How the Marketplace Model Can Limit the Impact of Supply Chain Disruption this Holiday Season
Labor shortages, inadequate inventory, and the cascading effects creating global supply chain issues are setting up the holidays to look more like a nightmare for retailers rather than a winter wonderland – with customers finding empty shelves and “out of stock” notifications in nearly every category.
This upcoming reality is the aftermath of the initial supply chain disruption brought on by the ongoing pandemic. The price of a shipping container is up 10-fold from a year ago, while the average transit time from Shanghai (the world’s largest port) to the United States has more than doubled.
Even for those willing to pay exorbitant transportation premiums, there’s no guarantee their supply will make it out of the factory and into consumers’ hands. The economic impact of this is staggering: some are already forecasting more than $100 million lost in holiday orders. From electronics and sporting goods retailers to toy and furniture manufacturers, everyone is feeling the pinch.
The risk extends past the bottom line, threatening to undo strong relationships retailers have built with their customers. As businesses scramble, shoppers won’t wait around for out-of-stock items to be replenished, or deal with delayed shipping times. Instead, they’ll continue their search elsewhere until they find what they’re looking for. According to McKinsey, the retail market has seen a historic shift in brand loyalty since the onset of the pandemic. Nearly 80% of shoppers are willing to change brands or retailers as they search for improved selection, value, and convenience. As a retailer, this translates to missed opportunities, both now and in the future: You can’t sell products you simply don’t have, and once a customer finds what they’re looking for elsewhere, there’s no guarantee they’ll be back.
While many retailers are squarely focused on supply chain issues for this holiday season, analysts believe these challenges will span into 2023. To address this new reality, retailers and distributors need a sustainable and agile solution. One that’s only available with an enterprise marketplace.
Deliver a ‘just in time’ buying experience without the ‘just in case’ logistical headache & overhead cost
While the current situation has left many businesses unnerved, those operating an enterprise marketplace find themselves at a unique advantage. Only with the marketplace model are they able to aggregate their supply through a diverse community of third-party marketplace sellers and dropship suppliers, providing themselves additional protection from stockouts or offering shoppers alternatives if that item is truly unavailable.
Furthermore, an online marketplace allows businesses to meet shopper demands without the risk of over-ordering: protecting them against being out of stock without placing increased pressure on margins. Only with the marketplace model do businesses have the agility and flexibility they need to minimize the cost and risk associated with owning inventory, which is both expensive to acquire and store, and hard to move after the holiday rush.
To see the marketplace in action this holiday season we looked at Platform Pioneers Phone House, Secret Sales, and Nature & Découvertes to learn how they’re using the marketplace model to address the impact of the global supply chain disruption.
Power of more
The marketplace model gets its strength in numbers. Rather than relying on a handful of manufacturing facilities and transportation options, marketplace operators can pull from both their own selection as well as that of their third-party sellers. So, when one is out of stock, another seller can step up to take its place.
In 2014 French retailer Nature & Découvertes saw an immediate impact with the launch of their online marketplace, which today accounts for 30% of their digital sales. This holiday season they’ll be further leveraging the platform to meet demand, specifically for one of their most sought-after products, telescopes.
Nature & Découvertes is using their third-party partners to better meet consumer demand on popular items such as telescopes.
As supply chain constraints intensify, those relying on traditional business models will be left with an ever-fleeting selection. This is where partnering with a curated selection of hundreds, or even thousands, of third-party sellers offers marketplace operators another key advantage.
Online marketplaces can provide an extraordinary selection, at competitive prices, as well as the availability and convenience customers expect long after traditional eCommerce sites are left bare.
Since 2018 Phone House, one of Spain’s leading communications retailers, has used its online marketplace as a way to complement its existing selection and expand into new categories. This holiday season their curated third-party seller assortment strategy is allowing them to meet the needs of their shoppers in the midst of global shortages: Without this partnership, Phone House anticipates they would have lost a quarter of their Black Friday business volume.
Phone House will rely on its curated selection of third-party sellers to meet consumer demands this holiday season
Asset-light and margin rich
An online marketplace offers businesses the ability to expand their catalog without the associated risks of owning and storing inventory. With the marketplace model operators simply take a margin on all products sold while putting the onus of securing, storing, and shipping items back on the sellers. Rather than worrying about the next “it” item or securing valuable cargo space, operators have the agility to remain asset light and margin rich.
One brand capitalizing on this is fashion retailer Secret Sales. In 2020 they transitioned from a flash sale site to a premium discount marketplace, adding more than 400 brands in just a year. This strategy has allowed them to offer a daily wave of new products without needing to locate and secure the inventory themselves; giving them the flexibility to quickly pivot from one trend to the next, and using marketplace data to optimize operational efficiency. All of this has helped lead to 6,000% growth. Since transitioning to a premium discount marketplace Secret Sales has unlocked unparalleled flexibility and growth
Now and for the future
While no business will be immune to supply chain shortages, those operating an online marketplace will have a growing advantage over traditional eCommerce models: delivering on consumer demands where others simply can’t. Marketplace operators can make the most of this opportunity by fully embracing their third-party sellers, allowing them to compete in all core categories, and even implementing a buybox mechanism that always shows the best available option - ensuring customers are never shown an “out of stock” message.
This ability to save the holiday season by still having that “it” item in stock will not be forgotten by shoppers, and can build brand loyalty in an ever-competitive eCommerce landscape.
Contact Mirakl today to learn more about our marketplace solution and how we can help power your digital transformation.