Online marketplaces provide superior convenience, access to a vast array of products, and the ability to comparison shop with ease. Having been fully embraced by consumers,
online marketplaces are growing rapidly—and are projected to keep growing at an exponential rate. According to a Forrester Research Study, shoppers in the United States made half of their e-commerce purchases on marketplaces in 2016, and this is estimated to increase by two-thirds in just five years. And this is not just an American trend— marketplaces are also achieving massive growth internationally.
The online marketplace explosion has brought many new challenges for manufacturers and brands. Until recently, companies normally distributed their products as widely as possible without imposing any restrictions on where their products could be resold. That was not particularly troublesome because, until recently, the advertised price for a company’s product in San Francisco meant nothing to a person buying the same product in New York.
However, with the rise of open online marketplaces, globally transparent and dynamic advertised pricing has become the new reality in virtually every product vertical. A whole industry has rapidly emerged in which unauthorized resellers obtain products from brands’ distribution networks in myriad ways and list them online— typically at discounted prices given that they have had to make no investments themselves to bring the products to market. Once these discounted products are listed online, they begin to disrupt marketplace pricing algorithms, which, in turn, disrupt prices across other channels, and a downward spiral ensues. The end result is thwarted e-commerce sales growth, massive
channel conflict and impaired brand value, which, left unchecked, will get only worse.
Companies today are struggling to adapt to this new environment. How effectively companies can respond will determine whether they win or lose in this new reality. On one hand, there will be companies that fail to appropriately evolve to establish the heightened level of brand control now needed to succeed. These companies will likely experience channel conflict, degradation of brand value, and negative product reviews. Ultimately, these companies will be significantly handicapped in their efforts to protect and grow their brands.