Consumers are flocking to online marketplaces for convenience and fast delivery this holiday season, but Lexer’s Ben Moreau urges retailers to think about whether they are willing to give up brand autonomy to be discovered by discount shoppers.

It’s holiday season again and one thing is clear – the convenience of shopping online is only growing. For those of us here in Southeast Asia, four in five (365 million) are digital consumers. Where we’re buying online is changing too. 

Marketplace adoption has maintained the gains that it saw during the 2022 e-commerce surge, so much so that 70% of consumers now believe that online marketplaces are the most convenient way to shop. Research is also indicating that marketplaces are beginning to chip away at the store’s ownership of first-time purchases – 42% of all post-pandemic online spending globally is taking place on marketplaces, with 75% in SEA.

Online marketplaces can help brands to be discovered by new customers, test international markets and clear stock in an off-price environment. But they don’t always give retailers enough control over their own customer experience strategy.

According to Shopify’s “Future of e-commerce” survey, 44% of brands report that the biggest challenges of selling on marketplaces are competing on price and controlling the customer experience. 

Not only do brands forgo their opportunity to build a direct relationship with customers for the chance to be discovered but they also lose access to valuable customer data that can help them to advantageously differentiate their market position beyond product and price over time.

It’s essential that retailers diversify their distribution strategy or run the risk of becoming beholden to marketplaces in a race to the bottom.

Who acquires whom? 

It’s important to understand that online marketplaces often take ownership of the customer, product and transaction data generated by their own website. A customer who purchases a product on an online marketplace is acquired by the marketplace, not the retailer.

If a retailer is outsourcing all of its e-commerce to marketplaces, they will only get a partial view of many of their customers. While it may capture sales, it won’t be able to stitch together shopping preferences across multiple channels and personalise the ongoing brand experience.

This is a lost opportunity to expand the retailer's own customer base, promote ongoing mental availability and increase market share with relevant messaging. Marketplaces can help brands to be discovered but the lack of a direct relationship can impact the cost-effectiveness of the overall growth strategy – acquiring a customer is five times more costly than keeping one. 

A growing disconnect

The ongoing fluctuation of pandemic-associated disruptions will cause omnichannel and online shopping to continue to pervade the retail world and customers are swaying between omnichannel, online and in-store shopping with a reduced-contact mindset. So focusing too heavily on online marketplaces and not gaining customer data is a lost opportunity to connect the dots across the customer journey and engage strategically. 

Given that 73% of shoppers use multiple channels before making a purchase and 32% would stop doing business with a brand they love after one bad experience, the gap between customer expectations and a marketplace brand’s CX efforts could diverge too far.

Love, Bonito has sidestepped this risk by using technology to deliver innovative omnichannel experiences that adapt to consumer behaviour. It has become one of the largest direct-to-consumer  womenswear brands and country director Joan Yeoh recently explained that “we believe the future of retail is not just online or offline but an integration of both”.

“Customers do not only expect convenience but also seek connection and being part of a community.” 

The leading brand is looking to expand into key markets such as Hong Kong, Japan, the Philippines and the US by continuing to meet customers across multiple touchpoints. A touchpoint could be a social media livestream, an e-commerce website or an online marketplace. But creating human connection regardless of the medium and instilling confidence in women of all ages is the common thread of the expansion strategy.

Selling solely on a marketplace and failing to connect cross-channel customer data wouldn’t give the brand the level of insight and control needed to create this competitive customer experience.

Prepare for a sprint

While marketplaces are a quick way to get online and start promoting products, they give brands little flexibility and sway over marketplace UX. It becomes difficult to position a brand around anything beyond price and product, as competition is fierce and retailers only get access to sales data.

Marketplace retailers lose autonomy over pricing and timing. They have to keep up with the requirements of the marketplace and are often swayed to offer discounts for sales periods which are determined by the marketplace. As discounts can cause sharp spikes in marketplace sales, some retailers may find it hard to avoid stockouts. 

This can impact the customer experience and how the marketplace subsequently prioritises the brand. There is also no direct line of communication between the brand and customers, and unsatisfied customers will often direct their grievances to the review section.

It’s important to have choices

E-commerce is growing in Southeast Asia, with it totalling 9% of retail transactions (it’s 19% in the US). And while the thought of getting in front of the many shoppers who use marketplaces to discover, research and compare products is both alluring and viable, the deeper you go with marketplaces, the more reliant you become. Your owned customer relationships are important. Remember that increasing customer retention by just 5% increases profits by 25-95% (Frederick Reichheld, inventor of NPS).

Retailers should begin with the end game in mind and have a diversified distribution strategy that also enables them to build direct customer relationships and a strategic market position.