E-Exports: Marketplace, what are the specific risks you may face?
The marketplace strategy is generally the first strategy that comes to mind when considering e-exports. However, expanding globally through marketplaces is not as simple as it may seem. Let’s take a look at the factors that must be considered before implementing this model.
Marketplaces reflect wide differences from country to country when it comes to target segment, functionality and required entry conditions. Moreover, each marketplace has different bidding and marketing strategies. For example, many marketplaces in Russia do not allow entry if the brand / supplier does not have a warehouse in the country. Therefore it is important to create a benchmark analysis to unlock and understand which marketplace is suitable for your brand.
The benchmarking analysis should include many different dimensions such as; product portfolio fit, analysis of competitor brands within the same marketplace, pricing analysis, entry conditions, marketplace specific risks, and risk management strategies.
Examples of marketplace specific risks that a brand may face include the following:
- Brand Image: A brand’s image can be negatively affected if marketplace partners are not carefully selected and managed.
- Price Control: A clear pricing policy must be defined. This policy must be developed with accordance to other sales channels. Moreover, it is important to be aware of the flexibility that a marketplace offers with regards to promotions and price changes.
- Marketing Investment: Optimising your brand’s marketplace presence can require intensive marketing efforts and investment, to secure popular search keywords. Therefore, ROI must be closely monitored in order to optimise such efforts.
- Hidden Costs: Marketplaces can involve hidden costs, therefore it is important to ensure that all costs/fees are clearly set out.
- Logistics: An important point is to be able to effectively manage shipping, returns and customer service. Such operations are more challenging in global markets due to factors such as legal requirements. It can be helpful to work with a partner that manages your marketplace presence.
If these risks are taken into consideration and the right strategies and partnerships are developed when implementing this strategy, marketplaces can be very advantageous. Inveon’s GrowthLab department offers e-export services to its customers by implementing not only the marketplace entry model but also franchise and direct exporting strategies.
In our next article we will discuss the risks of e-exporting through a franchise model, tune in!