Marketplaces and the phenomenon of cannibalization
E-commerce represents the future of commerce. It is no longer considered a mere hypothesis. But a reality that has been integrated into the strategy of brands, distributors, and retailers alike.
They have become unavoidable and in 2022, online marketplaces will account for 67% of e-commerce sales according to Forrester. In about twenty years, the model has established itself as a trusted third-party and federated a business ecosystem.
The threat of cannibalization is a common fear among online retailers when they are considering a Marketplace offering. In the world of e-commerce, competition is just a click away. And customers behave accordingly: they search, compare, and then choose.
Supply and demand
The match between supply and demand has never been so optimized. On the one hand, buyers have access to a greater number of offers compared to a traditional e-commerce site. The customer experience is generally well looked after and deliveries are under control. On the other hand, merchants reach a wider, sometimes inaccessible customer base. And thus create notoriety and visibility with more conversions.
Marketplaces are also real facilitators in terms of international trade. Thanks to the simplified setting up of partnerships. Finally, marketplaces make it possible to test one’s products in a new market and to validate the appeal of a product or its price positioning. All this without having to make the necessary marketing efforts in the case of a launch. Amazon, Rueducommerce, eBay, or Cdiscount thus provide sales spaces for thousands of sellers.
What is cannibalization by marketplaces?
Marketplaces are able to identify interesting market niches. That is to say, the products that sell best in their marketplace. They then decide whether to buy these products or to contact the suppliers directly, who can be your suppliers. By doing so they take a market share and become your main competitor. However, the products that are sold by the marketplace are better referenced. That’s mean that they appear first on the pages and therefore come before the votes.
We also talk about the cannibalization of your SEO (natural referencing). Under no circumstances should you use the same product descriptions that you have on your website (duplication). The marketplaces have optimal referencing and will often appear in front of you for the same request. It would be a question here of not cannibalizing even by proposing identical descriptions. The same goes for all content shared on your profile within the marketplace, do not repeat yourself, innovate.
What is the impact of the cannibalization of marketplaces on the brand’s e-shop?
The consumption habits of e-commerce buyers are changing: they are turning more to marketplaces. Indeed, these new digital shopping centers offer many advantages for the customer.
The marketplaces offer a wide selection of products and therefore a varied choice. A buyer will be able to compare different brands, styles, or offers without having to navigate from e-shop to e-shop. He also has the advantage of being able to make a multi-brand shopping cart easily without having to make several payments. The latter is moreover highly secured, which comforts the customer to proceed to the purchase.
These e-commerce experts also offer fluid and optimized shopping experiences. For example, they develop applications or mobile sites that allow the customer to order anytime and anywhere.
Marketplaces also benefit from large communication and marketing budgets. So it is difficult to compete on the referencing and visibility they offer, as well as the many levers to build loyalty among their (many) customers: newsletters, prize pool, sponsorship…
How to limit these impacts?
There are various levers to be put in place to cope and evolve with the marketplaces. The objective is for the brand’s marketplace activity to be a complement to its own e-shop and not the other way round.
The first thing is to respect the key success factors in e-commerce. It is to be able to offer fast and free shipping, varied and quality visuals, relevant commercial animation, and efficient and complete content to reassure.
Secondly, in order to retain customers and acquire new ones, it is important to build customer loyalty. This can be achieved, for example, through regular newsletters, the organization of private sales, a personalized service, complementary and exclusive products (capsule collection). As well as the implementation of a targeted marketing strategy: Instagram content, collaborations, sponsored publications…
E-commerce is much more similar to physical distribution channels than we think. The e-shop represents the brand shop and the marketplaces represent the shopping centers. These two models have been coexisting for decades now and have shown great synergies.
But to ensure the best possible synergy, the best solution is to seek professional advice. To avoid the phenomenon of cannibalization. This is important because being an expert in this field, they will be able to tell you the many pitfalls to avoid and give you the most effective guideline to follow.
Powerlab works with numerous marketplaces (more than twenty throughout Europe). Our team will be able to advise and support you in this development.
If you are interested in the subject of marketplaces, take a look at the articles in this category. We publish regularly.
Do not hesitate to leave us a comment or to contact us. We would be delighted to discuss this with you.
6 Replies to “Marketplaces and the phenomenon of cannibalization”
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