In 2020, 62% of e-commerce sales worldwide were made on marketplaces.[1] 155 of those marketplaces even recorded more than a million monthly visits across all sectors.[2] Offering a large range of products, a variety of options, and various delivery options, marketplaces precisely meet consumer requirements. For the retailer, they provide the opportunity to develop their customer loyalty and to launch a new sales channel. The question is which marketplace to choose: mainstream or niche?
The health crisis has accelerated the growth of phygital commerce. Today, it is difficult for retailers to do without a presence on the web: online sales grew 140% last year[3]. It is not, therefore, a question of whether they should get online, but how they should do it: what economic model should they implement, what steps are involved, what product scope should they choose, and what strategy should they adopt for their future marketplace?
These many questions are not easy to answer without a global overview of the benefits and limitations of each. Be it a mainstream marketplace that gives the consumer access to an almost unlimited number of products, or a niche marketplace in a product category, both meet specific challenges faced by the retailer.
Why opt for a mainstream marketplace?
A mainstream marketplace – or horizontal marketplace – can offer a plethora of different products in a plethora of categories (home appliances, fashion, beauty, DIY, culture, high-tech, leisure, etc.). For the consumer, this seamless buying experience offers the near certainty of quickly finding, in a single place, what they need and more. For the retailer it is a guarantee of customer satisfaction and the opportunity to diversify their business by rounding out their catalog with third-party products.
Another advantage is that by meeting the majority of customer requests, the mainstream marketplace attracts a broader clientele, allowing the retailer to expand their customer portfolio much more than they would with an e-commerce site or a network of physical stores. There is a double benefit for the retailer as the more new customers they attract, the more interesting they become to potential new sellers, and therefore the more new products they can offeron their platform. Because a mainstream marketplace is not limited by the number of product categories, the operator can enjoy development prospects that are also near-unlimited.
By continuously enhancing their marketplace, they offer the consumer an unparalleled variety of choice, not just in the choice of available products, but also in the diverse array of prices, possible options (color, size, material, etc.), complementary items, delivery and payment options, etc.).
By opting for a mainstream marketplace, the retailer not only diversifies their products and services, but also their clientele and market (if they decide to operate their platform abroad)! Nevertheless, in a highly competitive sector, this option can prove less profitable in the short term. It is difficult to carve out a place among the main e-commerce players who are well established. Depending on the chosen strategy, opting for a niche marketplace could therefore seem more relevant.
Why opt for a niche marketplace?
The current trend is more toward launching marketplaces that specialize in one market segment. Positioned in a clearly defined core market such as food products, sports equipment or DIY products, niche marketplaces enable retailers to assert their expertise in the field in question. This means that the platform has more chance of quickly becoming a leader in its field.
Although their product catalog is less diversified than on a horizontal marketplace, it is no less exhaustive and includes many additional services specifically tailored to the sector. Organized around a community of expert sellers, the vertical marketplace is more capable of attracting a large number of enthusiasts looking not just for the best possible products on the market, but also real expertise. As such, the retailer can offer higher added-value products and will therefore attract and gain the loyalty of the best sellers.
So a niche marketplace is more likely to offer the consumer a user experience that is more tailored to a specific need. The retailer will benefit from better quality traffic, which means a better online reputation and a stronger brand identity. Unlike a mainstream approach, a niche marketplace remains true to the DNA of the retailer’s brand. This new distribution channel fits more easily within the buying journey of existing customers.
While a mainstream marketplace generates greater sales volumes, a vertical marketplace generates less but better quality traffic, a conversion and sales factor with a higher added value. To make the right choice, the retailer must position the brand according to the buying habits in their business sector. What do their competitors offer? What are consumers’ expectations? What are the trends in their market?
While some prefer the simplicity of ordering on a mainstream marketplace that offers a large choice of categories, others will prefer the level of detail and the personalization of a niche marketplace. An effective strategy could be to sell your own products on a horizontal platform in order to benefit from a large volume of business, and to simultaneously develop a niche marketplace to increase margins and strengthen the brand’s image. After phygital, retail will continue its hybridization by combining sales on mainstream and niche sites to meet the expectations of all consumers.
[1] Digital Commerce 360, March 2021
[2] According to the survey carried out by the site Webretailer.com, 2020
[3] According to the report “2020: The Year of e-Commerce”, Wix, December 2020
