Democratization of Retail and the Rise of Global Marketplaces

Democratization of Retail and the
Rise of Global Marketplaces

Retail is Changing
Retail is changing…fast. As unified commerce is becoming the norm, processes become increasingly
complex. Retail is democratizing as consumers have full access to the prices, stock levels and offers of
retailers, and can control where and when they buy.
One of the most popular new channels are marketplaces. They have proven honeypots for the all-
powerful consumer with low prices and excellent service. Marketplaces have grown at rates never seen
before and appear to beat retailers on any turf, be it supply chain, assortment, conversion, customer
service or delivery.
This position paper discusses how retailers can collaborate with marketplaces while at the same time
strengthening their own position and competing with them. We’ve laid out the critical building blocks to
help transform your organization in our new world of democratized retail.
Feedback and ideas are always welcome.
Best regards,
© 2016 Demandware and Ecommerce Europe.
All Rights Reserved by their Respective Owners.2
Jorij Abraham
Managing Director
Ecommerce Foundation
Rob Garf
VP of Industry Strategy and Insights
Demandware

Agenda
•  Democratization of Retail 4 - 12
•  The Rise of Global Online Marketplaces 13 - 19
•  How to Collaborate with Marketplaces 20 - 27
•  How to Compete with Marketplaces 28 - 34
•  Conclusion 35
Topic Pages

1995
Shopping was Linear and Simple
As recently as 1995 consumers had a limited number of shopping destinations and choices. As the internet
emerged, retailers primarily managed established store and catalogue operations.

It’s Now Fragmented and Complex
2015
Today, consumers interact with nearly four physical and digital destinations during every shopping journey.
The path has become fragmented for consumers and operations have become complex for retailers.

Exponential Rate of Retail Disruption
Source: Democratization of Retail. © Copyright 2015. Demandware, EKN, Li & Fung.
The scale and rate of change in retail is massive. This unprecedented disruption has given consumers more
access and control than ever. Retailers must embrace this reality and build sustainable advantages.

Connected consumers dictate and control the terms of retailer engagement. Retailers must extend unique
brand experience beyond their physical and virtual four walls to wherever and whenever consumers demand.
Retail Has Become Democratized

New Paths to Purchase Emerge
Channel Retailer
Consumer
Channel RetailerConsumer
Traditional
Journey
Distributed
Journey
Retailers use engagement channels to PULL consumers to brand site
Retailers PUSH commerce directly into engagement channels
Democratization of Retail shifts
engagement from Pull to Push
In the evolving democratized model, the conversion funnel pushes forward to the point of engagement --
distinction between marketing and commerce is blurred in the intermediary channel.

New Currencies Emerge
A new set of capabilities – or currencies – are required to compete as marketing and commerce merge.

DisruptionandImpact
3-D Printing
Smart TV’s /
Entertainment Consoles
Micro-Location
Sensing
Consumer Wearables
Internet of Things
Low High
High
Commerce Adoption Rate
Messaging Platforms Social Networks
Mobile Payments
Web Browsers
Marketplaces
Commerce is Distributed into Channels
Transactions are increasingly occurring directly within what were historically marketing channels. Retailers
anticipate significant revenue growth embedded in social networks, messaging platforms, and marketplaces.
Search Engines

Marketplaces are a Critical Channel for Many
Producer Wholesaler Retailer Consumer
Source: The Rise of Global Marketplaces. © Copyright 2015. Ecommerce Europe..
Marketplaces have become an intermediary (akin to department stores of yesteryear) wedged between
buyers and sellers. Other media – like social and search – have entered the lucrative battleground.

The Rise of Online Global
Marketplaces

Most Countries have a Dominant Marketplace
Players Share
Arg CDMarket, Movistar 5%
Aus eBay, Coles, Woolworths 34%
Bra B2W Digital, Cnova 36%
Can Amazon CA, Costco CA 9%
Chi Alibaba, JD 80%
Den CDON, Coop 17%
Fra Groupe Casino,Vente-Privee 20%
Ger Amazon DE, Otto 55%
Ind Flipkart, Snapdeal 25%
Players Share
Jap Rakuten Ichiba, Amazon JP 40%
Es Amazon Spain, eBay Spain 20%
Net Ahold/Bol.com, Wehkamp 20%
Pol Allegro Market Place 50%
Rus Ulmart, Wildberries 10%
S.K. Lotte Shopping, Emart 9%
Swz Digitec, Amazon DE 14%
UK Amazon UK, Argos 28%
USA Amazon, Apple 28%
Source: The Rise of Global Marketplaces. © Copyright 2015. Ecommerce Europe.
Most countries have one or two leading players that have 20% or more of the market share. Amazon is the
leader in the United States while Alibaba and JD.com are the leaders in China, with nearly 80% market share.

Marketplace Growth Outpaces Online Sector
$18
$12.5
$8.4
$0.557
$66
10
20
30
40
50
60
70
80
90
100
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
AnnualRevenue
Year
Amazon
eBay
Facebook
Alibaba
Mercado Libre
Google
Annual revenue in billions of U.S. dollars
Marketplaces have grown spectacularly. Amazon is leading the way in “owned” revenue but Alibaba is bigger
than Amazon and eBay combined, if you consider the market volume being traded on the platform.
$89

Many Marketplaces Walk in Parallel
1998 Introduced
Amazon.co.uk
and Amazon.de
CDs, DVDs, Gifts
1996
Establishment of
Amazon.com
2000 Marketplace is
launched as well as
Amazon.co.jp & .fr
1997 Partnership
with Yahoo! and AOL
One millionth order
2007 Launch of Amazon
Payments
2009 Acquisition of
Zappos.com
2015 Launch
Amazon
exclusives
2002 Launch of
Amazon Web
Services
2004 Express Shipping
2005 Amazon Prime
& Kindle
2003 Launch of
Taobao.com
1999 Establishment
of Alibaba
2001 First 1 million
registered users
2004 Launch of
Alipay
2008 Launch
of Tmall
2005 Partnership
with Yahoo!
2009 Launch of AliCloud
2010 Launch of AliExpress
2014 Biggest
IPO ever of
$25 billion
1999 Establishment
of MercadoLibre
2001 Partnership
with eBay
2007 First IPO
of $400 million
2008 Acquisition of
Classified Media Group
2002 Acquisition of
Lokau.com
2005 Acquisition of
Deremate.com
Many marketplaces grow in similar ways. Developing their own fulfilment network, payment infrastructure and
expanding aggressively by acquisitions is a common expansion strategy.

Marketplaces are Booming Because They…
•  Create a flywheel effect:
-  Broad selection = higher conversion
and basket size
-  Extreme convenience = customer
retention
-  Lower prices = economies of scale
•  Operate on a global scale
•  Move quickly (fail fast), continuously
innovate and optimize processes
Why are marketplaces growing so strongly? Mostly because they are able to drive a flywheel of
complementary elements. They offer a huge assortment at low prices and excellent customer experience.

Fashion: Buys exclusively, in for $1B to add
luxury goods to its online marketplace
Intelligence: Partners with Acxiom to provide
personalization and targeting capabilities to
advertisers and merchants
Private Label: Launches Pinzon for private
label soft-lines products
Delivery: Invests in Lyft, Singpost, KXTX, and
others to expand last-mile delivery capabilities
Assortment: 17 main categories, 124
subcategories and 320 million SKUs in U.S.
Price: Adapts 2.5M million prices a day
compared to 50K times per day by Walmart
Marketplaces Compete on All Fronts
Marketplaces are no longer just for commodities, but are often a curated destination that operate and feel like
digital specialty boutiques.

Marketplaces Continue to Gain Market Share
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
at least 10% at least 25% at least 40% at least 50% at least 60%
Marketplace Market Share by 2020
Source: The Rise of Global Marketplaces. © Copyright 2015. Ecommerce Europe. N = 274.
Based on a survey of 274 retail managers and executives by Ecommerce Europe, they expect marketplaces
to have a sizable share of the digital market by 2020.

How to Collaborate
with Marketplaces

Why Collaborate with Marketplaces?
•  Increase sales:
-  Increase local customer reach
-  Expand internationally to new markets
•  Test (new) products in (new) markets
•  Improve operations:
-  More targeted advertising
-  Sell surplus inventory
•  Leverage scale and infrastructure:
-  Fulfillment
-  Payment
-  IT & Big Data
Marketplaces can help retailers by providing a scalable technical and operational infrastructure to grow into
new channels and geographies in a cost-effective way.

Five Key Ways to Successfully Collaborate
1)  Leverage for Geographic Expansion
2)  Ensure Discoverability and Customer Acquisition
3)  Utilize the Scale of the Marketplaces
4)  Automate Data Synchronization
5)  Utilize as Liquidation Channel

1. Leverage for Geographic Expansion
Use the power (trust, traffic and relationships) of marketplaces to expand internationally with lower costs and
risks than what is typical for a nascent business (i.e. no website, no local staff, less translation costs).

2. Ensure Discoverability & Customer Acquisition
Being present on marketplaces is only a first step. Being found is the next hurdle. At Amazon you need
to get into the “Amazon box.” On eBay and Alibaba, being at the top of the list is what counts.

3. Utilize the Scale of Marketplaces
Fulfilment by Amazon
Delivery via Google Express
Payment with Alipay
Due to their size, marketplaces have a huge advantage in economies of scale and scope. Leverage their
services in areas that aren’t core to your business to focus on unique and competitive advantages.
User Identification

4. Automate Marketplace Management
•  Products
•  Images
•  Prices
•  Inventory
•  Orders
Direct Interfaces Global Players
…………….
Local Players
No individual marketplace has global reach (yet). It’s imperative to establish scalable and repeatable
processes, and supporting infrastructure, to synchronize enterprise data across multiple platforms.
Open APIs

5. Utilize as Liquidation Channel
Returned Goods
Damaged Goods
Overstock
Margin erosion due to excess inventory remains an Achilles heel for most retailers. Marketplaces provide a
platform to sell overstock, damaged goods and returned merchandise while maintaining brand image.

How to Compete
with Marketplaces

Five Critical Ways to Successfully Compete
1)  Focus on Value
2)  Create Smart Alliances
3)  Leverage Your Stores
4)  Fuse Commerce, Content & Community
5)  Build a Love Brand

1. Focus on Value
Price
Convenience
Assortment
Service
Shopping
Experience
Setting the lowest price and
giving out different kinds of
promotions
Offering unique shopping experience with
online tools, e.g., design your own
products
Providing personal service,
detailed product information,
offering the possibility to interact
directly with experts
Minimizing friction, e.g., by
having a lot of products in stock,
and many payment &
delivery options
Selling a broad assortment with various models and
editions, e.g., following seasonal changes to be on-trend
Source: Spark Optimus
Discounting to match Amazon’s aggressive prices is a race to the bottom. Amazon changes 2.5 million prices
daily to be the most price competitive retailer. Retailers must focus on value to avoid being commoditized.

2. Create Smart Alliances
Purchasing Power
Platform
Delivery
Payment
Loyalty
Data Analysis
Join forces with other complementary businesses to build economies of scale and scope with sole
dependency on marketplaces. Cloud providers offer a more effective way to innovate and integrate.

3. Leverage Your Stores
Experience Center: Media Markt Service Center: Xiaomi Service Store
Pick up point: Jumbo Meeting Point: La Place – V&D
While pundits declared the death of the physical store, the industry has experienced a renaissance in brick-
and-mortar. Innovative retailers have leveraged locations for showroom, distribution and service centers.

4. Fuse Commerce, Content & Community
Commerce
CommunityContent
• Shoe Finder
• ‘Switcheroo’
• Order Lookup
“Delivers the best
performing products the
game has ever known”
•  Online Forum
•  Product Testing
•  Brooks & Events
•  Blogs
•  Running Tips
•  Social Media
Genuine and authentic content helps shoppers identify with the brand and provide product information to
accelerate their path down the purchase funnel. Leading retailers mash together content and commerce.

5. Build a Love Brand
Most marketplaces are analytical machines without feelings. Retailers can distinguish themselves by
leveraging consumer profiles and preferences to drive personalization and build emotional relationships.
Transactions
Implicit Data Explicit Data
Traffic Patterns
Address
Email
Phone NumbersBrand Affinity
Product Attributes
RFM
Payment Methods
Date of Birth
Device Usage
Price Sensitivity
Service Notes
Loyalty Status

It is Still Day One of the Internet
As retail continues to become democratized, it’s imperative to not only enhance owned-and-operated
channels but to also utilize third-party channels, particularly marketplaces, to extend brand and reach.

Democratization of Retail and the Rise of Global Marketplaces

Recommandé

Recommandé

Contenu connexe

Plus de Demandware

Plus de Demandware (20)

Dernier

Dernier (8)

Democratization of Retail and the Rise of Global Marketplaces