After 20 years of experience with major French and international retailers, Jérôme Radiguer shares his analysis of the evolution of commerce and the potential of the marketplace, which he sees as the natural outcome of retailers’ digital transformation.
1/ Last year, European retailer marketplaces saw a spectacular 60% rise in traffic. What is your take on this?
In the COVID-19 context, numerous restrictions of movement boosted the dramatic rise in e-commerce. This trend is set to continue, because online purchases are rising constantly. Consumers have adopted new habits; a shift has taken place. We will never go back to the past and this forces retailers to adapt very quickly.
Among all these changes, the omni-channel strategy has become an absolute priority. Let’s imagine a customer finds a shirt on a marketplace. They decide to buy the shirt on the brand’s website and select 24-hour shipping. When the customer receives the shirt, they realize they ordered the wrong size. The customer goes to the nearest store to exchange the shirt. That’s an example of an omni-channel scenario. For the consumer, the fluidity of the purchasing path has become a given. We have to realize that the customer is already omni-channel. Retailers have no option but to follow suit.
2/ Why is the marketplace the most profitable option for omni-channel retailers?
There are two main reasons. Firstly, because it meets a customer need. According to Gartner, 75% of e-commerce sales will be made via marketplaces in 2022. This figure really demonstrates consumers’ preference for this circuit. In terms of serving convenience (which we can translate as commodity and purchasing comfort), this is THE business model. Convenience is truly the factor that makes the difference right now and the end customer makes no mistake about that.
The second reason is the economic model of the marketplace, based primarily on variable costs. In plain terms, the retailer doesn’t stock these products, outsources the complexities (such as multiple shipping) and charges a commission. It’s a totally effective model! Gartner’s forecasts confirm this : by 2023, organizations that have been operating marketplaces for more than a year will see a rise of at least 10% in their digital earnings.
3/ Offering convenience to the customer is not a new idea. It has always been a concern for retailers. Why is it taking center stage at present?
Simply because the notion of convenience has evolved. In the 1960s, it was embodied by the founding precept of the hypermarket, the idea of “everything under one roof”. It was the service that Walmart, Leclerc and their counterparts offered their customers at that time. This convenience was reinvented in 2021. In practical terms, it means providing an unhindered shopping experience via:
- Unfailing accessibility (I order where I want, when I want, etc.),
- A virtually unlimited choice (I am no longer restricted to store space or to a retailer’s single choice),
- An attractive price and optimal delivery quality (whether to the home, the store, to a pick-up point or for a return, etc.).
According to the Stripe survey , more than a third of French consumers highlight the practicality of the marketplace (37%), access to a wider range of brands (37%) and the opportunity to discover new brands (33%). For the purchasing path of customers, these are benefits, but they represent the numerous challenges of omni-channel sales for sellers and operators.
4/ Speaking of which, Octopia developed an ad hoc offer in response to the latest convenience challenges linked to the marketplace. What are its strong points?
When we examine frontrunner businesses and companies such as Uber, AirBnB or Blablacar, who are all leaders in their sector, we realize that they all have two strong points in common: powerful, scalable technology and a solid network of partners.
As firm believers in this model, we thus provide a technological solution from A to Z, which draws on an ecosystem of partners (technological, transport, payment, aggregators and, of course, sellers). This enables us to develop the offer rapidly and provide a virtually unlimited catalog of products while outsourcing preparation, shipping and storage costs, etc. In addition, we also offer solid last mile expertise (parcel tracking, and the European warehouse network, etc.), which allows us to manage a significant volume of parcels of our own or on behalf of sellers (via our Fulfillment module) and to guarantee an optimal experience for consumers.
5/ How are the Octopia teams organized to support retailers in the creation of a marketplace?
We take retailers looking to launch their marketplace through three steps. The first step is to fully understand the retailer’s requirements, which are determined by their commercial aim, the geographical areas they operate in, their IT architecture and the potential need to develop the latter. This is the task of the sales and pre-sales teams, who suggest the most appropriate solution. The second step begins once the contract is signed. Our Solutions Consulting teams take over and guide the customer in the implementation of the solution, right up to the launch of the marketplace. Then comes the third and final step: our business consultants provide their professional expertise to facilitate the retailer's digital transformation (with advice, where needed, in the fields of offer strategy, recruitment of salespeople, customer relations and human resources, for the reorganization of in-house teams, and so on).
6/ Octopia boasts 10 years’ experience as a marketplace operator. What has this taught you with regard to facilitating the digital transformation of your customers?
First and foremost, the reality of marketplace business is significantly different to that of traditional retail. In this framework, we no longer buy to resell and we generate a volume of business rather than a turnover. The economic structure of the model is changing radically and this is why we insist a great deal on the drafting a business plan, to enable the retailer’s teams to adopt this new model.
Secondly, we work alongside our customers on their product range strategies, by advising them either to expand their categories (to recruit) or to refine them (to have an expert position or a “vertical” in a given field). The choice depends on their commercial strategy and is always in keeping with their marketing position. The latter is a recurring pitfall: retailers expand their offer without respecting their fundamental values, thus diluting their DNA, which confuses their customers.
7/ Once the solution is delivered, the customer is supported by an Octopia Customer Success manager. What is their role?
Their everyday role consists of providing close support to customers and helping them to use the solution in the best way possible to reap better rewards and boost their performance. The Customer Success managers also transmit case studies to our teams in order to enhance the solution via a continuous improvement process.
For example, if a customer is struggling with customer relations management, they share their difficulties with our experts who will help their teams by suggesting standard procedures and by teaching them to develop their own decision trees. In fact, the Customer Success manager is at the service of our customers’ satisfaction. They foster loyalty and ensure the success of projects.
8/ Retailers need to select offers when creating their marketplace. What advice can you give them?
The rapid onboarding of as many sellers as possible is one of the recurring requests from marketplace operators. Yet, when they are starting out, it can take them two to three years to form an adequate pool of sellers. Moreover, according to Gartner, this is the reason why only 5% of marketplaces launched since 2015 generate more than €50 million in business volume. Their catalog is not sufficiently developed. This stands to reason: merchants will only sign up if they believe they will benefit from an adequate volume of traffic to sell on a marketplace.
The fact is that when a marketplace is launched, its catalog is limited. Except in the case of a contract with Octopia, which enables retailers to onboard a part of Octopia’s ecosystem of sellers from the outset. This provides a real boost, because the retailer simply has to define their criteria (e.g., 24-hour delivery) in order to select the sellers who correspond to their needs. The retailer can thus onboard hundreds of sellers at once! Furthermore, the retailer knows they are choosing from a pool of merchants rated upstream by Octopia, which guarantees a certain level of quality.
9/ To finish, what role will marketplaces play in the retail sector of the future, in your view?
Marketplaces will serve as a booster for commerce by meeting consumer demands faster and better; by shortening the distribution value chain and optimizing logistical flows, by contributing to a greater freedom of choice and by offering enhanced responsiveness to consumer trends.
Marketplaces avail of an incredibly rich data base on everything related to consumers’ buying intentions:
- Purchase history
- Product pages viewed
- Reviews posted
- Requests entered in the search bar, etc.
Business intelligence serves to analyze all this data and extract future trends. This is made even easier by the fact that, thanks to its operating mode, the marketplace already constitutes a trend laboratory. By providing access to an extremely broad offer, known as a long tail, the customer has much more freedom of choice. With a store, the offer is naturally restricted by the sales surface or the retailer’s ability to carry stock.
On a ready-to-wear marketplace, for example, the virtually unlimited offer enables the web user to create their own trends and not simply follow a fashion imposed by one brand or another. All this data will ultimately enable retailers to anticipate their customers’ needs and stay ahead of demand. They thus offer the best purchasing experience possible!
* Brands and Marketplaces Report 2021