Online marketplaces are in focus again, so we caught up with Pivot International’s Neil Tunbridge to consider the key issues surrounding this e-commerce route to market.
The recent decision by the UK’s largest retailer, Tesco, to close down its Tesco Direct website shines a focus on online marketplaces yet again, with industry commentators suggesting it was destined to fail in the ever-widening shadow of Amazon.
But the online marketplace world is far broader than Amazon, Alibaba and eBay, the market leaders, with many specialist sites and geography-specific platforms going from strength to strength – and planning to grow further in the months ahead.
There have been some intriguing developments in recent months, with Walmart setting the wheels in motion to purchase India’s Flipkart – just years after acquiring Jet and in the wake of Amazon expanding into the Middle East with a $580 million acquisition of Souq in 2017. And luxury fashion marketplace Farfetch has secured some key partners in 2018, such as Burberry and Harvey Nichols, further supporting its reputation as a prominent 21st-century retail player.
Each marketplace runs in its own way, with its own individual commissions or fee structure for partner brands and retailers. Some have more sophisticated technology and distribution networks than others, and companies looking to sell their wares on them will notice the nuances between them. It really is a case of retailers and brands finding the one (or a combination of several online marketplaces) that suits them.
As part of a special focus on online marketplaces, Retail Connections poses some questions to Neil Tunbridge, co-founder and director of Pivot International, an e-commerce agency focused exclusively on online marketplaces. Tunbridge, who used to work with UK Trade & Investment (UKTI) (now known as Department for International Trade (DIT)), has long worked in the sector and has insider insights into how it operates and what the future holds.
Retail Connections: What are the key technology elements all retailers and brands need to consider when launching on online marketplaces – and how much should they arrange themselves compared to what they leave to the marketplace to organise?
Neil Tunbridge: There are some obvious basics that need to be in place such as having your product data in a usable format and also having an appropriate suite of digital assets that can be used at either brand level (lifestyle shots, brand logos, etc) or more simply some product pack/lifestyle shots for each style/SKU that you will be selling.
I appreciate that these aren’t really seen as core technology assets, however they are absolute requirements for a retailer or brand to be able to list and sell on a marketplace. In the same way that a physical store will need to have physical products that customers can buy, a digital store will be required to have the necessary digital merchandise. That aside, I wouldn’t say there are not any other ‘must haves’ from a technology perspective, although there is an almost endless supply of ‘nice to haves’. The key thing to remember is that marketplaces can solve a myriad of questions, from testing new markets, to testing new products, to offering discount channels, off-season channels, bulk sales, and many other things, all of which can be used to the retailer’s advantage depending on their needs.
Most marketplaces also do a significant amount of heavy lifting for you – from product integration, marketing services, warehousing, shipping and returns management (not in all cases), translation, etc.
To what extent do you see ‘challenger marketplaces’ chipping away at Amazon, Alibaba and eBay’s dominant market share in this space – the likes of Wish and Newegg, for example?
Without wanting to rely on the over-used stat of 40% of all e-commerce taking place on marketplaces by 2020; marketplaces do continue to drive significant growth. As such, we tend not to consider or talk of Amazon alternatives as challengers or competitors, and instead simply consider them to part of an ever-growing and maturing global e-commerce offering.
There are very few that don’t have (or didn’t start out with) a core USP (Amazon started in books, Newegg started in tech, Tophatter started as an auction-only discovery site and Farfetch targeted small independents) so I see these variances as differentiation and not as a the little man’s attempt to chip away at Amazon. Consequently, I don’t see those with a core growth trajectory as trying to chase Amazon (although Walmart may disagree) as much as they are trying to carve out a wider niche and strive to always be better at what they do.
Why do you think some retailers are still reticent to use online marketplaces, and what’s your message to them?
This will be an incredibly biased view obviously, but unless you have a fundamental reason not to trade on them (i.e. your product category isn’t accepted, or you’re in a product category that isn’t yet successfully growing on marketplaces) then I really don’t see why you wouldn’t.
There are very few obstacles to overcome and if undertaken sensibly and knowledgeably it is relatively easy to put a steady, risk-averse expansion strategy in place, without any huge CAPEX or OPEX costs. Additionally, because all costs are easy to plan for and accounted for, any investment in human capital can deliver a measurable ROI very quickly.
For those in the UK who are cautious then simply look at English-speaking platforms to start with of which there are many (in Australia, New Zealand, South Africa, India, Middle East, US, Canada to name a few). If you’re worried about shipping, don’t be – costs are transparent, usually pretty low and with a bit of research can be easy to use, and if you don’t know what to do then simply ask someone who does. There are very few people in this industry who are precious and nearly everyone will share experiences and stories.
You used to work at UKTI (now DIT) – how important are online marketplaces in terms of the work the UK government is doing to promote British brands abroad?
Its been a while since I was working with them, however we were fortunate to have some of the team join us at our recent Newegg Seller Summit as part of London Tech Week and they shared some interesting updates on the work they have been doing recently as part of their e-Exporting Programme, and I think your use of the word “promote” is quite pertinent.
DIT is leveraging its global marketplace relationships to allow the government to surface UK brands on marketplaces globally via local onsite marketing campaigns. They do this for several reasons, but primarily they’re allowing brands and retailers to short-circuit the traditional route to market and helping them build international brand interest on marketplaces. I’m sure this has changed since I was working there, however there was an oft-used saying in DIT that went something akin to ‘if our SMEs exported to the same level or the same % of our revenue was export-orientated to that of our German counterparts then we would have no trade deficit’.
A pithier version probably exists, but the fact remains that as an island nation we’re notoriously poor at building exporting into our company growth strategies, something that DIT is working hard to alter.
Overall momentum seems to have been building for a while now, but some marketplaces have fallen by the wayside, what landmarks are in store for the online marketplace sector in the year ahead?
I certainly think we’ll continue to see a bit of M&A as more and more platforms look to make some land-grabs at home and/or in emerging markets and categories – think Walmart in India with Flipkart, or Amazon/Souq & Noon/eBay in the Middle East. I think we’ll also see more digital tie-ups and collaborations, akin to the M&S/Microsoft one or the Google/JD.com one announced in June.
You’re right, though, there have been a few casualties recently and I think that this proves that e-commerce isn’t having everything its own way and in the UK at least, being digital and online doesn’t guarantee success over the high street.