E-concessions and consignments galore – the marketplace model has emerged as a new industry favourite. As these methods are making introductions to more retailers and luxury brands in 2023, the digital landscape of brands is experiencing rapid change.
Traditionally, luxury has operated on a wholesale model, selling inventory to retailers like Net-a-porter and Nordstrom, who held onto it and provided markdowns and discounts, which the brands couldn’t control. However, in a post-pandemic world, where the online shopping experience is crucial, e-concessions and marketplaces are starting to grow in popularity. Fast shipments and increased customer insights are now in high demand for luxury brands that may have previously stuck with traditional wholesale relationships and are trying to expand e-commerce capabilities.
The advantage of the e-concessions model, (incorporated by Matchesfashion, Mytheresa, or Farfetch for example), is that brands have full control over the display, content, and pricing of their products while also reaching additional customers, providing an offering across multiple channels. Retailers are now turning to e-concessions to expand their assortment without managing inventory costs as the e-concessions model provides a platform for brands and promotes them without the risk of buying their inventory. The retailer takes a commission, and the brand keeps most of the sales, thereby gaining customer insights directly from the marketplace giving the brand more control.
Marketplace is in a solid position to grow further in luxury retail. With 33% of shoppers purchasing from marketplaces such as Tmall by Alibaba, and Farefetch for example, provide a unique advantage that gives shoppers the ability to explore a variety of brands and product portfolios. Mobile marketplace apps also support a seamless shopping user interface that makes it easy to search, explore and browse on the go. The marketplace is also focused on transactions with saved personal account details such as delivery address and payment details, providing customers with a smooth check out process.
What luxury brands need?
Standard audience & recall shoppers: Every 3 in 5 luxury brands look to widen their reach, and by this they are not only looking to attract a higher volume of target demographics, but they also look for repeat shoppers. The bigger luxury houses are always in a strong position to take control in the marketplace because either way, they can sell their products through their own websites and have more authority and guidance with customers. The marketplace model can greatly benefit emerging or niche brands that are establishing themselves in the space. Whether big or small, it is crucial for brands to always be where the demand is, and they need better global coverage and an opportunity to strengthen brand presence in a high-spirited ecosystem.
Wider product assortment: Brands also want to offer a wider yet standard product assortment to increase revenue. However, it's not always easy to manage to expand inventory and additional SKUs. Especially not if brands oversee handling product inventory, cost, as well as promotions. Selling on a marketplace, if implemented properly, allows for wider product visibility that brands need, giving them insight into product performance data, and the volume needed for product portfolio categories.
Detailed customer insight: It is an aspiration of every luxury brand to have a wider view of customer habits, old and new, and gather insights that can inform business decisions to cater to their needs. As customer experience pushes to the forefront of what it means to have a pleasant online shopping journey, connectivity and accessibility with different customers is crucial. Brands need to create opportunities to unlock deeper product availability by streamlining their stocks and creating new ways for customers to discover products and be inspired.
What does Marketplace have for luxury brands?
It is a win-win for both. For the brand, a marketplace operation is a way to expand the business to different markets and segments and generate incremental revenue with little investment and risk. Selling on marketplaces is a way to add an extra sales channel to display products, making them available in trustworthy and credible websites. Also, to reach several potential customers with cross-marketing.
A digital touchpoint between brands and retailers can be strengthened through e-concessions, but the real prize lies in improving the relationship between the brand and the retailer. Customers should always be at the forefront of every brand's mind as the most important thing is to maximize the value and touchpoints within the customer’s reach.
Marketplaces are part of a wider omni-channel strategy for brands: As part of a wider online omni-channel strategy, marketplaces offer brands an opportunity to reach a new segment of shoppers and provide touchpoints they may not have had before. They enable a wholly centralized data management towards synchronization of existing channels. Therefore, it brings shoppers a seamless shopping experience when blurring all boundaries among channels. The luxury brands have control over pricing and product assortment enabling another sales channel while some marketplaces offer to take control of automating supplier management and some inventory handling as well as processing sales and orders. Marketplaces also manages the expanding SKUs as they are expected to grow going by one of the benefits of the marketplaces.
Marketplaces provide enhanced customer experiences: While online customers are likely to be more concerned about the flexibility & ease of processing payments, marketplaces make payment processes easier. Brands enabled can rest easy knowing that they offer their customer a range of payment options to choose from which are safe, reliable, and often quicker. With ongoing supply chain disruptions and overloaded mail systems, many web stores have experienced shipping delays. This impacts independent retailers, and can result in over a third of shoppers not repurchasing from a retailer again. Marketplaces solve this problem by enabling faster shipping, as some have global shipment capabilities and additional channels.
Marketplace paves way to customer retention and better promotions: Marketplaces offer goods and services of multiple vendors to the customers within the same platform. Multi-vendor store allows the admin to identify customers, build relationships with them, and bring new customers with the similar choices and preferences. The customers get a wide range of product to choose from, while the sellers receive an access to larger audience range. With marketplaces, customers also have access to additional promotions or discounts, and an enhanced user experience with frequent offerings. Another way luxury brands incorporate this through marketplaces is by using the marketplaces targeted planning and promotional methods to attract and retain customers.
Synchronising your brand to a marketplace often requires the implementation of new digital models. Sometimes, that also means releasing dependence on a legacy technology landscape to enable it for transformation. However, implementing the new models is often not a smooth process, and needs a business blueprint to outline an end-to-end solution for selling on multiple channels while and delivering a seamless customer experience.
47% of digital purchases worldwide happened via online marketplace platforms in 2022. This number is increasing every day. While marketplace business ideas are a good one to pursue for a specific niche, it has its own set of limitations
While we advise luxury brands to reap the benefits of the marketplace, we also would like to shed a light on a few common challenges faced by brands:
- Choosing the wrong development platform: One of the leading challenges of e-commerce marketplaces is that sellers have no idea where to begin. There are multiple options to choose from. Companies can always opt for SaaS solutions like Shopify for building their marketplace. But by adding the right plugins and features, the marketplace platform will be ready within weeks but could have additional gaps. Luxury brands need to choose an e-commerce and marketplace solution that will grow as they do, helping them curate and scale.
- Out of touch with user experience: The biggest marketplace problem any company could face is poor user experience. Without the right elements in place, the buyers and sellers will not show any interest in the marketplace platform. The marketplace growth depends on how many stakeholders register on the platform. There needs to be a simple checkout process. One-click checkout is the simplest way to attract most customers in the marketplace. Because of the wide array of product selections, brands need to ensure the marketplace represents them properly to help guide the user experience and cushion the customer journey.
- Technology for growth: One of the most important factors behind the exceptional and world-renowned success of the e-commerce industry is leading-edge technological advancement. The scope and efficiency of marketplaces have been improved when developments were made in areas of location-based marketing, IOT, mobile commerce, and VR techniques. To be provided with infrastructure updates as well as convenient stack, brands should collaborate with a good and reputed technological partner if they wish to attain enterprise-level success. If there are no scalable solutions embedded in the infrastructure, then the marketplace cannot be enabled for success.
Streamline Marketplace adoption with Absolute Labs
At Absolute Labs, we provide architecture consulting and a target operating model for brands to live by when making this transition to sell on a marketplace.
- We set up operational and support processes for onboarding a new marketplace or e-concessions model, and work with brands to understand the requirements for the key internal business applications.
- As an ESB agnostic partner, we help select a vendor that is best for scaling your brand.
- While a strategic design is required to ensure the transformation goes smoothly, Absolute Labs works with various enterprise platforms to tailor to the selected marketplace needs and create a technical roadmap and architecture needed to implement these platforms.
- Providing reusable and scalable APIs to make the transition, our team delivers quick results, allowing brands to onboard additional marketplaces and incorporate other solutions with minimum disruption to the business.
- We work with the selected marketplace to automate inventory management and synchronise retail applications with the marketplace for automation and replenishment.
To find out more, please visit our customer stories page, or email.