Online marketplaces: Interview with expert Valerie Dichtl
Online marketplaces such as ebay, Amazon or Zalando have enjoyed increasing popularity for years. Especially in the fashion industry, business on marketplaces is booming.
Valerie Dichtl can look back on over 10 years of experience with online marketplaces, first on the marketplace side and then on the brand side. There, she has experienced the growing relevance of online marketplaces live. In 2019, she therefore decided to start her own business and founded Marketplace Uni, where she wants to share her knowledge about online marketplaces with employees of sports and fashion brands.
We have met with Valerie to talk about the current developments in online marketplaces.
Online marketplaces have gained a lot of relevance in recent years. How do you explain this development?
I see two reasons for this: On the one hand, because there are more and more D2C, that is, direct-to-consumer brands that no longer sell classically via wholesalers, but take the selling of their products into their own hands.
On the other hand, the run on the marketplaces is caused by the fact that the big online shops like Zalando, About You or myToys are jumping on the marketplace trend and are now putting their focus on getting brands to sell more and more by themselves via their marketplaces. After all, it is much less risky for the shops if they do not have to buy the goods themselves, but if they simply make their online shop available as a platform and receive a commission for it. In addition, online shops can expand their selection through the marketplace offer and through their large reach they can offer the end customers more product variety.
From a brand perspective, what is special about online marketplaces compared to other distribution channels?
What is special is that brands can decide for themselves which products they sell and at what price. On most marketplaces, brands only need approval once, then they are allowed to sell. From then on, they can decide for themselves whether they want to show their entire collection or, for example, only five selected items.
In wholesale, on the other hand, the retailer's buyer has a certain budget and thus decides which products are included in the product range. In the marketplace business, brands have much more freedom to decide how and where they want to sell which products.
What is the advantage of online marketplaces compared to having your own online shop?
Many brands first think of their own online shop when they think of direct sales. In terms of the processes and considerations in the background, marketplaces work similarly to a brand's own shop: How does the product get online? Which images do I need and which product data? How do I deliver to the end customer? However, on marketplaces you can use an existing system. With an online shop, you also have to take care of the shop software and how the shop looks in the frontend.
Another advantage of marketplaces is that there is an existing reach. On marketplaces, you sell where the end customer already is. Everyone knows Zalando or About You and many people already have an account there. However, for customers to order from the umpteenth brand's online shop, the product must be particularly exclusive or a certain service must be offered.
For which companies is it particularly interesting to sell on marketplaces?
It depends on which products we are talking about. Generally, it is interesting for all companies that sell consumer goods. But a double pack of socks, for example, cannot be sold profitably via marketplaces because the shipping costs are simply too high. The question is: how can you redesign your product range so that it is profitable? Especially with sports and fashion brands, this plays a bigger role than with DIY products, for example, because of the high return rates and seasonality.
So how does a brand have to change its product range in order to sell it profitably on online marketplaces?
This depends on the selling prices, the products and the return rate. Let's stay with the example of socks. You can probably profitably sell a multipack of eight pairs of socks with a 5% return rate for 16.95 euros. A dress with an RRP of 30 euros and a 70% return rate, on the other hand, is not very profitable. So it is definitely possible to sell profitably in the fashion and sports sector. The primary question is: To what extent are you willing to adapt your assortment to these requirements? How can you adapt your online assortment and make it profitable?
Why is it worthwhile for all businesses to keep an eye on online marketplaces, even if you don't sell there?
Marketplaces are excellent for research. You can see pretty accurately what the competition is doing. As a sock brand, you could watch Falke or Tommy Hilfiger, for example: Where do they sell their socks? What product ratings do they get? And then there are not only big, well-known brands, but especially on Amazon there are also many no-name brands from which you can take some lessons.
What is the first step to start selling on online marketplaces?
The first step is to become aware of where you want to go. You have to think about which marketplaces you want to use to sell which products. The choice of marketplaces will then determine how you strategically position yourself and which tools and service providers you select.
It is also important to know where you currently stand, how many tasks you can take on yourself: Do you have free capacities and employees with basic knowledge about online marketplaces or are you completely lost and urgently need support?
In the next step, you can start to work on your strategy. Once you know which marketplaces you would like to have, you can choose the software that you will use to bring your products online and also decide on different countries. This software is a middleware where you upload for instance your product data and pictures and the software sends this data bundled to the marketplaces. When you sell, the customer data is fed back into the software and passed on to the logistics.
What should be considered when choosing a marketplace software provider?
Let's say you have decided to sell on five marketplaces and there are three different software vendors. Vendor No. 1 has a connection to two of these marketplaces, vendor No. 2 to four marketplaces and vendor No. 3 to all five. Then you should rather choose the provider with four or five connections. The problem is that often you will only get this information when you dig a little deeper.
What happens once a brand has decided on a software?
In addition to the software, fulfilment plays an important role. Unlike in wholesale, on marketplaces you often have to deliver to the end customers yourself. Most brands only have experience with large B2B pallet deliveries. But whether you send 50 pallets to one or two customers or 15,000 packages to 15,000 end customers is a completely different logistical challenge. Many brands therefore need support from a service provider. In the fashion sector, it's also a question of which logistics provider can handle all these returns. I wouldn't want to throw away a dress with an 80% return rate every time, but of course recondition it and send it out again.
Some marketplaces offer fulfilment themselves, which is calledfor exapmle Amazon FBA, i.e. Fulfillment by Amazon, or ZFS, Zalando Fulfillment Solutions. Here, the marketplaces take care of warehousing and shipping for the brands. myToys, for example, does not offer this. If you have chosen a marketplace without fulfilment and can't handle the B2C logistics yourself, you also need someone to take care of the shipping for you.
There are also service providers who will handle both the software and the fulfilment for you. That's why it's so important at the beginning to be aware of where you are and where you want to go. Otherwise you will have a hard time finding a profitable solution for your specific business case.
What are the biggest challenges for brands selling on marketplaces?
The biggest challenge is definitely that there is a great lack of knowledge about how selling on marketplaces works. I am regularly asked by brands if I can refer them to a marketplace manager. Unfortunately, at the moment the answer is mostly no. There is a huge lack of qualified staff, not only on the side of the brands, but also on the side of the service providers and the marketplaces themselves. This is also the reason why I founded Marketplace Uni: There is simply a lack of education and training opportunities in this area.
On Zalando, in addition to the partner program for brands, there is also the Connected Retail program, where retailers can sell products on Zalando as well. What impact does that have on the brands?
It may be that, as an example, the Mammut brand sells directly on Zalando, but Mammut's retailers also sell their goods on Zalando via Connected Retail. This means that for one product, for one EAN, there are several suppliers on one marketplace. The problem behind this is that the vendors often want to undercut each other's prices. Depending on the algorithm, the one with the better price is usually the first to sell the product. As a result, retailers and the brand itself may find themselves competing on one platform, often at the expense of the selling prices.
Do you have a solution for this problem?
I usually advise brands to create products with custom EANs that they sell exclusively through their own retail. This is actually a D2C approach: to produce a certain item not only in pink, for example, but also in red, or to sew a blue bow on the pink item. And then they should sell these new items exclusively on the marketplace.
How do you think online marketplaces will evolve over the next years?
The current trend is moving towards more and more individual marketplaces. I believe that those marketplaces that have found a niche will endure. But in the broad mass, the focus will have to be on specific marketplaces at some point. Who needs 20 marketplaces that sell fashion for the whole of Europe, for example? Over the next few years, it will become clear who will win the race.
After all, it's not interesting for a brand to sell on 15 different marketplaces in Germany alone, but to focus on a handful that are important to them. And Europe is big, so each country has its own market leaders.
Overall, I believe that online marketplaces will become even more relevant. Brands will hardly be able to avoid dealing with them. Basically, the question is now merely when and how they deal with them, and no longer if they do so. Even though many are still resisting this "if".
Thank you very much for the in-depth interview.
Valerie Dichtl is a digital marketplace expert with over 10 years of experience in sports and fashion e-commerce. She trains and advises brands to sell their products on major European marketplaces like Zalando, Amazon, About You & Co. With her background as a Vendor Manager at Amazon and her work as an Online Wholesale and Marketplace Key Account Manager for a brand, she has a 360° view on the online textile industry. She loves to share her knowledge and train brands to become Marketplace Managers in the Marketplace Uni she founded.
To learn more about Valerie Dichtl, visit her LinkedIn profile page.
XPLN supports the Marketplace Uni as a partner and expert for marketplace pricing. For more information on Marketplace Uni and all courses, please visit: www.marketplace-uni.com.