Shop and marketplace — standoff or integration?

Marketplaces are coming, and analysts are already sounding the alarm, warning that some retail brands will no longer exist in the digital space. What is fraught with the active development of the marketplace and what remains for the other players — let’s understand.

Some numbers. According to a Forrester Research study, in 2016–2017, consumers worldwide made more than 50% of online purchases through marketplaces (primarily Amazon, Alibaba, JD.com, and eBay). The forecast for 2022 is 67%.

Since the share of the Internet channel in Russia in 2017 accounted for 3.5% of retail trade (ACIT data), while abroad — 7–8%, marketplays can be expected to continue active development in the Russian market.

The first projects, such as Enter and Wikimart, failed and were closed primarily due to the unavailability of consumers, as well as under the influence of the crisis.

Today, Lamoda, Wildberries, Goods, Yandex.Market, Yulmart, and others continue their development on the Russian market.

Wildberries

The main advantage of the marketplace model is the opportunity to buy everything you need in one place, saving time, which consumers have less and less every day. The development of Russian marketplaces allows expanding consumer opportunities for Russians who do not speak English.

“Making a parallel with traditional retail, marketplace can be defined as hypermarkets with a huge range of food and non-food products,” says Elena Ponomareva, a member of the guild of marketing specialists, founder of the research company “Laboratory of Trends”. — From a consumer point of view, marketplaces have a significant advantage, allowing you to purchase everything you need in one place, saving time on the process of choosing and paying for purchases, and also in the case of previously tested or having many positive feedback from marketplace buyers — certain guarantees that the goods will be delivered within the specified time and money will not be wasted. In addition, reviews are a valuable source of information when making a purchase decision. Consumers consider marketplace reviews to be more honest and independent and are more likely to trust them than reviews on the websites of individual online stores. ”

Vain panic?

Marketplace is the inevitable format of globalization, digitalization and the pursuit of a seamless customer experience. It seems logical that the marketplace will completely absorb individual online stores, but this statement is not indisputable.

“Such“ horror stories ”are usually used by cunning marketers to attract more attention to their projects, playing on the fears of everything new, says Danatar Atadzhanov, marketing director of MoscoWine marketplace. “But usually such fears are not justified: online stores and online movie libraries have not supplanted shopping centers and cinemas, and e-books have not replaced paper ones. Internet space has not yet replaced even the classic offline shopping. Despite all the successes of online commerce, digitalization and killing, it’s premature to say that offline commerce is seriously threatening. Traditional shopping is not only a way to purchase the right product, but also entertainment, a popular way of leisure. And I don’t even have to say that marketplaces will be swallowed up by online stores in the near future. ”

Маркетплейс — неизбежный формат глобализации

The motivation and behavior patterns of consumers buying in the marketplace and online store of the brand differ, says Timur Yefimov, head of the Internet sales department of Obuv Rossii group of companies: “For those who enter the marketplace, a large assortment of goods is important. Such buyers are ready to leaf through many pages in order to choose the most acceptable option with an optimal price / quality ratio, and the brand can play not the first role. The buyers of branded online stores are brand loyalists who purposefully buy goods of a certain brand and are not interested in hundreds of models of other brands. ”

To earn, the marketplace requires a lot of traffic, while it is limited to the maximum attraction cost for this business model. “Marketplaces are fiercely competing not with online stores, but with each other — for traffic, customers and retailers,” says Andrei Polonchuk, director of e-commerce at the combined company Svyaznoy | Euroset. “Therefore, it is more appropriate to speak not about the absorption by marketplaces of online stores, but about ousting some of the marketplaces by others that are more efficient in terms of generating traffic.” In addition, there are many categories of goods and services where marketplaces are simply not in demand.

For example, there are niches limited by logistical or legislative difficulties, there is also a premium segment, in which case contact with a brand is especially important and which does not enter the marketplace at all.”

Илья Елпанов

Ilya Yelpanov, founder of the Eat Rustic company

A single store will not be able to compete directly with the marketplace, while the marketplace is unlikely to want to support someone’s brand. But here you can think of a reasonable collaboration, for example, agree on a shop-in-shop format, when a separate section of the brand will be presented on the marketplace.

But the store will be able to increase the number of units sold many times and not worry about the stability of supply and the quality of the goods. The marketplace takes on all these tasks, and a small retailer can focus on operational management and not think about marketing.

After all, the main “killer” of start-up entrepreneurs in online commerce is the undervalued cost of attracting a single client.

Many people underestimated this factor and died, because the economy was not “struggling”. At our site, the cost of attracting a client is 1,500 rubles, the gross margin is 35%, the average bill is 3,500 rubles, the client’s price pays off only from the second order. From the first order we do not earn. Of course, if at the expense of a large marketplace I could solve the issue of reducing the cost of attracting and investing in marketing, I would be glad to cooperate.

We are already negotiating integration with large aggregators of products, we are in collaboration with major players, there is no point in fighting.

Pluses of loneliness

What is the competitive advantage of a separate online store? According to Danatar Atajanov, a successful separate online store is interesting for its uniqueness, exclusive assortment, it has a clear positioning and its own target audience.

The work of a branded online store is based on the development of relationships with loyal customers. This online store specializes in a certain range and works professionally with it.

“Marketplaces will never be able to compete with niche highly specialized brands in terms of expertise in the category,” said Wildberries Advertising Division Director Yegor Pchelintsev.

Wildberries

Separate online stores — is an analogue of small shops that have three main advantages.

The first is proximity to consumers (in the case of location in the city from which the order is made), which allows for delivery or pick up goods from the point of issue in the shortest possible time. In the case of the marketplace, delivery may take several weeks if the goods are delivered from another city or country. But in large cities this advantage can be leveled.

The second is the opportunity to offer a wide range or unique products within the chosen specialization, as well as flexible adjustment of the range to the demands of consumers.

“In the case of niche products, consumers trust more individual online stores, considering them experts in their field,” explains Elena Ponomareva. — It can be fashionable healthy food, specialized cosmetics, elite alcohol, customized products and other products that require consultation, the opportunity to ask the seller a question, a difficult choice or the need to refine the product to the requirements of the buyer. In this case, online stores can compete with marketplaces that have the same specialization and offer a choice of several manufacturers or brands. ”

westfalika

The third is that a part of customers of an online store may know “by sight”, i.e. have personal communication with the consumer in the process of making a purchase (by phone, through social networks, on the website of an online store, in a messenger, etc.). In addition, as a rule, such online stores anxiously protect their reputation, so they work with buyers “carefully”, realizing that notoriety can quickly ruin a business.

“The online store, unlike the marketplace, gives the customer the opportunity to get in touch with the brand,” says Andrei Polonchuk. “Hence the main advantage of the online store: it builds personal and emotional communication between the brand and the customer. All communication is saturated with expertise, love for the product and attention to the customer. The marketplace should not, and often cannot, provide it. ”

Channel blending

Despite the advantages of independence, many online stores will choose a mixed channel, just like in real trading — some of the sales will be made through their online stores, some will be given to marketplaces. For example, many fashion brands are already working under this scheme.

Ксения Рясова

Ksenia Ryasova, President of Finn Flare

Finn Flare adheres to the omni-channel development model, which makes it possible to use all channels of communication. In the absence of a model of the desired size or color in retail stores, the consultant can immediately place an order in the online store with delivery in any convenient way. The site offers a wider range — the current collection and collections of past seasons. We also successfully cooperate with Wildberries, Lamoda marketplace and are pleased with the results, because it is an additional sales and communication channel with the customer. Marketplaces have their own pool of loyal customers, therefore, presenting goods on such sites, our store gets access to a wider audience.

For example, Obuv Rossii Group is banking on the development of its own mono-brand online stores, continuing the strategy of mono-brand offline networks. Online stores are considered primarily as an additional service for regular customers, as well as a tool to attract a younger audience. At the same time, the group collaborates with online hypermarkets, such as Wildberries, which makes it possible to expand the audience of customers.

Тимур Ефимов

Timur Efimov, Head of Internet Sales, Obuv Rossii Group of Companies

A separate branded online store, as in the case of a traditional brand store, has a clear positioning, an audience of regular customers, closer interaction with them. In general, all the work of a branded online store is based on creating a pool of loyal customers and developing relationships with them. Such an online store specializes in a certain range, and works professionally with it.

In varying degrees, marketplaces are in demand everywhere. Of course, it is convenient for the buyer on one site to have the opportunity to explore the entire range and choose what is necessary, without having to think about the relationship between the supplier and the site and pricing. Especially if it does not suffer the time and service.

Obuv Rossii is ready to cooperate with marketplaces and online hypermarkets, while developing its own mono-brand online stores.

Маркетплейс — неизбежный формат глобализации

Attractive marketplace

Marketplaces invest large funds in development and promotion, thereby forming consumer traffic and increasing their attractiveness. Each site participant receives its own advantages.

Retailers get an additional sales channel on the marketplace and draw attention to themselves by falling into a possible consumer choice. In this case, interest in the brand will increase demand in its online store (if available), and in real retail. In other words, web-hosting can then lead to a purchase in a real store.

Manufacturers — a new sales channel that allows you to quickly get access to a large number of potential customers, significantly save on promotion costs when entering the market or increasing sales volumes, as well as reduce dependence on federal and regional networks. (So, Alibaba has enabled thousands of manufacturers to enter the international market and multiply their volumes).

Ешь деревенское»

Online startups — quick and convenient entry to the market.

“In an effort to take a large share of the market, the marketplace takes on more and more operational processes,” said Ilya Yelpanov, the founder of Eat Rural. — Not all players on the site are able to provide quality service, logistics services. A small local manufacturer with limited supply can get on the marketplace and immediately get access to the audience, logistics and promotion services. ”

The other side of the advantages is that marketplaces force their participants to enter into constant competition, regardless of whether the same product is offered by different sellers or its analogues. “Competition inevitably leads to a loss of profitability,” says Elena Ponomareva. — However, such a fall can be compensated by turnover.

 Данатар Атаджанов

Danatar Atajanov, MoscoWine Marketing Director.

For any partner, the marketplace is an opportunity to increase sales. It does not matter if the partner has a website or not. Marketplace partner receives:

Access to a new, broader motivated target audience.
Additional opportunities for sales of stock goods or the announcement of new products.
Access to loyalty programs and marketplace competencies in promotion, which is especially important, for example, in alcohol retail.
Additional feedback and analytics for their product positions.
And all this without investment and at the most modern level!

Customers receive a wide range and high level of service. “The buyer is gradually switching from the scheme of finding the best price for a quick search of goods and the expected level of service,” says Yegor Pchelintsev. “Thus, medium and small stores offering a similar assortment without any added value for the buyer will not be able to compete for a long time only with price and will gradually lose.”

Егор Пчелинцев

Egor Pchelintsev, head of advertising Wildberries.

More than 10 thousand brands are represented on the Wildberries website, and already more than 70% of buyers in Russia receive their orders for free the next day. As a result, more than 2 million users visit WB daily.

Retail brands come to us themselves. Wildberries at the expense of its own logistics networks and storage areas optimizes transportation and distribution of goods, storage of warehouse residues. On a special portal for suppliers it is convenient to follow the movement of goods in real time and keep all the documentation.

Placed on Wildberries, the supplier gets access to a multi-million dollar audience and a wide range of marketing tools to promote their products. The chances that the product will find its buyer, increase significantly.

Problems of formation

Marketplace is one of the most promising formats, and this niche is practically free in many segments. But there are high barriers to entry into this market.

“Perhaps the main problem facing new marketplaces is the high cost of entry and, as a result, difficulties in building a cost-effective business development model,” says Andrei Polonchuk. “Opening and servicing a marketplace project requires large investments in the required volume of traffic, customer base and the search for suppliers.”

Any marketplace is sharpened on volumes, and with large volumes it is difficult to maintain quality and service. “Fast order processing, logistics, bonus programs, user-friendly interfaces, interaction and mutual settlements with suppliers — everything should be at the highest level, because the competition in almost every niche is very serious,” says Timur Efimov.

Ешь деревенское

One of the problems that the start-up marketplace of the MoscoWine alcohol market is experiencing is a lack of confidence in the new format. “Unlike the rest of retail, alcohol comes across the marketplace format for the first time,” says Danatar Atajanov. “Some potential partners see us as their competitors.”

At the same time, the problem of the balance between the quality of services and the number of partners is not too acute, since everything is strictly regulated by the state on the alcohol market and all players are known. Here we need the right choice of partners and the scalability embedded in the business model in order to quickly respond to the emergence of “problem” partners or disagreements between the partner and the marketplace.

Another problem MoscoWine faces is attracting and retaining customers in the alcohol market, where there are a lot of restrictions on advertising and promotion. We have to build up competencies, we need substantial investments in marketing and IT-infrastructure. We need not only a website, but also a mobile application that allows you to interact with the customer quickly and conveniently. “Our task is not just to connect the buyer and the seller of alcohol, but also to create for them the additional value of the service. For this, we use an innovative business model, technological and marketing advantages, ”says Danatar Atajanov.

Андрей Полончук

Andrei Polonchuk, director of e-commerce of the combined company Svyaznoy | Euroset.

“Svyaznoy”, based on market trends, develops both traditional retail and online channel. One of our advantages is the presence of a huge physical network numbering 5.5 thousand stores throughout Russia, interconnected by competent logistics. You no longer need to adapt to the courier or delivery service, we are adjusting to the customer’s schedule to make the purchase process at all its stages as clear, simple and convenient as possible. In turn, on the Svyaznoy website already now you can buy a huge amount of goods, services and services: in addition to the traditional range, we have hoverboards, quadcopters, VR-, AR-gadgets, smart home systems, Pandora jewelry and even Tesla electric cars . And over time, we will come to the fact that we will sell everything, giving customers and brands a platform for effective communication.

Niches for exclusive

Of course, the marketplace format may not be suitable for everyone. Some retailers find it more profitable to communicate with the consumer only directly. Probably, this format is not very interesting to sellers of low-margin or, on the contrary, unique high-margin goods. Perhaps there will be independent players in the segments where the price is greatly overestimated due to elite positioning and customization, because the marketplace almost excludes exclusivity. When buying on the marketplace, a high margin simply will not «fit» in the heads of people. Single players of the exclusive niche will have to, in addition to the special product, offer some kind of non-standard interesting service.

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