Marketplace Strategy Podcast by Onport- Ep.1 Introduction to Marketplaces



Aug 20th, 2020

We're launching our Podcast series on Marketplace Strategy to help you understand the Marketplace Business Model, and what are the different strategies and topics you need to address to run a successful marketplace. We will be able to share the experience we've had supporting +100 Marketplace businesses on top of our technology.

In this episode we are starting by giving an overall introduction to marketplaces:

  • What they are
  • How do they work
  • What they need to be successful

Our following episodes will touch more in depth in topics such as Shipping, Operations, Commercials, Finance, Technology and more, stay tuned!

Episode 1 - Introduction to Marketplaces

Amanda: Hi, I’m Amanda, Customer Success lead at Onport, and today we will be starting our new podcast format series on Marketplaces. As some of you may know Onport is a marketplace automation SaaS company, which enables a lot of the automation needed to run a marketplace, so we wanted to conduct a show where we talk about marketplaces from different angles, in order to help educate our customers or people wanting to pursue this business model.

We will be having these conversations with our Head of Operations Francisco, who will share some of his own personal experience and knowledge on the topic, and leveraging our relationships with over 100 marketplaces running on top of Onport’s technology.

Francisco, care to introduce yourself?

Francisco: Of course Amanda, and thank you for letting everyone know what the podcast series will be about, hope that together we can shed some light on the topic and further help anyone trying to be successful running this business model. So I’m Francisco, Head of operations at Onport, and I’ve always worked within the Marketplace space. Spent over 3 years working in Operations at Farfetch, the largest online luxury marketplace listed which is listed in the New York Stock exchange, saw it grow from around 500 workers to over 3000, and then moved to a start-up marketplace in the shoe industry where I lead Partner Acquisition, Partner Management and Supply Chain development, and that is where I got acquainted with Onport’s technology, and now here I am, hoping to help empower the marketplaces of the future.

Amanda: transition to questions: Thanks for the introduction Francisco! So as today is our first podcast episode, we will have a more generic discussion on marketplace operations, and will cover topics such as what are the advantages of having a marketplace and what is needed to run a successful marketplace. So Francisco - as you are experienced in the marketplace space, would you mind starting by giving a brief explanation to our listeners of what is a marketplace?

Francisco: A marketplace is a place where different sellers display their products or services catalogues and a place that allows customers to buy from them. Products are typically shipped directly from the Vendors to the end consumer, and the Marketplace operator takes a fee or commission from the sale.

Amazon is the most well known Marketplace for their wide range of products, while Uber and AirBnB are service marketplaces, pooling together homes for rental or car drivers, to provide a service to the end consumer.

Amanda: I think most of us are familiar with marketplaces such as Amazon, although working in the industry now has shown me that there are all sorts of marketplace models, as businesses of all sizes enter this market. What would you say are the biggest distinctions that exist within marketplaces?

Francisco: Besides the big difference between providing services or providing products, marketplaces also differentiate themselves on how open they are to Vendors coming onboard. One on end you have Ebay which allows pretty much everyone to sign-up and start listing items up for auction, this is what you’d refer to as a two sided marketplace, as it is very open and easy for Vendors to come onboard, and on the other hand you’d have a Marketplace like Farfetch, that carefully selects the networks of partners and brands that fit their offering and target customer, which you’d call more of a Curated Marketplace.

Amanda: Thanks for explaining the difference Francisco. I read on Retail Dive that marketplaces are expected to grow by 100% in revenue share over the next couple of years. Why do you think marketplaces work as opposed to more traditional monobrand ecommerce stores?

And why a Marketplace? Why do they work as opposed to more traditional monobrand ecommerce stores? Why are marketplaces expected to grow 100% in revenue share over the next couple of years?

Francisco: Well, it’s all about what is best for the consumer. There is definitely still a place for monobrand ecommerce stores, but the implication is that the consumer has found your brand and loves your products, but that’s precisely where Marketplaces take the lead.

By aggregating supply that is relevant for their target, they are allowing consumers to easily discover new brands and new products. A customer has a particular style, lifestyle, values, and if the Marketplace speaks to that, he’ll be able to connect and relate to their offering, and trust that the marketplace somewhat represents or mirrors some aspect of their personality, which is essential to consumer’s more and more demanding buying behaviours nowadays.

A lot of things in a supermarket are vegan, but wouldn’t it be much easier for a Vegan to buy at a Vegan supermarket where he doesn’t need to read every label? If you’re looking for a green dress, would you rather visit 10 different websites from the brands you like, or visit 1 website that joins all of those brands together, and you can simply use filters to check all of the green dresses available and choose the one that you like best. Those are the sort of customer dynamics that play a strong role in the success of Marketplaces. It facilitates the discovery, browsing, and hopefully the purchasing experience, as you can also order multiple items from different vendors in a single checkout.

Amanda: As a consumer, that makes a lot of sense. When I think about where I like to do my online shopping, say for clothes, all my favorite sites, such as Asos and Urban Outfitters are marketplaces. It’s just usually more convenient to shop from one site, rather than having to visit and place individual orders at each brand’s site. I also notice that there are more and more small businesses that have started marketplaces now, as it seems to be an easy way to attract customers and grow revenue. What would be your top tips to any listeners that are looking to start a successful marketplace?

Francisco: If I had to summarize the 3 main characteristics of a successful marketplace, those would be:

1 - Targeted - know who you are, what you are selling and to whom you are selling

There’s only room for a handful of Amazon’s in the world, and as wide of a product assortment they have, they can’t sell everything unless they make strong changes on how they approach each category. I think luxury yet again stands out, a very few people would buy a brand new Louis Vuitton bag on Amazon, their marketing, positioning, understanding of the product, does not speak to the type of consumer that is looking for such a statement piece. So find your place in the market, understand the group of customers you want to attract, bring in the supply that is relevant for them, and speak their language

2 - Marketing - find your audience. We see too many marketplace startups fail because they neglect such an important component of marketplaces, and ecommerce in general. You need to reach your target audience, there are plenty of ways to do it which we can discuss in another session, but the most blatant one we often see being left out is paid Marketing. It may be tough to consider investing more money into your business, you’ve probably already spent some to get to where you are, but if you are serious about making it a proper sustainable business, you need to test and learn with paid marketing. Google and Facebook Ads are definitely the priority when starting out, test, test and test until you are able to find a positive return on your ad spend.

3- Great customer service & order experience

Providing the best customer service will build trust with potential buyers, leading to higher conversion and combining that with a great order experience, low cancellation rates, speedy fulfillment and transit times, tracking information updated at all times, plentiful shipping and delivery options, and a wonderful unboxing experience will keep your customers very satisfied and coming back for more. Not only will they become repeat customers, they are also very likely to talk about your marketplace to friends and family that share common interests, essentially doing free and very targeted marketing on your behalf, so make sure to keep your customers happy :)

Amanda: So a targeted focus, good marketing, and excellent customer experience will set a marketplace for success.

Well thank you so much for going over the general topic of marketplaces and giving us your insight and tips on operating your own marketplace. I’ll be happy to dive in and explore some of the major topics that come up whenever I have discussions with new and existing marketplaces, such as shipping, commercials, marketing, orders, and of course returns! Looking forward to going over these in depth with you in our next episodes. Thank you again Francisco, and to our listeners - if you have any questions or specific topics you’d like us to cover in future episodes, leave a comment down below. Thanks

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