When marketplaces go (very) wrong

Photo by Aarón Blanco Tejedor on Unsplash

Many retailers have been following a trend of adding marketplaces to their e-commerce, expanding their assortment with their partners’ on their websites and apps. The economic logic is clear: the company already has the trouble of creating and maintaining its e-commerce, so adding up their partners’ assortment (3P) should attract more traffic, improve repurchase, generate sales commissions and sell even more of its proprietary assortment (1P). Clear, simple and dangerous.

The problem is that, while digitizing the physical store requires a technological ramp-up but does not change much the business model, creating and growing a marketplace is a smaller technical leap for those who already operate an e-commerce but requires very different strategic thinking and business models. Worse, there’s little space to learn by making mistakes, since ‘patchwork’ solutions can create bad customer experiences and reputational spillovers that harm a brand even in its own stores and 1P e-commerce.

For instance, consider the situation I recently experienced:

Marketplace 1: broken promises

On Monday, September 21, I had to buy some vacuum cleaner bags which I found on only two marketplaces: an omnichannel retailer with 3-days in-store delivery near my residence for R$34.90 and an online marketplace with 3-days home delivery for R$31.90. However, since there was a postal strike, I thought it was better to order from Marketplace 1, even at a higher cost.

I ordered, payment was approved, I waited three days, but got no confirmation that the item had arrived. On the fourth day, with the deadline already expired, I went to the physical store but they said they had not received it and there was nothing they could do. I asked in the contact form when it would be delivered, but the merchant’s response deadline was in four days — meaning it could arrive much, much later than the original delivery deadline.

Marketplace 2: the well-kept house

Frustrated, on the same day September 24th I decided to order the item at Marketplace 2. The deadline was three days, but surprise: it was delivered the very next day! Even more surprising: when I looked at the invoice, I noticed that it was the same merchant partner in both marketplaces! With the same partner, Marketplace 1 was unable to meet the delivery date (even though it is an omnichannel retailer!) and incapable of answering questions in-store or replying quickly through even while charging 10% more, while Marketplace 2 managed to deliver 70% faster than the same deadline and at a lower cost.

Since then I have already made six other purchases at Marketplace 2, always with fast delivery and no communication problems. It quickly became the first or second place where my family and I research items to buy, since it has excellent assortment, good service and on-time delivery.

Marketplace 1, continued: reputational nightmare

Meanwhile, Marketplace 1’s service has only gotten worse. On the same September 25th that the item arrived at Marketplace 2, I requested cancellation at Marketplace 1. They could not cancel because the item was in transit, and it was finally delivered to the store the next day, with 70% delay compared the original deadline. I waited a week and got no feedback, no reply, not even to my original messages.

On the 3rd of October I sent another message asking for a refund and they replied: “the deadline to collect at the store is until the 6th of October, only if it is not collected until then it will be returned to stock and we can approve the cancellation “.

I waited until the 6th, sent another message and they replied: “as soon as the product is collected in store, it will return to our stock within 5 working days, after which your card will be refunded”. In other words, I would still have to wait for the item to return to their own stock and only 5 days later get refunded.

I waited another week, until October 14th, and then requested a new status. This time the retailer took three days to reply and blamed their partner, who then replied: “We are waiting for the item to return to our stock, as soon as it arrives, the refund will be released”.

I tiredly waited another ten days and requested a new status yesterday, October 27th. This time, the retailer / marketplace’s response came much, much worse: “the product was delivered to the store, and products ordered in this modality must be returned to the post office by the customer. The store is not responsible for making the return. To be refunded, you must collect the product at the store and post it at the post office, following the instructions below…”

Lessons to learn

It is worth reflecting on the perverse incentives that make a leading company, one of the market leaders, create a marketplace so absurdly anti-consumer that for them it feels normal and reasonable to ask a customer to go to their own store to get a product that was delivered late so the customer themself can go to a post office to post it back to the very retailer. In an effort to compete with other omnichannel marketplaces and rivals, the organization created a consumer experience that, anytime it is exposed on social networks, ReclameAqui, Consumidor.gov and/or Procon, certainly creates a negative reputational spillover for all of the company’s businesses, not just the marketplace.

Even knowing the company, liking it, and understanding why this happened — particularly since I have worked in one of their close competitors — an experience like this makes me much less likely to ever repurchase, even in a physical store. I genuinely hope that the company improves! But it is very necessary for the organization’s highest levels to reflect on what they want to achieve with their marketplace, if it is worth generating money in the short term while compromising reputation and results in the long term.

How to get marketplaces right

Many of you probably recognize yourselves as customers in scenarios similar to the above. Some of you certainly work in retailers and recognize your companies as possible generators of experiences like the one I had. Consider the following recommendations to build a robust marketplace that grows right, and doesn’t hurt your other businesses:

  • Plan and design, first of all. Plan the business model, design the customer journey and internal processes, develop the business case. Do not think that it is enough to copy and adapt what you already have in your e-commerce — this is how big mistakes arise. And do not think that you need not plan, the cost of not planning can be exceedingly high further down the road
  • Prototype and scale as you gain confidence. Many people know that taking a long time trying to find the best possible solution is not good — as the popular saying, “great is the enemy of good” — but few consider that being too fast can be even worse, when speeding too much requires putting out fires time and again, wasting attention that could be dedicated to building a more robust solution
  • Keep your promises and deadlines. When a client deadline is not met it should be treated as a profoundly serious problem by the company. Sure it is bad to have a delivery date larger than the competitors’ and lose sales, but it’s even worse not to deliver on time and lose customers
  • Guarantee consistency in the 3P experience. It is no use providing a good experience sometimes and a bad one at other times — if the shopping experience is a lottery, the customer’s expectation will always be limited by the worst one
  • Ensure congruence between 1P and 3P experiences. It is already difficult for a customer to understand that he is not buying at Retail X but at his marketplace, even worse is creating different rules such that they do not know what to expect regarding deadlines and customer support
  • Align internal incentives. When the marketplace business was created on Amazon, several category owners were uncomfortable with the competition this would generate with their 1P businesses. The answer from above was clear: good, as this inconvenience would force 1P businesses to become even better. Your answer may not be this, but you need to reflect how you will deal with these conflicts before they occur
  • And most important of all: put yourself in the customer’s shoes. A policy that gives the partner four days to reply even after the item is late is unreasonable. Asking the customer to pick up a delayed order at the store and take it to the post office is so far from reasonable that it is difficult to understand how someone can write it, in all seriousness. If you do not put yourself in the customer’s shoes and reflect about the experience they have in your marketplace, even all of the above can’t help you

What do you think? Have you had similar experiences, good or bad? Have you ever considered whether it is worthwhile for your company to build a marketplace, or whether it should focus on stores and 1P e-commerce? Just comment below!

Cheers, and until next time!

Originally published at http://bovolon.com on October 28, 2020.

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Felipe Bovolon

Felipe Bovolon

Writing about the point of it all

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