If we were to cite just one marketplace pioneer, it might be ManoMano. Although another ten companies instantly come to mind, including GiFi in France and Dott in Portugal (see below), ManoMano’s trajectory is a reminder of how the marketplace model opens up almost unlimited growth opportunities. Founded in 2012, ManoMano saw a gap in the market and took the plunge: at the time, although the DIY and gardening sector in France was worth some €30 billion, just 1% of sales were online*.
Its founders chose to outsource inventory management and logistical challenges and consequently offer an infinitely wider range than in stores, with more than four million products available to date.
Marketplaces were initially C2C, enabling individuals to buy and sell amongst themselves. But professionals saw the potential benefits and chose to adopt the model for their businesses. 2018 saw a significant milestone being reached: over 50% of online purchases were made on marketplaces**. The 2020 Fevad ranking of e-commerce sites (in terms of customer numbers) also featured marketplaces like Veepee***.
So, if you’re thinking of opening a B2C e-commerce site, we’re serious when we ask you: why not open a marketplace? Read on for our advice on developing your business model.
1. What do we mean by the term marketplace?
Let’s start with a common-sense definition. A marketplace is a virtual shopping mall; its operator provides a transparent and secure framework to inspire consumer confidence. Whether they are manufacturers or distributors, sellers benefit from a reliable platform (which provides a good user experience) and an extensive pool of customers. In return, the marketplace receives a commission from all sellers’ sales.
B2C marketplaces sell products or services. They are both horizontal and vertical (fashion, sports, wine, food, etc.). In reality, any company can create its own niche marketplace! The idea is for the company to attract and therefore control the competition by hosting the marketplace on its own retail site.
A marketplace exists because of synergies between five different stakeholders: the operator (yourself), the sellers, the buyers, the software publisher and the payment service provider, just as with B2B marketplaces [+ link to article 1].
2. Extreme flexibility
The diversity of revenue models and the value of the operator’s commission (which should be established and negotiated based on your objectives) make the marketplace a particularly flexible model that can be tailored to your needs.
3. Behind-the-scenes savings
You’ll save time in every area and you won’t need to worry about product sourcing, logistics and inventory management. That’s the beauty of the marketplace model: you’re not responsible for these aspects.
At the same time, the risk of failure is lower because a marketplace is a virtual store: investment costs are therefore lower.
4. Exponential growth
On a marketplace, volumes can always be increased: more sellers, more products, more customers!
Another advantage: a marketplace is an opportunity to test new products. Some operators don’t even open a marketplace with their own product range: instead, they choose to sell new products launched by other companies. The data collected provides a good understanding of market trends; the marketplace model is therefore an excellent opportunity for developing in-depth and strategic analysis.
Conversely, if you open an e-commerce site, you are structurally limited in terms of operations and finances.
5. Controlled risks
As a trusted third party, the marketplace develops its image among consumers. Yet it’s the sellers that provide the service (product quality, delivery times) and ensure quality of service. Consequently, the marketplace administrator must establish a robust and realistic vendor management policy.
It can be difficult to find a balance between sellers and buyers: to attract sellers, you need buyers and vice versa. One of the major challenges of a marketplace lies in successfully growing these two separate pools at the same time.
In conclusion, a marketplace boasts two key advantages: extremely low investment costs and hyper-growth potential. For retailers, it provides a wider scope for exploration and presents excellent opportunities for them to test, learn more and adapt their products and services.
Learn more about two iconic marketplaces enjoying B2C success
1. GiFi has always been a brick-and-mortar group and has 550 stores in France. This network remains its strength. However, listening to its customers has enabled it to respond to a new demand: a desire to access other types of products that are related to items already sold in store. GiFi doesn’t develop these product ranges and doesn’t want to develop them for profitability reasons. The marketplace is an ideal way to expand the brand’s range of products and services with the help of other suppliers.
The first impact has been the acquisition of new customers. The marketplace makes it possible to reach internet users who are looking for a product or using social media and ensure that a few days, weeks, months or even years later, they step inside a GiFi store, despite not being aware of the brand before. The second advantage is that GiFi has been able to add a huge number of partner products to certain sub-departments, while always prioritizing its own products on the site. This enhances its credibility and enables it to meet customers’ needs systematically, without cannibalizing its native offering. The group managed to ensure that its marketplace activities remained stable during lockdown. This ordeal helped the company develop closer relationships with its partners.
2. Dott. Welcome to Portugal, where two national companies have launched a marketplace and taken Amazon by storm. In Portugal, the online retail giant only offered its site in Spanish. Sonae, the leading Portuguese distributor with 40,000 employees, and CTT, the Portuguese Post Office, launched a very ambitious marketplace in the space of six months, bringing together 500 retailers selling some 500,000 products.
To create “the country's leading online shopping mall”, Sonae and CTT chose retailers which would appeal to Portuguese clients, particularly those with a focus on local production. They also focused on providing a wide range of services: delivery in less than 48 hours, Click & Collect, free returns, payment via a third party.
How can you launch your marketplace? What skills are necessary? You’ll find the answers to all your questions on our blog and you can develop your thoughts by completing the exercise below.
=> Clarify your strategy
This list of questions will help you develop your ideas before embarking on any project.
What are your customer segments?
What is your value proposition (products and services) for each of these segments?
What type of customer relationship do you want to establish with them?
Think about distribution channels: for example, you may decide to sell some of your products on the marketplace and others in physical stores.
What revenue streams are generated for each customer segment? What added value are customers willing to pay for? Under what conditions (time frames, management costs, etc.)? What are their payment methods? How do you set your prices?
What key activities are essential to your value proposition, both internally and externally?
What are your key resources: tangible, intangible and human assets?
Who are your key partners? (essential outsourced assets)
Lastly, think about your cost structure: fixed and variable costs, customer acquisition cost versus ROI, repeatability & scalability of the new model, etc.
Visit this dedicated page to find out more.
(*) Capital, April 2017