Should I sell it on the marketplace or build it myself?

Walmart, Best Buy, Target, Macy’s, Kroger, The Home Depot, J. Crew, Albertsons, Bed Bath & Beyond, Madewell — In addition to being a US brand of Marquee, what do all these companies have in common?

These retailers span a variety of disciplines, from technology to apparel, groceries and household items. But they all use the marketplace model.

While millions of US vendors have successfully sold to the market, the top companies are the ones that run them.It raises the question: should you sell? finished Marketplace or you have to try Become 1?

The rise of the market

About 10 and a half years ago, platforms such as Amazon, eBay, and Craigslist stole all headlines. Proponents advertised these early markets as revolutionary. But according to Ryan Lee, founder and CEO of Nautical Commerce, they have been around for much longer.

“B2B distributors, wholesalers and suppliers are markets, they just don’t support technology,” Lee told Modern Shipper. “So they were always there, they weren’t just in the public eye. These B2B platforms and businesses support our economy with absolute anonymity.”

Lee previously worked for supply chain software company Turvo. Won According to last week’s Lineage Logistics. So he built a private marketplace for brokers to facilitate trading through TMS.

At Nautical, Lee created a similar platform for brands that want to move to a multi-vendor marketplace model.He quoted compelling stats that could shake them: Marketplace Increased by 80% In the fourth quarter of 2020, overall e-commerce growth more than doubled year-over-year.

“And the reason is that the average order value is high,” he explained. “The breadth of the product is wider from a discovery point of view.”

Watch: E-Commerce is a new global trading system

Over the last five to ten years, more and more Silicon Valley giants have embraced the market as a way to create value by delivering products to more customers.

“It’s like Apple, and you might buy other third-party marketplace-enabled apps and accessories that work on your iPhone or iPad,” Lee added.

This trend was further accelerated by the release of Apple’s iOS 14 update, making it more difficult for businesses to track customers and their data. Therefore, instead of spending money on advertising, many have opted for a different approach.

“Dumping Google ads is trying to get people to the top of the goal-achieving process, while if you’re on the market looking for a product, you’re already at the bottom of the goal-achieving process,” Lee said. I guessed it. “You are at the forefront of conversion.”

If you can’t beat them, you’ll be them

Vendors can profit from selling through the market to increase reliability and visibility while market owners receive traffic for their products. For example, Amazon has an advantage if a company like Best Buy chooses to sell in the market because Best Buy customers are driven by Amazon products.

But that doesn’t mean that Best Buy and other retailers couldn’t create their own marketplace.

“Amazon is everything to the market, it doesn’t have to be everything, right? Porsche can launch its own marketplace. They don’t have it, but they may have it,” Lee said. Suggested. “And I bought a ceramic Brembo brake from Porsche. As a consumer of that vehicle, I absolutely trust more than going to a parts company and trying to find that particular part.”

Lee predicted that there would soon be thousands of Amazons instead of hundreds. However, it doesn’t look exactly the same.

“Amazon believes it will be unbundled, like the previous Craigslist and the previous eBay,” he said. “And this unbundling will be a highly specialized vertical market that complements consumer activities and dissertations, or the product itself.”

So what exactly does it look like? Lee uses Nike as an example. Its area of ​​expertise is athletic apparel, and if you are building a market, you will probably want to try selling other athletic or apparel products.

“Nike currently has no market. If they had a complementary product that might not have been manufactured but would look good on my shoes, I trust them and I have to buy from them. You won’t get it. I trust the brand’s promises and their service level, “Lee explained.

Following Nike’s example, Lee suggested that Nike Golf could partner with golf equipment companies like Callaway. Currently, customers need to go to a golf store or elsewhere to get Callaway products. However, Nike can instead agree to sell those products in its own market and bring their customers into its own ecosystem.

Taking it one step further, Callaway can open its own marketplace for selling Nike Golf apparel. In that way, brands drive their customers into each other’s ecosystem. This is the idea that Lee described as “cross fulfillment.”

“I think the future of commerce is connected by these marquee brands sharing catalogs with each other. It will be discoverable. As you and I share photos with each other on social media platforms. I think this is just as much what organizations and marquee brands do, “he predicted.

Lee’s Big 3

But seeing the value of owning a market is an easy part — it can be difficult to actually build. Lee has set three key beliefs that brands should consider when considering a switch to a market model.

“The market is at the crossroads of commerce, fintech and logistics,” he said. “Most marketplaces don’t understand that fintech and logistics need to be significantly enhanced when building a platform. The commerce part is pretty straightforward — it doesn’t really get off the ground. Is a logistics work. “

On the commerce side, brands can leverage their existing e-commerce platforms to connect to marketplace platforms like Nautical and become the number one seller on their marketplaces. From there, invite other brands to the market and connect your own e-commerce site to one integrated platform.

When it comes to logistics, the process is more complex, but brands have several options. The first is centralized fulfillment using a shared warehouse. For example, both Nike and Callaway store their products in the same facility. This will speed up the delivery of orders in the market and increase the likelihood that they will arrive together.

Another option is to use separate fulfillment. This is how most marketplaces operate today. With this model, when an order hits the market, some are transferred to Nike and the other part to Callaway.

From there, each handles fulfillment through its own downstream process. The check-out experience is seamless, but customers may receive multiple packages if the order includes products from both companies.

The third way is for Nike and Callaway to leverage a third-party e-commerce fulfillment provider. This will be a company like Deliverr that consolidates warehouses and increases efficiency by storing clusters of inventory from both companies in the same location. This is similar to the centralized fulfillment model, but neither company owns a warehouse.

read: Amazon Web Services, Bosch Cooperate in Logistics Market

read: First column: Bed Bath & Beyond joins Door Dash Marketplace

But even after building a logistics network, there is still a lot to do. The fintech aspect of the marketplace is just as important, and according to Lee, it is often the most difficult hurdle that clients need to overcome.

“It’s the biggest surprise they come across, and in many cases it’s the one that suspends, delays, or wholesales market projects,” he explained.

Unlike traditional commercial trading companies, the market is responsible for checking vendor sanctions and distributing funds to the appropriate beneficiaries. This is a feature that is usually handled by the payment provider.

As a result, it is often difficult to get financial institutions to approve the market. To do this, brands need to provide a kind of proof of concept. This indicates that you know who the vendor is and whether the vendor is compliant. At a minimum, there must be a mechanism in place to review vendors, both before and after they are onboarded.

“We need a thorough onboarding process that starts with self-selection. When the vendor comes, we provide all the relevant information to perform what is called a compliance check,” Lee explains.

But when a company tackles three major elements of Lee, it’s essentially a smooth voyage. In the marketplace, you don’t have to worry about your assets. Assets are from other vendors. In fact, all the brand needs to do is keep up with compliance checks and monitor the shared logistics network. If you decouple the fulfillment, you may not need to do it.

“Once you have the power to run a marketplace and overcome some of the more difficult aspects of launching it, at that point it’s a toll road,” Lee said. “This is a low asset, so you don’t really have to take inventory risk.”

The numbers are eye-catching. According to a Gartner survey, retailers using the multi-vendor marketplace Promote digital revenue More than 10.And of the miracle 2021 Enterprise Marketplace IndexRetailers with marketplaces Increased web traffic 34%.

Then it’s no wonder Some of the biggest brands in the USFrom Wal-Mart to Macy’s to Bed Bath & Beyond, everything has built its own marketplace. It may not be long before they are ubiquitous.

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