Why Marketplaces Fail as a Cross-Border Ecommerce Strategy


Using a marketplace to sell into new regions can seem the easier option for cross-border expansion, but brands lose out in the long run.

When selling into new markets, brands have myriad options on how to enter the region. From building a bespoke in-house solution to working with a solutions provider such as ESW, there are numerous points of entry. Marketplaces such as Amazon are also a possibility, although in a recent webinar with Coresight Research’s Deborah Weinswig, ESW Founder Tommy Kelly outlined the downside of using a marketplace as a cross-border ecommerce strategy.

Why Choose a Marketplace?

Amazon and other entities such as eBay and Alibaba allow sellers to host their products on the marketplace, where shoppers can reach them. It is an easy point of entry into new markets, and a way for brands to test new regions before committing to a brick and mortar presence.

There are a number of issues for brands using this method – from competition with other brands and Amazon’s own products – which get preferential placement in searches, to not owning the customer data created when shoppers purchase from the marketplace.

Customer Experience and Brand Loyalty

Kelly spoke about the importance of customer experience and how imperative it is that brands own that. Brands using a marketplace have no control over marketing the product, the shopper journey, or access to customer data. With 66% of customers switching brands due to poor service and 91% not complaining but just leaving, brands can lose customers from having a poor experience on a marketplace through no fault of their own.

In a recent Forbes interview, Kelly elaborated on the disadvantages to brands of using a marketplace: “The success of the marketplace is trying to find your biggest competitor and beating them on price. The only way you win is to deep discount. Anybody that’s had lot of brand equity and tried it, has come off the marketplace and is using the power of their brand to engage with their customers directly. Once the customer engages, they’re very loyal. If you’re in a marketplace you can never create that direct customer engagement and follow up with outreach.”

Customer Data Doesn’t Belong to the Brand

Most importantly, the brand won’t own any data generated by the customer. Without this data, brands cannot understand how the shopper finds them, their buying habits and preferences or any other important information that is generated during the journey. Kelly said, “You want to preserve equity. You want to own the customer. You don’t with Amazon. It’s difficult to get a customer, it’s difficult to keep a customer, but never owning and paying a commission for them – I don’t see that as a suitable option.”

However… Pay Attention to Exceptions

Of course, for every rule, there’s an exception. In many countries in Asia for example, marketplaces can be the best first step into a market. Brands new to the region can benefit and gain instant credibility by being presented and associated with well-known brands in their category. As with all markets around the world, there is simply no substitute for deep local market knowledge. It is the best guarantee of success.

Listen to the interview here:

New call-to-action