We interviewed Stephanie Frackowiak, Managing Director (France), to discuss the impact that COVID-19 has had on eCommerce marketplaces and to find out her predictions for the future of this market.
eCommerce is about creating an online platform to connect vendors and customers so that customers can buy what they want, when they want, at the right price/quality and it gets to the right place at the right time.
eCommerce success is dependent on four pillars; people, products, process and the “e” bit is technology. Technology fulfils the role of being an enabler, an amplifier, a differentiator, or an accelerator.
COVID-19 has put those pillars under stress. For example, demand surged or dropped on specific products sets. From a process perspective, border and factory closures disrupted supply chains which meant consumers couldn’t get what they wanted easily.
Winners and losers seem to have been defined by what people viewed as essential during the lockdown and during the work/school from home period. In retrospect, it will make sense but I’m not sure we could have predicted an exhaustive list ahead of time.
The winners were IT equipment like printers, computers, screens and home gym equipment, DIY products and anything to do with hobbies or keeping busy. Then there’s also been a bit of a surge on telemedicine and online pharmacies.
The losers were fashion and make up, the stuff we care about when we go out, and services. Airbnb have been hit really badly for example.
It is less obvious what the long-term shifts will be versus this short-term surge. As we come out of confinement, we’re still figuring out a new normal and I think that’s where the opportunities will lie.
COVID-19 has put existing processes and infrastructure under stress and that’s where marketplaces have been more resilient than traditional eCommerce sites. This is mostly because marketplaces have a distributed model, they’ve got lots of vendors selling and delivering their own products so there’s an ability to flex. They’ve got less reliance on single massive warehouses and logistic crews, so their points of failure impact a lower volume.
On the other hand, some of the larger brands had already experienced what was going on in China earlier in the year. So, when confinement hit Europe, they were far more prepared with PPE measures for their workers and they had the right kind of stock. It’s been a really interesting contrast.
Another interesting thing has been that new partnerships have formed. Some of the startup, flexible and agile players have pivoted. For example, we’ve seen that Deliveroo has started to do delivery for brands like Aldi and M&S who are more traditional companies.
There’s a COVID-19 challenge which is getting goods out of the door in a pandemic compliant way; managing infection risk for personal and customers and predicting those fast or extreme surges and drop offs in demand. That is a very specific challenge.
Another element of operating a marketplace platform is that your merchants need to meet KPIs around delivery and customer satisfaction in order to be listed on the platform. Many platforms use algorithms to determine the order of listing based on how they do against those KPIs. That’s an extra stress factor because delivery and the ability to get something to customers fast are the key things that have been impacted by this crisis.
Lastly, cash flow is an issue for these merchants and it’s an issue not just when they’re not selling, but when they’re actually selling. When there is a surge, financing can be the difference between a surge being a growth accelerator or an opportunity that passes them by because they don’t have the funds to buy more stock.
eCommerce sites need to figure out how to drive loyalty from both customers and vendors whilst also removing growth inhibitors. In my opinion, partnerships and network effects are key. The advantage of the marketplace over a vendor going it alone is that they have facilities at scale. These facilities are services such as marketing, partnerships, brand, awareness and catalogues of services. Marketplaces are going to have to work quite a lot harder on those to really retain those star merchants so that they don’t go it alone or go to other platforms.
In terms of the financing element, eCommerce sites need to be better at removing financial constraints from their star performing merchants. Whether that’s paying them faster for the goods they are selling or giving them access to some kind of funds. They really need to help these merchants grow because if they’re helping their merchants grow, those merhants will keep selling through those platforms.
The final part on eCommerce brands is brand perception. Customer perception of a brand, and of a marketplace brand, will be driven by a consistency of good delivery experience. They don’t care whether they bought it from one merchant of another, they just know they’ve bought from the ‘Amazon’ marketplace. AI tech will play a role in ensuring optimisation for logistics.
Finally, under brand perception is how they are treating their workers, how are contributing to the pandemic response, are they doing any cool stuff like making masks or helping distribute PPE equipment to hospital workers. Those kinds of things play on customers desire to buy or not buy from your brand.
One thing I’d be comfortable predicting is that there is an acceleration in the shift to online or digital retail. It is definitely really given it a kick.
Another thing I think is quite interesting is that we’ve been exposed to how fragile and complicated international supply chain. That’s leading to more questions from consumers and businesses and I think that’s an area where we may see more efforts to localise production and distribution into regional hubs.
Linked to that, we’re also seeing governments and public bodies are using this as an additional lever to push for investment in producing European competitors to the big American and Chinese marketplace brands. I’m not convinced that a top-down or political approach will deliver that, but it’s certainly a space to watch.
I guess the reality of pretty much everyone-who-can working from home is that it could lead to a decentralisation from big cities and therefore more flex in terms of where these eCommerce brands have to distribute. Instead of just concentrating on the big cities, they’re going to have an audience which is far greater in terms of reach even at a national level.