Build Tomorrow’s Amazon of Your Industry Today - and do it Right!

Amazon, eBay and co. prove that a marketplace model makes sense for merchants. The advantages for the connected merchants are obvious: They save on expensive technical resources and can rely on an already existing and functioning infrastructure.

The advantages for the platform initiator are even more lucrative. On the one hand, having an own marketplace constitutes a revenue stream that eliminates commodity risk and capital commitment because only products from other merchants and manufacturers are sold via the platform. A different approach would be a brand building a marketplace where its own product range is complemented and expanded by other merchants. In both models, the risk is more likely to be on the side of the connected merchants than with the platform owner.

On the other hand, the transfer of know-how and customers to their own sales is valuable due to the performance of the merchants and increases growth opportunities.

User engagement can also be drawn to the platform by existing customer groups from the very start. Customers who already trust a merchant or brand will be more willing to purchase products from these suppliers via a marketplace.

• Revenue through marketplace fees
• Advertising (see comment below)

The condition for the aspects mentioned above is transparent reporting on the partner and merchant side. This enables the marketplace operator to identify reasons for low sales figures or high return rates, for example, and to identify optimization potential. This is the only way to increase sales and increase customer loyalty – win/win for both sides.

Amazon’s market dominance as an ‘all-round marketplace’ cannot be denied for the B2B sector, either. Keeping up with the constant development, new services, and patents seem impossible for new platforms.

On the other hand, Amazon’s extensive product range also demands major compromises on the user experience. The quality of product presentations by individual merchants is not consistent; many products are not adequately described; Amazon’s customer reviews often provide more information about the product than the product description. These aspects can be decisive for a purchase, especially in the B2B sector.

This is precisely where B2B providers can play out their advantages. In terms of product and industry knowledge, they are far superior to Amazon. Products and services can be offered in a more user-friendly way. Requirements: price, payment options, and order processing must keep pace with the Amazon UX.

Special interest platforms, in particular, can focus on very differentiated target groups. B2C and B2B customers are increasingly demanding ‘everything from a single source’ – marketplaces perfectly meet this relatively new requirement. Merchants and manufacturers who offer not only a standard range but also niche products, custom-made designs, and services can position themselves as pioneers in their industry with their own platform. The marketplace operator offers merchants a platform with already stored products and content that can be expanded as required. The merchants have the advantage of launching their online shop with little effort and are integrated as trading partners.

Another advantage for both sides: Trade partners and merchants can not only sell products via the platform but also place advertisements, thus increasing sales. This can take place through sponsored listings or display banners, for example. These advertising expenses, for their part, can provide the marketplace operator with an additional revenue stream.

1. Revenue

The challenge in many companies: every department has established its own definition of revenue. This can lead to miscommunication, different interpretations of results, and wrong decisions

"Revenue as a term seems so harmless; it acts as if it were the simplest key figure in the world. But the opposite is true: there is no key figure that is trickier to define than this one. It is the key figure that is actually 20 key figures.”

- Lennard Stoever, Co-founder & CEO minubo

Even if it seems pointless to define the term even before the first cent is ever turned over, you are on the safe side if this is done in advance in a precise and binding manner. This is because by the time the parties involved realize that apples are being compared to oranges, it is usually too late, and there is a far more complex problem: the time-consuming and nerve-racking process of calculating the different revenue streams and the underlying definitions. Unfortunately, this is the reality in many companies. Situations like this cost a lot of time and are highly inefficient. Therefore, the goal and precondition for company success are the focus on a cross-departmental, uniform definition, and understanding of the term ‘revenue.’

2. Sales

Sales are a fundamental success factor for a marketplace. Channels must be made profitable for all sides of the platform. It must be more attractive to sell and buy on the marketplace than via direct channels for both merchants and customers. Therefore, the framework within which the merchant can sell its goods on the marketplace must be precisely defined in advance.

3. Reach

The most important tool to control and increase reach itself is ownership of customer access. This includes both specific authorizations and data transparency on the merchant’s side as well as a binding CI. These are decisive factors for a high reach. Extensive customer data allows more detailed segmentation for higher marketing efficiency and more accurate retargeting.

A binding CI and guidelines for the merchants are important because they strengthen the public image: if customers recognize the platform based on certain characteristics of the CI, this increases trust and thus also the willingness to make a repeat purchase and recommend the marketplace to others.

4. Customer satisfaction

Customer satisfaction is a relatively ‘soft’ KPI, whose comparative values cannot be viewed in a purely analytical and number-based manner.

The KPI for customer satisfaction can be, for example, the creation of a consistent shopping and fulfillment experience within a defined period, but also strong performance and high page loading speed. Making this a testable factor allows knowing exactly how the customer really thinks, optimizing customer focus, and generating a growing customer base

5. Product range (extra wide vs. special interest)

The focus must be on the following question: do I want to design the range of products in my marketplace to be rather wide, or do I want to cater to special interest groups? The answer to this question depends on the platform‘s target group, but especially B2B marketplaces that only target one industry should not offer a range of products that is too wide; instead, they should focus on depth. Quantities and number of items should be precisely defined in advance. Additional complementary services or products, such as batteries for electronic devices, should also be taken into account when designing the product range.

Strategic considerations and the answers to the following questions are essential here:

• What is the goal of my marketplace?
• How many merchants do I want to have?
• How much competition from other providers do I allow on my platform?
• What product range does a merchant offer, and does it match my selection of products?

The answers to these questions are unique – a reasonable goal may be exclusivity, for example, while other marketplaces prefer to offer a large selection of products.

The decisive factor for acquisition should be the existing portfolio of merchants. Meeting specific ertain criteria, such as sustainability, should also be taken into account, as well as strong demand for categories offered by the merchant. A new merchant who lists products in this category can also tend to be very interesting and be prioritized.

Ratings on other existing marketplaces can also provide an initial indicator for already active merchants. These are also already familiar with the ‘marketplace model’ and its implementation. Also, they already have product data that allows valuable conclusions about customer behavior for your marketplace.

On the other hand, a rating for merchants can also reveal possible shortcomings: poor quality of product data, non-existent images, missing descriptions, etc.

If the services do not meet expectations, a merchant can be excluded from your platform in advance.

To keep control over your platform, a ‘closed marketplace’ might be useful, limiting access to the shop to merchants and partners. The advantage is that you, as the operator, stay directly in control of the entire product range. Keep the possibility to set your principles and standards obligatorily: the quality of the merchant can be verified in advance and monitored later – so that the quality is right and the image of the marketplace is not at risk.