.
In our experience, car companies and other big brands are now aiming to unite their buyers’ experience and become the place for their brand, the one destination in their customers’ minds.
In reality, online marketplaces are really only just beginning to truly evolve. They were born through big technology businesses, and those continue to grow and change.
Through this evolution and our 10+ years of marketplace experience, we’ve worked to develop a methodology for marketplace success; we call it our “Platform For Success”. By using our platform, brands and customers can leverage our experience to accelerate 10 years in a day and create a world-class marketplace without the burden of creating the technology behind it.
Thinking about implementing a marketplace strategy?