“Over 50% of the gross market value for the top six ecommerce players in the world is on marketplaces,” Colin Lewis, CMO of OpenJaw Technologies and author of Econsultancy’s Third-Party Marketplaces Best Practice Guide, told attendees at Econsultancy Live this week.

Despite the continuing domination of big retailer.com sites, and the rising trend for direct-to-consumer brands, “The bit that most people don’t realise,” said Lewis, “is that ecommerce is, pretty much, mostly marketplaces.”

So, how can marketers grasp the marketplace opportunity? Here’s a run-down of Lewis’ strategic advice, including the benefits of marketplaces and how brands can win on them.

Marketplaces are rapidly growing

The Covid-19 pandemic has contributed to the acceleration of marketplaces, helping Amazon’s gross market value to grow 40% in 2020.

“It was already huge at $200 billion, but it grew to $300 billion in just one year,” explained Lewis. “The marketplace part of Amazon is 62% of total sales and is the fastest growing area of anything that Amazon is doing.”

This growth can be explained in the context of wider societal trends, “such as entrepreneurship and cross-border shopping, and the gig economy, and so on.”

As well as niche marketplaces such as sneaker-focused StockX, Lewis suggested that the success of Amazon-only brands has spurred on other big retailers to invest in this area. “Walmart, Kroger, Carrefour… they all have their own marketplace,” he said.

Reasons to be present on marketplaces

So, what are the major benefits of marketplaces?

“First of all,” explained Lewis, “no matter what way you look at it – in particular Amazon, but I know this is the same in many other markets around the world with local marketplace brands – Amazon is the default product search engine.”

Lewis cited Nike as proof of this fact, with search volume for Nike on Amazon staying more or less the same even though the brand stopped selling on Amazon two years ago. Searches remain high due to the third-party sellers who are selling the brand on Amazon. Consequently, this shows that “decisions by Nike or Amazon do not appear to have any influence on what customers search for.”

Lewis continued with nine more reasons to look at marketplaces:

  • Access to customers. Be where the customers are.
  • Cross-border. Ease of access to international markets through local marketplaces.
  • Product discovery: Shoppers search for products, not brands.
  • Search engine: More product searches start on Amazon than Google in the US (74% of US in one survey)
  • Compete and win against big brands.
  • Discovery through advertising: “customers who viewed this item.”
  • Better customer data: brands can study competitors’ pricing, and get direct feedback from consumers through ratings
  • Time to market. Brands can spend years trying to get a meeting with a real buyer. On marketplaces, they decide to do it themselves.
  • Access to fulfilment services. E.g., Fulfillment by Amazon (FBA) or Alibaba’s Cainiao. Brands don’t need to set up their own fulfilment infrastructure.

Finally, there is the fact that marketplaces have their own loyalty programs, such as Amazon Prime. “You will be using FBA, customers will automatically see your products, you’ll get better search ranking which can give you more new customers which will give you more reviews, and you can take part in Prime Day. These loyalty programs are very, very powerful,” Lewis said.

How to win on marketplaces

The benefits are clear, but what can brands do to win on marketplaces?

Go global, regional, or local

“The first decision is do you want to go for a global marketplace like Amazon or eBay, or do you want to go for one that is heavily focused on a region, such as Lazada in South East Asia or Mercado Libre in Latin America?” asked Lewis. “Or, you can go super local. For instance, Allegro has already got 20 million users, based out of Poland.”

“Although you’ll hear me talk about Amazon, many of the things I am talking about are directly applicable to these other brands, because everything they see Amazon doing, they apply to their own individual marketplace. I’ve recently come back from the middle east and it’s not Amazon that matters, it’s Noon and Talabat.”

“The second thing to do,” Lewis suggested, “is to work out [some] things in advance.” In summary, these things are:

  • Commission: What percentage does the marketplace charge?
  • Initial deposit: Is there a deposit required by the marketplace?
  • Subscription fee: What is the annual cost of operating on the marketplace?
  • Brand enhancement: Is there rich A+ content, or branded store front?
  • Customer fulfilment support: Does the marketplace offer delivery to customers? Cost?
  • Payment: Does the marketplace facilitate payment using a number of solutions?
  • Advertising: Does the marketplace have an advertising proposition to help discovery?
  • Data and insight: Does the marketplace give sales performance and other data?

Optimising content and winning the Buy Box

Further to these points, Lewis stated that it is vital “you understand how customers shop online.” To do this, he suggested, “for your particular product category and for your particular brand, go into your chosen marketplace and put the words in – you can work out what the customer sees.” Then, “get your content ready for the product pages.”

“The quick things you need to know,” he continued, “[are that] the product title is the most important piece for search rankings, so it’s key to check the usage of keywords that customers are using.” Meanwhile, other information should be “very specific, very features and benefits-focused”, and “you need multiple photos from multiple different angles, and ideally a video.”

The Buy Box is another area to consider when selling on marketplaces. As Lewis explained, the Buy Box is “an algorithm that recalculates the highest-ranked seller based on their performance every time that product is searched for.” Amazon picks the winner based on various factors such as high seller performance, competing price point, availability, and delivery options. So, Lewis said, “if you are on FBA or Prime, you have a better chance of winning the Buy Box. If you are cheaper, you have a better chance.”

Advertising, A+ Content, and customer reviews

“The advertising that Amazon and a lot of other marketplaces are doing is super powerful,” he continued. “Amazon’s advertising business is growing $5bn a quarter.”

So, what type of advertising is worth investing in? According to Lewis, Sponsored Products is still the most popular, accounting for around 80% of all advertising on Amazon, while Sponsored Brands is less so but still useful. Interestingly, he said, “Video Ads is rarely used, so that is one of your opportunities. Everybody I’ve talked to has said that Video Ads is getting much more results for them than they did years ago and there is a lot less competition.”

Second to advertising, A+ Content is also a worthwhile tool. “It’s quite detailed, so you’ve got a lot more visuals, a lot more material to play with. I highly recommend that you do Amazon A+ Content. It’s free… you can give a lot more content that helps the customer make the decision.” In conjunction with this, Lewis also recommended using Amazon branded storefronts, which is “their way of trying to do the direct-to-consumer stuff.”

Finally, “on winning on Amazon,” said Lewis, “it’s super important to get across this idea of customer reviews.” This is particularly the case in comparison to some of the aforementioned factors like the Buy Box, which is tricky to win.

By contrast, “not only do [reviews] give the customer a better idea of what to expect, but Amazon uses them as part of its algorithm,” said Lewis. “As a result, they lead to increased conversions and increased basket size. They’ve got a very specific process listed on the Amazon Seller Central website, and I highly recommend you follow those to a T.”

“If you want to win on Amazon, ratings and reviews (and having a strategy around ratings and reviews) are super important.”

Quick Guide to Ratings and Reviews

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