According to an elaborate research study conducted by the Ecommerce Foundation and Nyenrode Business University, retailers from all over the world expect that global market places, such as Amazon and Alibaba, will own 39% of the global online retail market in 2020. This indicates that the influence of market places on retailers and brands continues to grow considerably over the next few years.
Figure 1: What do you expect the market share of market places to be in global online consumer sales in 2020?
By order of the Global E-commerce Summit, the Ecommerce Foundation, an independent non-profit organization, initiated the Rise of the Global Market Places research study, together with Nyenrode Business University. This study was powered by Adobe, Informatica, Lengow and LiveWords.
The purpose of this study is to help companies define their strategy for successful competing, and growing, in a world where online market places are a dominant new force. In total, the online survey was completed by 231 retailers and 43 retail consultants, while around 30 CEOs of leading companies worldwide provided their views in more in-depth interviews.
Overly optimistic outlook
The main conclusion from this research study is that retailers have a very positive outlook regarding their future. Even though they expect market places to have a share of 39% in the global retail market in 2020, they also believe that their company will grow as well. According to the study, this optimism is based on two views: retailers consider the impact of market places to be neutral or positive and they believe they can outperform market places.
“According to the respondents, e-commerce platforms can indeed significantly increase domestic and international sales of retailers and brands, by helping them to reach more customers,” says Jorij Abraham, Research & Advice Director at the Ecommerce Foundation. “However, market places charge companies who want to use their services a hefty price, taking up a large part of their margins and profit.”
Figure 2: To what extent will market places improve retail performance towards 2020?
In addition, retailers overestimate their performance compared to that of market places. Generally speaking, retailers state that they outperform market places in almost every aspect, but especially in customer-oriented processes, such as customer experience and service. Only with regard to IT and Big Data, retailers are more reserved about their performance.
“This ‘The Rise of the Global Market Places’ study is a wake-up call for many retailers,” says Prof. Kitty Koelemeijer of Nyenrode Business University. “Retailers capitalize on their ability to excel in servicing customers while outsourcing part of their marketing efforts to market places. Companies who do not have a clear vision on their future fail to respond timely and will eventually fail.”
In terms of actions in response to the rise of global market places, retailers believe they should focus on specific customer segments, improve their customer services, and focus on specific markets and/or products. Retailers do not see reducing their prices and investing in offline stores as viable options.
When asked about strategies for dealing with market places, retailers consider cooperating with and selling through market places as the most interesting options. The respondents were clearly not very keen on completely ignoring them or exiting the market due to the competition.
The answers provided by retail consultants show some interesting differences compared to those of retailers, especially with regard to the obstacles that retailers face towards dealing with market places. Where retailers see many different barriers, consultants clearly see a lack of general leadership as the largest problem for retailers. In their opinion, retailers in general do not really see the urgency of market places and on average lack a clear vision on how the market will develop.
Figure 3: Which barriers do retailers face towards dealing with market places?
Advice to retailers
Through the in-depth interviews with CEOs around the globe, three main advices regarding dealing with market places emerge. First of all, retailers and brands should definitely use marketplaces to increase their domestic and international sales and also learn from them. Not only from their success, but also from their mistakes. Second of all, they have to migrate towards the vertical and/or specialist retailer model. The existing retail model where retailers have a large role in the supply chain is no longer valid. Third and final of all, companies should build a brand with a heart. Or as Paul Greenberg, Executive Chairman of the Australian e-commerce association NORA, puts it in his interview: “Pure players are typically smart brain companies. Retailers can also offer a heart. They will have to start, however, internally by building an emotional relationship with their employees and other stakeholders before they can build up a real relationship with their customers.”