Ready, set, flop: four reasons why your online marketplace could struggle to gain traction

Establishing an ecommerce model that relies on third party sellers isn't an automatic route to riches, writes Boris Lokschin, Co-Founder and CEO at Spryker.

Have you read about online marketplaces going gangbusters and wondered whether it's time your organisation had a crack too? You and scores of other retailers looking for opportunities to maintain sales and growth, as Australians continue to tighten their belts in response to cost of living pressures.

Around the world, the online marketplace sector has been growing at an extraordinary pace. Once synonymous with the original US behemoths, Amazon and ebay, advances in technology have enabled businesses of all stripes and sizes to establish their own seller eco-systems and to reap the rewards they can generate. These include increased visibility, turnover and customer 'stickiness'.

Here in Australia, we've seen a string of household name players, including Woolworths and Barbeques Galore, get in on the action. In August, homegrown furniture and homewares merchant Temple & Webster posted record revenue of $426.3 million for the 2022 financial year, courtesy of the ecommerce boom the Covid crisis ushered in. The company's site lists more than 200,000 products from hundreds of suppliers. Temple & Webster CEO Mark Coulter noted that the company had 'once again bucked the trend to deliver a great set of numbers', according to Business News Australia.

Riding the wave or cruising for a bruising?

Some analysts expect the global online marketplace sector will be clocking up a staggering $US8.7 trillion in annual sales, by 2025. It's without doubt a Bigger than Ben Hur opportunity for operators like Temple & Webster that are getting it right. 

Unfortunately, plenty of other businesses aren't, can't and won't. Those organisations will be the also-rans, whose forays into online marketplace ownership are destined to founder and fail.

At Spryker, we've seen our fair share of the good, the bad and the ugly, when it comes to ecommerce in general and online marketplaces particular. These are the most common reasons owners of the latter struggle to build mind and market share.

Seeing the marketplace as a sideline

Yes, an online marketplace can transform your fortunes but only if you're prepared to place it front and centre of your operations. That's where many operators fall down. Treating their venture as an adjunct to the main event – their own ecommerce business or their bricks and mortar outlets – means they don't invest the effort required to create a category killer or compelling customer destination to which shoppers will return again and again.

Scrimping on the set-up 

There's a saying that 'you have to spend money to make money'. That's not always the case but the old maxim certainly holds true when it comes to online marketplaces. While the technology required to set one up may no longer be the exclusive preserve of large, well established players, getting one going is still a major undertaking; one which requires the commitment of significant time and funds. Take the attitude that your marketplace is an IT cost centre, rather than an opportunity to grow your business, and you'll likely be reluctant to invest the money it takes to establish and maintain a slick digital engine room. And without one, you'll struggle to operate effectively and attract high calibre sellers to your team.

Cutting suppliers out of the action

Then there's the temptation, irresistible for purchasing departments whose focus in on the short-term bottom line, to cut top performing sellers out of the action, by purchasing the wares they supply and offering them directly. Yes, doing so can push your profits higher initially but it's an extraordinarily effective way to destroy whatever trusting relationships you've succeeded in creating with your eco-system of suppliers. 

Doing the details well

Finally, there's housekeeping and hygiene. Establishing service level benchmarks for sellers, implementing consistent return and refund policies, and being equipped to respond rapidly to customer queries and complaints is 'online marketplace 101' stuff. Cutting corners on these fronts is a recipe for customer dissatisfaction, one and two star reviews and churn. But, when businesses are focused on getting a marketplace up and running in a hurry, the basics all too often fall by the wayside. Sort them out at the outset and you'll set your online marketplace up for success and save your team time and trouble too.

Making it in the online marketplace world

Australia is a nation of ecommerce enthusiasts and, in today's times, it's a brave retailer that eschews the digital arena entirely. But running an online operation of your own and operating a successful online marketplace are two different propositions. Doing the latter requires commitment from the top down and a comprehensive plan to convert your core retail business into a thriving eco-system of sellers. Dedicate the requisite time and resources to your initiative and you'll up its chances of becoming a seriously valuable asset.