We are in the midst of the first pandemic to ever sweep through our connected world. Covid-19 has thrown the importance of connectivity into stark relief – without it we would not be able to work from home, interact with friends and family, educate our children from the kitchen table, access online medical consultations and benefit from the myriad forms of screen-based entertainment.
However, connectivity has also become integral to how we shop. Of course, online shopping is not new, but the coronavirus situation has created a whole new customer base of people who are now forced to shop from their screen. The activity of existing online purchasers has also increased. During the pandemic, half of customers are shopping on digital channels for products they have never bought online before, with a focus on necessities.
We are seeing the same behaviours that became the basis of Alibaba’s success in the early 2000s. The SARS epidemic catalysed the purchasing public in China to move online – millions of people afraid to go outside became captive customers. This coincided with Alibaba’s entry into the B2C business and its growth to become one of the largest eCommerce companies in the world.
Unlocking new revenue streams
Few online businesses will enjoy as large a customer base as Alibaba, but the beauty of the platform economy is that, with the right approach, every retail business can benefit. Leveraging a digital platform to bring together sellers, buyers, and service providers opens up a world of new revenue. Mirakl-powered marketplaces achieved 111% GMV growth in just the first half of 2020, defying the economic downturn of the global crisis. An online marketplace and efficient backend processes enable retailers to deliver high quality and personalised customer experiences. In addition – and here’s the huge plus point of the digital approach – those retailers can gather priceless data. This means they can not only continuously improve the customer experience, but also create opportunities for upselling and cross-selling, assisted by the steadily increasing sophistication of artificial intelligence and data analytics.
Enabling range extension
However, the competition for online customers is only getting fiercer, so the more reasons those customers have to visit a particular site, the more likely they are to make a purchase. This is where the marketplace model is so powerful. Marketplaces are one of the platform model types driving the transformation of retail. Of the nearly 70% of UK shoppers regularly shopping online, more than half are doing so via marketplaces. With a marketplace, an eCommerce operator connects third-party sellers with buyers. This enables retailers to rapidly extend their ranges and gives a much-needed opportunity for smaller companies which do not have the resources to launch their own online store to sell via larger marketplaces. Well-designed platforms can offer a broader selection and more competitive pricing than other eCommerce strategies, creating a better customer experience that leads to more purchases. Keeping customers happy and coming back for more creates the network effect – the virtuous cycle that delivers growth.
A great example of extending marketplace benefits comes from French retail giant Carrefour. Earlier this year the company launched a food marketplace, with offerings from more than 100 retail ‘partner vendors’ – just over half of which are small companies and start-ups. To help them weather the pandemic, Carrefour is giving them free access to the marketplace until the end of the year. That’s a huge help to these SMEs which don’t have the technical knowhow to rapidly create their own platform or the marketing spend to promote it. Even if they did, it would take a long time to reach a customer base the size of Carrefour’s – some 15 million people visit carrefour.fr each month. These partner vendors are instantly sharing the benefits of having a presence on that digital shopfront.
Creating a resilient business model
In a digital-first economy where demand changes quickly, marketplaces are a resilient eCommerce model. They are adaptive, giving retailers the ability to reshape their offerings as buyers’ needs change. They can be far more flexible than physical stores, because when demand drops or spikes, products and services can be sourced quickly and directly from sellers. They are therefore capital-efficient, requiring fewer investments in stock and able to leverage existing fulfilment and delivery networks.
Buyers spent $2 trillion globally on online marketplaces in 2019. While very few businesses include coping with a pandemic in their business continuity plans, Covid-19 has highlighted that business strategies that lack agility are vulnerable. With brick and mortar retail profits dropping and storefronts shuttered, the amount spent online is only set to rise. To gain a share of that, retailers need to adapt and expand in the digital world. The survivors will be those who seize this opportunity to enhance or reinvent their market strategy, to surmount the challenges caused by Covid-19 , and emerge more resilient in a post-pandemic world.
Brendan Walsh, UK General Manager, Mirakl