What’s the one sales function that thrived most during the global pandemic? You guessed it, online shopping. In fact, Statista reported an astounding $4.9 trillion in retail eCommerce sales in 2021, up from $1.3 trillion in 2014. Furthermore, forecasts indicate that number could grow by 50% over the next four years. Businesses will be booming thanks to this growth. Will you be one of them? You will if you strategically position your brand in the digital marketplace.
What are Digital Marketplaces?
Digital marketplaces are the e-commerce solution to get your product in front of your target audience. When consumers are seeking the products you offer, you want to make sure you are in the right marketplace to make a conversion. There are two marketplaces that consumers may seek, and each offers different benefits to companies.
Vertical marketplaces focus on a category. For example, Airbnb is a vertical marketplace for landlords and homeowners renting out their properties. The benefit of a vertical marketplace is that companies can leverage comparative advantage and penetrate a niche market of consumers.
Horizontal marketplaces sell products from a large number of categories. One of the most notable horizontal marketplaces is Amazon, with goods available in several categories, such as food, apparel, furniture, electronics, books, toys, and so on. The benefits of a horizontal marketplace are the broad customer base and the opportunity to increase profits by testing different pricing models and reducing expenses through shared cost distribution.
The World’s Top Online Marketplaces
Some of the world’s top online marketplaces are well-known horizontal marketplaces: Amazon, Walmart, and eBay. These top three sites have dominated the marketplace for years, and it’s no wonder since they entered eCommerce in the late 90s and early 2000s when the digital marketplace took off. These marketplaces have two things in common: convenience for online consumers and outstanding sales features for online retailers.
Thriving in a Digital Marketplace
You already know consumers are flocking to these digital marketplaces. Will they find your brand when they get there?
Now is the time to forge your digital marketplace partnership and position your brand where consumers will find it. These four steps are the recipe to help your brand thrive in the digital marketplace.
Step 1: Focus on the eCommerce Equation
One simple equation can help you forecast your potential earnings in a marketplace and can also help you strategize your options for increasing revenue over time.
Revenue = Traffic x Conversions x Average Online Order
Use this equation to analyze the data and identify opportunities to increase profitability. If you select a digital marketplace with a broader audience, you will undoubtedly increase traffic. However, will you increase conversions? That depends if you will reach quality traffic – the people actually interested in your product category.
So, when you assess which marketplace you will go with, weigh how many people will encounter your brand and the quality of that traffic.
When you find a marketplace that can help you reach more traffic and put you in front of quality traffic, then your conversions (sales) will increase, ultimately increasing revenue.
It’s also important to note that once you achieve optimal traffic and conversion volumes, you can continue to test revenue growth by optimizing your pricing strategy. If your average sales price increases without deterring conversions, you will increase revenue further.
As you can see, the eCommerce equation requires time and ongoing analysis to achieve optimum results. By using the sales features in your digital marketplace, improving marketing efforts, and tracking progress over time, you can identify the best strategies to generate revenue growth for your brand.
Step 2: Develop Competitive Differentiation
When you are in a digital marketplace, you’re positioning your brand against many similar competitors. Let’s face it; there’s a wide net of consumers on the marketplace because they know it’s an easy way to comparison shop. So, it’s your job to make your brand stand out.
First, you must have an intimate understanding of your competitors. Study their products, product benefits, and marketing strategy. Then, make it your mission to differentiate your product.
Second, develop your strategy and position your brand to gain consumer interest. Once consumers notice your product, you have the potential to influence the sale. Two solutions are commonly used to create a competitive difference.
Set a competitive price. Everyone is looking for a deal. So, if your quality is similar, but your price is better, you’ll win the consumer.
Offer a unique selling proposition. Your product’s appeal will increase if it has a feature or benefit that outshines the competition. In this case, some consumers may be willing to pay a higher premium for the product they perceive to have a higher value.
Step 3: Know Your Buyer
When you have an intimate understanding of your consumer audience, you can target your product description and benefits to pique their interest. What are the demographics of your typical consumer? These details can help you target your search traffic. Additionally, determine which psychographics define your target audience. By understanding your target audience's purchase behaviours and motivators, you can make product and marketing modifications to connect with your consumers and build buyer loyalty.
Step 4: Optimize Continuously
Finally, recognize that your work is never done. The digital marketplace is constantly evolving, and your competitors are evolving, too. To stay relevant, you must continually optimize your product, promotion tactics, and pricing structure. Repeat step one, the eCommerce equation, on a continual basis to track progress and set stretch goals. Your brand has the potential for unlimited growth if you stay competitive and focused.
Build Your Brand Equity on a Digital Marketplace
When you enter the digital marketplace, you are marrying your brand’s perception to that of the marketplace. So, do your homework before entering a digital marketplace. Make sure your marketplace will help build brand equity and increase perceived value for your brand. Once you’ve found the right digital marketplace for your products, follow the four steps from this article and watch your brand thrive.
Contact us to learn more about how we can support your marketplace strategy.