Brands and marketplaces: The relationship that can't be ignored

Brands and marketplaces: The relationship that can't be ignored

After responding to the rise of ecommerce and social media, plus the changing high-street landscape, brands are once again evolving in line with millions of customers, who are overwhelmingly turning to marketplaces for their retail needs.

In the early years of Twitter’s existence, very few brands considered it a viable way to meet specific consumer demands. In 2019, it’s used by thousands of companies as a primary means of communication.

Now, brands are once again evolving in line with millions of customers, who have overwhelmingly turned to marketplaces for their retail needs.

Since its inception in 2006 as a microblogging service, Twitter has morphed into a social media giant with 330 million active users; what was once a means of recording day-to-day lives has turned into a key marketing channel for thousands of companies, with many putting it at the heart of their brand strategy.

When looking at the changing relationship between brands and marketplaces, parallels with Twitter’s evolution cannot be clearer. Brands have long been wary, and cynical, about marketplaces. Many initially viewed them as glorified jumble sales, and in the early stage of their existence, this was a fair perspective to have.

However, marketplaces have now entirely reshaped the ecommerce landscape and, just as Twitter has changed the way people communicate online, marketplaces have fundamentally changed the way consumers shop.

Big businesses leading the way

Until recently, the common belief shared by the majority of brands was that selling via marketplaces would weaken brand identity, affect the legitimacy of their offering, and ultimately surrender control of the customer to a third party. Although some of these are understandable concerns, brands are now having to weigh them up against the countless benefits that come with trading via marketplaces.

A recent UPS survey found that 96% of US and Europe consumers shop on marketplaces. It’s higher still in Asia, where 98% of customers use them. Brands are now waking up to the realisation that they need to be where the customer is and, as such, marketplaces are fast becoming an integral part of their growth strategy.

BMW was one early adopter, launching its BMW Direct store on eBay way back in 2011. The brand understood there was an existing, yet untapped, customer base searching for its products on eBay, but it couldn’t access them. BMW is a clear example of a leading global brand which has a successful marketplace strategy as an integral part of its broader ecommerce model, and now sells across multiple marketplace channels, including a branded store on Amazon.

BMW's presence on Amazon UK.

Another standout example is Nike, the world’s biggest sports brand, which decided to launch its brand directly on Amazon.com as part of a pilot initiative in 2017. Rather than a desire to capitalise on the huge traffic levels, Nike’s decision was driven primarily by a desire to re-exert control over its brand, as thousands of Nike items were already being sold by third parties on the site.

Nike ended this pilot program in late 2019, but its two-year commitment to the platform proved that even the world’s most recognisable sports brand could no longer deny the power of marketplaces.

These powerhouse brands are certainly not alone. A recent survey by Feedvisor found that over half of US brands are selling on Amazon and over 80% of these are looking to expand to other third-party marketplaces.

Indeed, an increasing number of companies are shifting their entire ecommerce offering to a marketplace-led model. A good example is the long-established Hallmark, which has a non-transactional UK site that directs customers to its branded Amazon store.

A change of tack

Brands that previously exhibited reluctance to explore marketplaces are now looking beyond outdated perceptions and facing up to the reality they need to use them to succeed in the long term. Ultimately, they have little choice. In 2018, the top 100 marketplaces sold $1.66 trillion in merchandise globally, accounting for over 50% of global web sales. This figure is up 19.6% from the previous year, and shows no sign of slowing.

Accelerating this growth is the fact that major marketplaces are working hard to remove the last remaining barriers to adoption by brands of all sizes and offerings. For example, Amazon now offers an array of brand-building tools and services, with a large degree of success. These include Amazon Brand Registry, which is designed to help sellers protect, control and promote their brands, as well as the recently launched Transparency program, an item-level authentication service aimed at preventing counterfeit products.

Hallmark's Amazon-only marketplace store in the UK.

Asian competitors are also taking note, specifically in the ways to attract investment from Western businesses and consumers. Earlier this year, Tmall Global unveiled key initiatives aimed at supporting brands of all sizes to enter the Chinese market and access the company’s 307 million active buyers.

Tmall Overseas Fulfilment is a new solution for brands that want to test their products on the largest cross-border platform in China. Additionally, the marketplace launched an English language website aimed at expediting the process for brands looking to introduce their products to Chinese consumers, further removing the hurdles that once prevented brand entry into the market. Indeed, the marketplace plans to bring in $200 billion worth of branded goods into China over the next five years.

There for the taking

While it’s true to say the customer is the major factor driving brands to marketplace selling, marketplaces themselves are catering to business requirements in order to accelerate and facilitate uptake.

The leading players across the world now offer the infrastructure, reach and scale for brands to grow and develop their entire offering. Every major marketplace is launching payment models, warehousing options, fulfilment services, advertising solutions and even lending opportunities for selling partners, giving them all the more reason to work with them.

Those remaining businesses resisting these undeniable positives of marketplace selling simply need to remember that, as was the case with Twitter, they need to be where their customers are.

In other words, they know they can’t beat them, so why not join them?

Learn more about the incredible opportunities that marketplaces can provide brands by [downloading our State of Marketplaces Report**](https://www.shiftmagazine.com/reports/the-state-of-marketplaces-report.html).**

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