E-commerce is becoming more complex and demanding every day. It's not always easy to keep track of...
Online marketplaces are booming like never before, and now account for the largest share of e-commerce sales. This offers companies an enormous revenue potential.
But as tempting as this prospect may sound, the road to success does not necessarily lead via established giants like eBay, Amazon and Co. To remain competitive, retailers should meet their customers where they want to buy.
With that in mind, let's look at why an increasing number of brands and retailers are venturing into niche marketplaces, and learn how to effectively manage and optimize sales.
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From Broad Scope to a Focused Approach: Understanding Niche Marketplaces
When considering expansion into online marketplaces, horizontal platforms like Amazon and eBay might be your first thought. However, there now exists a wide variety of vertical niche players that give intriguing opportunities for retailers.
A niche marketplace in e-commerce is a specialized platform that focuses on a specific industry, product category or target group.
From Avocadostore in Germany, specializing in sustainable products, to high-end fashion curators like UK portal Farfetch, and even ehorses, a dedicated platform for horse enthusiasts: there's a tailored niche for every industry and target group.
An examination of the 100 largest marketplaces in Europe indicates that fashion, jewelry, and baby products hold particular appeal, commanding a market share of 22%. Trailing closely are arts, crafts, and gifts with an 11% share, followed by home, garden, and DIY products at 8%.
The Rise of Niche Marketplaces: A New Hope
The global trend of e-commerce, particularly on online marketplaces, continues to thrive. According to Oliver Wyman's "Future of Retail" study, e-commerce is expected to grow at an average rate of 11% in the coming years, with online marketplaces set to expand by up to 30%.
Based on this trend, the study predicts that over 40% of global e-commerce revenue will be generated via digital marketplaces by 2024.
OC&C suggests that in sectors such as fashion and books, marketplace purchases are poised to surpass traditional channels like proprietary online shops.
And while global e-commerce giants like Amazon and eBay have long dominated the online retail scene, there's clearly a shift currently happening from generalist to specialist:
A 2022 study by Ecom Consulting and Gominga found that the number of marketplaces in the DACH region (Germany, Austria, Switzerland) has tripled since 2015. The same study expects e-commerce marketplaces to further differentiate in the future, with an increase in specialized niche marketplaces – a trend savvy online sellers can no longer afford to overlook.
Likewise, niche marketplaces are seeing strong growth in the Middle East, and particularly the United Arab Emirates - read our guide to the top online marketplaces in the UAE and Dubai.
Benefits of Niche Marketplaces
Unlike mass marketplaces, a niche marketplace targets a homogeneous buyer group, resulting in the following advantages:
Increased Sales Opportunities and Enhanced Brand Recognition: Let's start with the obvious. New distribution channels draw attention to your brand and provide your business with additional revenue opportunities.
"When you have a presence on a marketplace, it creates visibility for your brand. It's a fantastic marketing opportunity with enormous reach," explains Axel Zöllner, Head of E-commerce at NÄVE Leuchten during a panel discussion at the Marketplace Convention 2022 on the topic of "Success in the Niche: Pros and Cons of Specialized Marketplaces".
Reduced Competition: While Amazon might overshadow other marketplaces in terms of monthly visitors, niche marketplaces offer you the advantage of a better buyer-to-seller ratio and a target audience that's already interested in your offering.
Claudia Weigang, Senior E-commerce Manager Central Europe & Marketplace at Reima, emphasized during the same panel discussion, "It's important for us to target the right audience. There's no point in joining a marketplace if our target group isn't there."
Improved Customer Relations: This leads us to the Achilles heel of a horizontal marketplace. With their extensive range, big players cater to a broad customer base, making it difficult for retailers to personalize their approach.
Niche marketplaces, on the other hand, target a homogeneous audience with shared interests. This allows you to develop user-friendly and personalized strategies that can foster long-term customer relationships.
Personalized Marketing Strategies: A clearly defined target group also allows for tailored marketing campaigns, which in turn translate into higher conversions. Advertising costs are often significantly lower than for your own online store, as the target audience already exists and is ready to make purchases.
As Aljoscha Kollmeyer, Director of E-commerce at GERRY WEBER, explains in the K5 Commerce Cast: "We noticed quite early on that we were reaching a target group on e-commerce niches that we didn't have available in our own shop. For us, marketplaces are like display windows, offering high customer frequency and tremendous traffic."
- Accessing International Markets: As the target audience is already in place, niche platforms also offer a quick and straightforward opportunity for global positioning.
"Marketplaces have become a strategic lever for us and provide us access to new countries. With well-curated assortments, we can reach customers abroad who would otherwise be hard to attract, and we can do this without a huge marketing budget," adds Aljoscha Kollmeyer, Director of E-commerce at GERRY WEBER.
Niche Marketplaces Strategy Checklist: Download Now
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Challenges of Niche Marketplaces
However, a niche marketplace can also present retailers with technical challenges and complex operational processes, as they often impose specific requirements on internal business processes and customer needs. These can include:
- Data Management: As order volumes increase, larger amounts of data need to be processed and continuously updated. This is a complex and time-consuming process that can demand substantial resources.
- Customer Expectations: In addition, niche marketplaces tend to be highly customer-focused, often to the detriment of providers. Delivery delays, high cancellation rates or negative reviews can lead to account suspension. Excellent customer experiences are crucial to a successful sales strategy.
- System Integration: The technical integration of internal systems such as inventory management, payment processing, customer service, and marketing tools can be highly challenging.
"A big challenge is the technical component, the speed and how quickly we can be present. We work with small teams and have to make sure we automate everything that can be automated," commented Axel Zöllner during the panel discussion at the Marketplace Convention 2022.
Increasing sales channels ultimately lead to a complex system landscape. If you want to extend your omnichannel strategy to niche marketplaces, you should therefore focus on technical integration into your own existing IT. This is where a headless Digital Operations Platform (DOP) comes into play.
Digital Operations Platforms: the Foundation for Success
Based on the MACH architecture (Microservices-based, API-first, Cloud-native and Headless), a modular headless platform enables flexible and fast integration of new systems and applications. Learn more about each MACH principle and their benefits in our guide.
To expand to new niche marketplaces, the following advantages arise:
- Marketplace Integrations: New store systems, marketplaces and various external providers can easly be integratad into your existing tech stack, while at the same time all information is synchronized in back-end operations.
- Product Information Management (PIM): A PIM system manages, updates and automates all product information across all sales channels and in real time. It ensures accurate and up-to-date information, prevents errors due to manual data maintenance as well as incorrect stock levels and ultimately saves you and your team a lot of time and money.
Axel Zöllner sees the PIM as a "very big topic" for future business activities. He explains: "A PIM opens up completely new opportunities to drive internationalization by allowing us to use automatic translation of texts and attributes. For this, we need a solid software solution as a foundation."
- Order Management: Fulfillment solutions are designed to efficiently process orders regardless of which marketplace or channel they come in from. Learn how to make your order management more efficient in our Composable Order Management guide.
- Omnichannel Orchestration: You can collect all separate business processes in one central location and automate workflows to enable efficient processing of orders and improve customer experience.
- DataHub: Here all data is mapped, transformed and transferred to other modules as well as external systems - fully automated via ETL. It ensures consistent and accurate information across all business processes.
Aljoscha Kollmeyer explains the importance of seamless data flow for business success in the K5 podcast: "We integrate data such as user feedback, including return labels and direct feedback, into our decision-making process. Moreover, we utilize the data provided by marketplaces to adapt our product development and allocation strategies. This adaptability, in turn, is crucial for our success."
Overall, a Digital Operations Platform promotes a comprehensive Unified Commerce strategy that allows you to optimally cover all business processes on a niche market.
Aljoscha Kollmeyer adds, "Our restructuring was a profound system change that has made us more flexible and agile - a necessary and correct step. We have reorganized our shops, integrated an innovative PIM system, and fundamentally overhauled the system landscape, including key interfaces for omnichannel. This was an indispensable advancement."
Actindo Core1: Integrate Marketplaces, Automate Processes
The Actindo Core1 Platform can facilitate your entry into new niche marketplaces.
Core1 offers numerous interfaces to seamlessly integrate and centrally orchestrate their own web store as well as numerous external marketplaces.
Inventory levels are continuously and in real-time synchronized between all marketplaces and Core1. Orders from sales channels are automatically imported and forwarded to the Order Management system, providing an accurate overview of all stocks and orders.
All product informations are centrally recorded in the PIM and automatically distributed to your web store and all connected sales channels. Conversely, orders are automatically imported and forwarded to Order Management for a precise overview of all stocks and orders.
The integrated DataHub of Actindo is the central data hub of the system and links all modules and external services together. Via ETL process all data is automatically assigned and transferred. This gives you a 360-degree overview of all business processes.
Would you like to learn how you can successfully expant to new sales channels with the Actindo Core1? Our experts will be happy to advise you!
“At Actindo, we've made it our mission to enable sophisticated transactional business models beyond retail, e-commerce, and desktop and to be responsible for driving and delivering the single point of truth for composable commerce and control customer-centric experiences in the unified commerce era.”