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Don't wait for the economic rebound – build resilience now with a marketplace strategy

Fareeha Ali
December 13, 2022
Don't wait for the economic rebound – build resilience now with a marketplace strategy
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Today, businesses across the globe find themselves at the center of three macroeconomic forces, putting pressure on businesses large and small:

  1. Rising inflation is forcing businesses to pay more for goods and services.

  2. Increased cost of living and diminished purchasing power for consumers means businesses face greater competition for shoppers’ spend. 

  3. Continued inventory challenges extend the time it takes for businesses to fulfill orders, impacting their ability to meet customers’ expectations for fast delivery and capitalize on sudden surges in demand.

Every region is being impacted by this triple squeeze. A quick trip across the globe shows us that in the UK, consumer sentiment toward the state of the UK economy is currently at -80%, while the United States reports inflation rates that are close to highs last seen in the 1980s. In Germany, macroeconomic pressures are leading to significant changes in consumer behaviors, with almost two-thirds of consumers saving more due to high inflation. Dramatic changes in currency valuation are also exacerbating the inflation crisis, with Japanese workers seeing wages adjusted for inflation decrease for five consecutive months and consumers cutting back on housing and food expenses. 

Facing turbulent economic times and mixed signals from the market, businesses have little margin for error as they adapt their strategies to ride out a potential economic downturn. Even so, history shows that resilient organizations – those that adopt a through-cycle mindset, as opposed to those that batten down the hatches and dramatically reduce spending during downturns – are much more likely to come out stronger from a crisis. While it may seem counterintuitive, now is the time to invest in a marketplace strategy.

Previously, we explored how consumers can benefit from marketplaces as they deal with rising costs. But the marketplace model doesn’t just benefit the end shopper. Taking a platform approach to the current economic situation allows businesses to grow in spite of the triple squeeze and ensure long-term profitability.

Why marketplaces matter in a downturn

Minimize near-term costs without losing sales. Through a network of third-party sellers that are responsible for stocking products, marketplace operators can offer their customers the products they’re looking for – without having to invest in new inventory. This enables businesses with marketplaces to reduce inventory they have on hand, ultimately lowering costs and mitigating risk without losing sales. This network of third-party sellers also offers marketplace operators a valuable opportunity to diversify their supply chain, mitigating continued inventory challenges and keeping sales flowing. 

Quickly respond to evolving demand and maintain customer loyalty. Buyer demand constantly evolves, and never is this more true than during an economic downturn, when customers are looking for the best value for money. Here, the inherent flexibility in the marketplace model is invaluable, allowing operators to onboard new and best value products in near real time to increase wallet share, even as customers reduce overall spending. We saw this dynamic in action during this year’s Black Friday and Cyber Monday sales, with marketplace sales growing 53% globally year-over-year, even as eCommerce sales grew by just 2%.

Prepare to lead in the upswing. No downturn lasts forever. When organizations cut costs or reduce inventory without a backup plan, it puts them at a disadvantage when the inevitable turnaround does happen. Retailers faced this very issue when consumer demand came roaring back during the COVID pandemic, leaving retailers with empty shelves (and lost sales). Businesses that commit now to agility and flexibility will be better positioned to respond quickly when the economy recovers, capturing increased consumer demand, maintaining loyalty and driving revenues while their competitors are stuck in first gear.

A wait and see strategy won’t work

No one knows how long the current economic downturn will last. Some  argue  it may take two years for inflation to come down.

This period of uncertainty is part of a broader trend impacting brands throughout the world. As the economy responds to world-altering events, businesses are left to make sense of upswings and downturns that are becoming bigger and more volatile. For consumer brands, margins are narrower than ever, seasons and shopping holidays are no longer driving revenue, and just-in-time inventory planning is no longer viable – leaving retailers with zero room for error. 

As business leaders look out at the turmoil ahead, they need to ask themselves how they can reduce costs and increase efficiency while simultaneously staying prepared for shifts in demand. By investing in an online marketplace platform, business leaders can ensure that they’re meeting and exceeding the expectations of their shareholders, employees, and customers – in both good times and bad.

Written by
Fareeha Ali
Director of Competitive & Market Intelligence at Mirakl

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