To generate the maximum value from a marketplace, companies need to assess their business case before building a strategy, identify value pools, and determine the level of effort required to get the marketplace off the ground.

For some parts of the consumer tech industry, there are already dominant marketplaces. Examining the competitive landscape can help determine what marketplace solution is the best fit. This process provides a framework for deciding what model will generate the most value and profitability, highlighting associated costs and assessing the best technology fit.

After deciding on the business case, companies should consider the following marketplace models:

• Seller model (B2C vs. B2B vs. C2C)
• Assortment strategy (product/solution vs. brand/lifestyle and frequent vs. infrequent)
• Invite strategy (open vs. closed)
• Logistics (3PL vs. 1PL)
• Pricing strategy (dynamic vs. fixed)
• Social proof strategy (monitored vs. unmonitored)

Marketplace operators need to take care of demand generation, attract buyers and sellers, facilitate transactions, and control and manage data. In the consumer tech space, operators must work well with digital shopper-marketing platforms to enable incremental profit and more control of discoverability for sellers.

Marketplace buyers want to feel confident that the products they purchase will work within their current product ecosystem. Operators attract buyers by having a reliable merchandising strategy in place and supplying an attractive product mix.

Marketplace personalization is another demand generation driver as it allows for more assortment online without being overwhelming. A personalized marketplace experience can become an essential differentiator as it enables a seamless purchasing process.

Sellers look for operators that provide seamless onboarding, manage product information, imagery and other metadata. Sellers will likely put a premium not only on the revenue and profit they make from a specific marketplace but also the amount of buyer data the operator is willing to “share back” to the seller.

Sellers implement their own fulfillment models within a marketplace. Because inventory numbers are visible to buyers, employing a successful fulfillment model is key for maintaining a seller’s brand reputation. Marketplace operators with dynamic pricing, fulfillment options & flexibility are more likely to obtain and retain sellers.

Providing an experience with minimal friction for sellers to incorporate their products into the marketplace is a win-win-win situation for the operator, seller, and buyer.

As operators plan their marketplace strategy, they need to answer the following questions:

A rapid flow of high-quality data is essential for successful marketplace operations. Retailers creating marketplaces need to operate as Algorithmic Retailers with dynamic, AI-driven tools for buyers, sellers and managers.

Typically, the marketplace operator owns customer data, including their competitors’ data, transaction data, and behavioral/analytical data. Unless the seller can negotiate a data-sharing agreement with the operator, they may lose the ability to extend that data into better offerings and customer service.

It’s important to have a process for managing product data. Implementing a “test and learn” model with sellers can quickly help operators measure success within their marketplaces. Operators don’t have to buy the sellers’ inventory, so they can swiftly onboard and offboard sellers as they see fit.

If you’re interested in learning more about marketplaces and which model is most applicable for your business, let’s connect!