With a 40% increase in online purchases, industry players are beginning to realize the importance of digital marketplaces in the new normal.
Brands looking to join a digital marketplace require smart decision making and partnership strategy. Global online purchases before COVID-19 generated over $2 trillion through digital marketplaces. From apparel to very niche markets, consumers are continuously searching to purchase online with over 60% of stores based in the United States. As industries continue to adapt to an online environment, they must strategize around their competition and begin to join forces to successfully access their full consumer base. McKinsey’s Moving Past Friend or Foe: How To Win With Digital Marketplaces walks us through the core characteristics of digital marketplaces today and what retailers must do to prepare and thrive in one.
Though digital marketplaces have been the buzz for the past several years, many brands are struggling to understand if and how to create a successful partnership with them. Both small and large marketplaces all have their trade-offs, but there are several characteristics that define the services they all have to offer along with core-characteristics that make them attractive to online brands. McKinsey’s Moving Past Friend or Foe: How To Win With Digital Marketplaces lists the forces shaping present-day digital marketplaces and their growth during the transition into the digital environment.
Marketplaces provide new channels for distribution and acquiring potential customers. Each brand must lay out their objectives in order to fully take advantage of their marketplaces and make smart decisions. These objectives can range from the purpose of entering a marketplace to whether or not it’s operationally feasible to handle the trade-offs of being a part of one. Brands can find marketplaces that either fit their current customer base or have the ability to expand into new ones. They can also decide on how to and how much they would like to interact with these end consumers.
Operational trade-offs almost always center around surrendering some degree of control to the provider. This can touch how price is performing with the current marketplace compared to how much a brand is currently selling their products for. Marketing and branding may have to change along with how a retail fulfills their orders. Especially with the new standard of speedy and convenient delivery, marketplaces must work with their sellers to choose the best type of fulfillment for their goods.
McKinsey starts off the road to success in a marketplace with a brand’s operational model. It boils down to making smart decisions centered around day-to-day operating activities and managing multiple partnerships to generate a streamlined process for the end customer. Brands who join marketplaces are creating roles centered around this – from e-commerce marketplace managers to marketplace-specific merchants. This line of work is more specialized compared to traditional account-management structures. Out of all industries, apparel is honing in on digital marketplaces faster than ever. Companies such as Anthropologie, Madewell and Urban Outfitters have already launched proprietary marketplaces and are looking to join forces with many other brands alike. If all goes well, according to McKinsey, brands, marketplaces and consumers should experience a three-way win. It’s a classic spread of value if brands are able to successfully access and thrive in a massive consumer base.
The operational success of retailers engaging in digital marketplaces all stem from developing the right objectives and being able to remain flexible as industries continue to evolve. We’ll see how many different retailers approach the marketplace arena and where it can possibly take them. The amount of opportunities brands can gain through marketplaces are endless as long they are able to play their cards right.
Source
McKinsey and Company. 06/18/20. Moving Past Friend or Foe: How To Win With Digital Marketplaces.