B2C Online Marketplace Strategy

With a market share of 66% in German B2C E-Commerce (see Figure 1), Amazon is an undeniable heavyweight and the platform via which, in statistical terms, 66 Cents of every Euro in E-Commerce in Germany is transacted. Germany is also the largest Amazon market within Europe, with Amazon.co.uk (about 70% of Amazon.de), Amazon.fr. (about 40% of Amazon.de), Amazon.it (about 20% from Amazon.de) and Amazon.es (about 10% of Amazon.de) behind it. However, Amazon.de is relatively small compared to Amazon.com, which is about eight times larger.

Figure 1: Amazon.de in comparison to the overall German B2C E-Commerce market

At an international level, eBay and Alibaba are also highly relevant.  JD.com and TMALL are particularly relevant with regard to China.

Providers can gain access to this tried-and-tested infrastructure by listing their products, thereby also gaining access to the existing ecosystem, which includes a whole spectrum of service functions such as Fulfillment by Amazon (FBA) and Amazon Marketing Services (AMS). The listing comes with access to the high sales potential generated by a large international customer base; however, notwithstanding these substantial opportunities, a dedicated online marketplace strategy must be used to determine – in a differentiated fashion – the product categories for which the platform is truly suitable. It must also determine the conditions to be met and, most importantly, the associated risks. As seen in Figure 2, such a typically consists of the following core elements.

Figure 2: Core elements of an online marketplace strategy

The first five steps of an online marketplace strategy are incorporated into a business plan to which further details are to be added over the course of the project. It takes into account all relevant costs and benefits of distribution via selected online marketplaces.

The first step is market potential analysis, where an estimate of revenue potential is made based on data-driven market intelligence with actual transaction data. The development of a suitable strategy is only worthwhile where sufficient potential can be identified on the basis of numbers, data and facts, which is why the potential analysis always forms the initial step. The next steps consist of defining the right matching marketing mix strategy (the focus here is on the 5Ps), negotiating with selected marketplaces prices & terms and deciding on a dedicated organisational structure with appropriate monitoring principles.

Sustainable success can only be achieved if these strategic core elements are worked through in a systematic fashion. Our many years of experience have shown that the approach has a decisive influence on the level of success and the company’s relationship to Amazon and other players. Figure 3 illustrates the typical course experienced by manufacturers with and without an Amazon strategy:

Figure 3: Evolution of profits and margins in Amazon cooperation