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The problem with online marketplaces

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As retail becomes increasingly competitive, markets more saturated and consumers more discerning, companies are looking for any advantage in an attempt to get ahead. Increasingly, the key to boosting sales lies in a retailer’s ability to create a meaningful relationship with the consumer through intelligent marketing. With an increasing amount of retail activity flowing through online marketplaces such as eBay and Amazon, however, to what extent are these meaningful consumer-retailer relationships compromised?

A recent study into the practice of retailers showed that 95% of UK retailers now sell via online marketplaces such as eBay or Amazon. The survey, commissioned by ChannelAdvisor and carried out by Redshift Research, asked a number of UK and US retailers about their selling practices, with just 5% of the companies (with revenues averaging between £1.7m and £3m) not selling on online marketplaces.

Despite this widespread loyalty to online marketplaces as a retail platform, many retailers are doubtful of its value. There are significant pitfalls of this approach, with regards to the ability of delivering positive customer service, maintaining reasonable pricing and sourcing products.

While these negatives do hold considerable sway, another key issue seems to have been overlooked. The overriding problem with online marketplaces is the disconnection that they foster between retailer and consumer. By selling through an intermediary party, brands can cause irreparable damage to their future sales prospects. In terms of brand recognition, consumers have been shown to remember the marketplace (and not the retailer).

This perhaps holds less true with branded merchandise, but any store selling a variety of items from different brands risks slipping into anonymity. For example, one would b e hard-pushed to remember the exact eBay user they bought their new iPhone earphones from, and would react to this simply by returning to eBay, likely choosing a new retailer along the way. Retailers, then, suffer unavoidable losses in returning commerce and consumer loyalty.

And the damage doesn’t end there. Perhaps the greatest threat to retailers with a reliance on online marketplaces is the inability to gain a better understanding of their customers. A direct-to-consumer sales strategy allows the retailer to retain tighter control on valuable data that, if used correctly, can help them connect with their consumers in a proactive, efficient and meaningful way.

From a marketing standpoint, the advent of big data and targeted marketing has become one of the biggest weapons available to any retailer. Any opportunity to accrue insight into a consumer’s preferences and tendencies should be gladly taken; and not left in the grateful hands of an eBay or Amazon.

Of all the retailers surveyed, 73% said they used digital marketing, but 38% pointed to website limitations as a factor constraining them from upping their output. Many retailers, it seems, are either closing themselves off from vital data, or unaware of its existence and the possibilities it can give them.

While the majority do recognise the importance of digital marketing, it seems mobile marketing is set for a boost. 73% of UK retailers said they would increase their mobile advertising budget in the next two years, and 43% recognising that up to 30% of their web traffic comes from mobile devices. Direct-to-mobile advertising allows retailers to stay ahead of competitors by forging a personal and targeted bond with the consumer, but it cannot be done without access to consumer data. In short, retailers must regain control over their retail process, selling through their own online stores and resisting the temptations of online marketplaces. While they may promise to smooth the way and offer greater exposure to consumers, these sites in fact create an unbridgeable chasm between the retailer and the consumer. For first time sales, eBay or Amazon are useful, but retailers will soon find themselves alienated and unable to drive return sales. With a business model that uses consumer data to create a targeted marketing strategy, retailers will see huge boosts in returning customers and brand recognition.

Published on Tuesday 23 September by Editorial Assistant

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