For Brands, Online Marketplaces Beckon, but Pose Challenges

These platforms often compete on pricing (and little else)

Author: Krista Garcia

May 18, 2018

The explosion of online marketplaces run by Alibaba, Amazon and eBay has given brands opportunities to reach new consumers and test ideas, but brand marketers worry about potential consequences of the new retail model.

According to a Q2 2018 survey by the CMO Council, a majority of brand marketers worldwide (56%) think retail is being reinvented by marketplaces. Many also agreed that marketplaces are forcing brands to rethink every aspect of how they go to market.

A change this disruptive naturally causes concerns. No. 1 by far is the potential for conflict and cannibalization of traditional retail channels (50%). Less worrisome—but still important—are concerns about counterfeit product sales (32%), and privacy and protection of customer data (32%).

Although some brands have avoided marketplaces, the channel has grown too large to ignore. A recent Coresight Research study cited Juniper Research data estimating that global marketplace revenues were $18.7 billion in 2017 and will more than double to $40.1 billion by 2022. This growth is being driven not just by the big three marketplaces, but also by sharing economy sites like Airbnb and Rent the Runway. 

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For consumers, the allure of marketplaces is strong. A July 2017 survey by business-to-business (B2B) service provider Clutch found that more than twice as many consumers preferred to shop on online marketplaces as retail sites (69% vs. 31%), primarily because they could compare prices easily. Shoppers also like the convenience of multiple brands under one roof, a single shopping cart and stored payment details. 

On the brand side, marketplaces offer opportunities to reach more shoppers, and in some cases have made it easier for smaller businesses to better compete with the CPG giants. They are also being used to gain entry into foreign markets, although there are costs and challenges associated with that tactic

“We have to think about marketplaces in terms of how we can curate the right products and the right marketing messages for the different marketplaces that exist," said Allison Giorgio, vice president of marketing at Puma North America, in an interview with CMO Council. "The challenge is that they can still be viewed as commodity destinations by many consumers, who will look for the best deals and explore different sites until they find the best price."