The Rise of Marketplaces and The Ones to Know

These days you can't go far in the world of retail and not hear talk about e-commerce marketplaces. The biggest one and the one we all talk about most is, of course, Amazon. But what exactly is a marketplace? It's a definition that has become increasingly blurry as new models and curations come to market. In its most basic sense, a marketplace is a place where buyers are connected with sellers. In today's online era, it's a place "where one can find different brands of products coming from multiple vendors, shops or person showcased on the same platform."

Under this umbrella of the marketplace, there are different types of relationships between buyer and seller. In many cases, the marketplace operator doesn't own any stock and rather the stock is shipped directly from the seller to the buyer. (This is referred to as drop shipping.) In this scenario, the marketplace operator will simply take a cut of that sale. There's also hybrid models where the marketplace operator might own some of the seller's stock, but other products are sold wholly via the aforementioned third-party model. Other marketplace models enable the seller to select which services, like warehousing, shipment, or marketing, they want as part of the relationship. So, as you can see, the marketplace model, while simple at first glance, has increasingly become more complex - and competitive.

Let's talk briefly about why we're seeing more marketplaces as an alternative avenue to selling product. First up, traditional wholesale relationships, like those between brand and department store, have proven to be risky and one-sided, in some cases. Many brands look at the bankruptcy of Barneys as a pivotal moment in the history of brands banking on key wholesale relationships for their own survival. Whether during this bankruptcy you were a brand actually left holding the bag, or watching on the sidelines, the pain and risk were palpable. A marketplace provides an alternative model where you have both control over your inventory, and you can simplify some of the headaches of wholesale (chargebacks, unwanted promotions, etc.)

Another key reason why marketplaces are increasingly common is that it gives a brand with limited resources a place to be seen. The cost of acquiring new customers on your own is only rising, and marketplaces can aggregate consumer interest in more cost effective and efficient ways.

Last but not least, the reason we have more e-commerce marketplaces today is, well, Amazon. Amazon has both proven the viability of the marketplace model, and it has also encouraged competitors to take up arms to offer up something that's its counterpoint - a more curated, personal, and, frankly, interesting experience.

Before we talk about some of the most interesting marketplaces out there, we ought to look at the other side of the marketplace. Specifically, what are the limitations or downsides to brands utilizing this sales channel?

The first limitation is control. If you're selling your brand direct-to-consumer, then you maintain 100 percent control of your brand experience, from on-page presentation to the package in which the consumer receives your product. If you're selling via marketplace, you will have to, instead, adhere to the marketplace's standards of selling. For example, you might have to shoot different product images or your product might be shown side-by-side with competitive substitutes. The extent to which this verges from inconvenience into dealbreaker is really up to the individual brand's business model and cost structure.

Another downside of marketplace selling is that there are more and more marketplaces out there. And because increasingly savvy shoppers often shop around different places for the best deal, price competitiveness can either encourage or discourage shopper conversion. This is why both a unique curation of products and an eye on the external market are key considerations for a brand weighing potential marketplace partners.

Now let's talk about some of the most interesting marketplace models out there at the moment.

First up, meet The Yes. Or as they like to say, "Shopping made genius." It's smart because it's a platform where, to get started, you answer a few questions about yourself, and then they offer you brands and products based on your preferences. It's a cross between a dating app ("nope, not for me"), and a curated marketplace, because as you go, it becomes smarter and smarter about presenting products and curations it knows you'll like. Once you find that perfect match, you can purchase it directly through The Yes. It's both highly personalized and interactive, two unique features giving it sustained appeal amongst fashion-forward shoppers.

Next, meet FastAF. It's a relatively new entrant to the market, and it's a place where you find all those new D2C brands in the beauty, home, food, and apparel space (you know, the ones called "The Something" with minimalist packaging.) FastAF offers both a unique curation of these premium brands and super fast delivery to shoppers in urban locations. Because of the newness and "cool factor" many of these brands are capitalizing upon, bringing them all together in one app introduces the brands to new shoppers and offers attractive product and brand adjacencies to sellers.

Another of our favorite marketplaces is Garmentory. Its premise is that by shopping small, it creates positive local impact. Garmentory is a place where local boutiques can sell their goods to a global audience. Think Farfetch, but a greater emphasis on emerging designers versus established major luxury brands. Garmentory also goes to great lengths to spotlight specific boutiques around the world that are part of its ecosystem.

We could go on and on about marketplaces, but you get the point. To be and remain successful as a marketplace today you must offer something unique. To learn more about tools that will help keep your positioning competitive and relevant, check this out.