The fundamental focus of our research, as we sift through data pouring from hundreds of customers, is simple: What do successful marketplaces have in common? What have they done right?

We've boiled this down to five best practices. Each one is vital for success – and at the same time all too easy to postpone, downplay, or ignore. After all, there's a daily temptation, one with lots of support throughout the company, to maintain the status quo and follow the usual routines. It's so much easier.

At the same time, these practices are challenging because they touch on how people think. It's much simpler to install a machine or even new enterprise software than to change how team members view the basic elements of their careers, including customers and competition. But for a marketplace to thrive, they must.

The five best practices to tackle energetically before the launch:

• Help people to think about customers much more broadly. Everyone you do business with, from sellers to shoppers, is a customer.
• Battle the myth of cannibalization. It can sink morale within an enterprise, undermining a new marketplace. And it's untrue.
• Don't shortchange yourself on change management. The effort and money you invest at the start will pay itself back many times over down the road.
• Don't confuse good curation with scarcity. Use automation to achieve curation at scale. Your marketplace can remain welcoming and intimate, while still offering more of what your buyers need.
• Spread the word. Just like any other eCommerce business, your marketplace needs meaningful marketing support to reach its full potential.

Reaching Every Stakeholder

The talent market for marketplace expertise, as we write this, is white hot. This makes sense. Until about 2015, the marketplace industry barely existed outside the ranks of Amazon, Alibaba, Walmart, and a handful of others. Those companies incubated their own talent. Now, as the marketplace ecosystem expands outward to thousands of marketplaces, the demand for experienced experts far outstrips that limited supply.

The bad news, from an employer's perspective, is that the talent market is unlikely to cool off anytime soon. Growth in marketplaces is too robust for that. However, the new skills can be learned. While our customers often go outside to hire experts, they also effectively retrain their own workers – in purchasing, sales, marketing, and logistics – to adapt to the new way of doing business. These insiders are vital, thanks to their connections to the company, their colleagues and customers.

A central challenge during this period is to prepare every stakeholder for the change ahead, and to position them for success. The process involves intense communications efforts. They must reach customers, suppliers, advertisers.

This vital outreach doubles as research. The needs and desires of these stakeholders will help define and position the marketplace. Their constraints, whether limited capacity in the supply chain or out‐of‐date fulfillment technology, will be relevant not only to them, but also to you. After all, they form much of your ecosystem, and will be part of what you're building.

Getting their views on both their status and their buy‐in requires concerted effort. In this, the purchasing team will play an important role as liaisons. They're in touch with distributors as well as suppliers, many of whom are future sellers on the marketplace.

The sales and marketing teams, meanwhile, must reach out to customers, both in person and online, probing for their concerns and preferences. In addition, some of the most valuable research, as we've discussed, already exists via the eCommerce site. With search data and comments, customers signal what they want to buy and when, and also register their frustrations.

Of all the outreach efforts, the most crucial must be targeted within the company itself, on fellow employees. These colleagues are facing a vital transition into an economy with different behaviors, laws, and metrics. It's paramount to listen to their concerns.

The Myth of Cannibalization

One worry that emerges in virtually every budding marketplace involves the specter of cannibalization – the possibility that sellers on the marketplace will drive down prices in core categories and feast on the host company's customers.

These fears are drawn from the physical world of retail, from the era in which a local store could count on a home‐drawn clientele. It was long understood that discount competitors, when they set up shop nearby, threatened to wrest away markets and dethrone reigning powers. This was the Darwinian nature of commerce and capitalism. To those accustomed to that world, competition is by definition dangerous. Consequently, it can seem highly unsettling, or even insane, to invite potential predators into the online store itself, allowing them not only to court customers, but encouraging them to do it. It can feel like welcoming foxes into a henhouse.

Yet such fears are based on an old model of a steady and faithful customer base. To be sure, elements of that model remain intact. Customer loyalty still exists. But there are also legions of online customers, unshackled by geography, who lay the field. They've been doing it, increasingly, ever since they learned to click their first mouse. Many of them hunt for what they want on search engines, and then compare prices and services. So in many senses, the dreaded competition already exists.

The response to this challenge is not to turn away from the future. A marketplace is the most effective way at this time to capture customers and to provide them the quality and service they demand at a price they'll pay. Whether a first‐party or marketplace sale, it generates revenue and often boosts profit margins, while also delivering valuable insights drawn from data.

As we've been stressing, it's the pathway to survival and growth, and not, as many fear, the road to cannibalization and death. An analysis of our customers' marketplaces showed that when they increased their offerings by 29% in one year, their Gross Merchandise Value (GMV) grew by 25%. The result of the wider assortment is not cannibalization, but growth.

Take the example of Germany's MediaMarkt, which carried out a cannibalization experiment. The company encouraged one of its existing retail technology vendors to also become a marketplace seller, offering through the marketplace any assortment that MediaMarkt didn't purchase wholesale. The vendor extended its offering by 72%, effectively making its full assortment available to MediaMarkt customers. At the end of the 12‐month trial, says MediaMarkt's Marius Lückemeyer, that same seller's revenue grew by 93% overall. Interestingly, while about two‐thirds of the growth came from the new marketplace assortment, the retail segment also increased by around 40%. “This seller generated completely new revenue from the marketplace, and at the same time, the existing retail assortment markedly did not suffer from cannibalization, but rather thrived as well,” he says. “It basically showed that we all benefit.”

Many companies, wary of cannibalization, keep third‐party sellers at a safe distance from their core offerings. But this approach sacrifices growth and dynamism. At The Bay, for example, footwear had long been a core category. But when the company brought in other shoe vendors and doubled the assortment on its marketplace, “We grew that category by 75% percent,” says Adam Powell, The Bay's former chief digital officer, now leading a digital‐first shopping journey at Zellers, a division of The Bay.

The Change Management Challenge

Many employees will agree that a marketplace makes good sense, and even acknowledge that it's the path to growth. They're online customers themselves, and they understand the power and dynamics involved.

Yet an explanation of the marketplace's inevitability, no matter how compelling, leaves untouched the most pressing issue concerning the employees: What does it mean for them?

Employees are eager to learn how their jobs – and measures of success – will change. Will new hires from Amazon and Alibaba, and legions of computer‐science grads and statisticians replace them? Will automated processes take root? To find their niche in the marketplace, what do they need to learn? Perhaps most crucially, how are they going to be paid?

Such questions, if not answered, keep people tossing and turning at night. They can tank morale and feed unhappiness, dissension, and churn.

To respond, focus on how a marketplace can make people's jobs easier. Start from their pain points. Ask someone in merchandising, for example, how long it would take to on‐board 15 new suppliers and add 10,000 new products in a category earmarked for growth. The person might respond that it would take 18 months to 2 years, to which you might respond, “With the marketplace, you'll be able to do it in 3 to 6 months, in some cases, even days.”

These discussions, focusing on how a marketplace will make certain jobs much easier, shift people's thinking from threats to possibilities. It's a good idea to come up with concrete examples of these benefits for every department of the company.

At Parts Town, in Addison, Illinois, Emanuela Delgado says she realized too late that the marketplace development team came up short on change management. The process was led by an in‐house innovation division, the Red Lightning Group. She and the rest of this group busied themselves with the massive job ahead and faced an aggressive timetable. They focused on their imposing to‐do lists. And they tackled every task, from selecting products and recruiting sellers to establishing categories, developing the design, and fitting the new platform into the company's back engine for transactions and financials. It was a ton of work. It also stirred up eager anticipation.

They didn't ignore the outreach to fellow employees. But looking back, Emanuela regrets not stressing it more. The marketplace “was a big departure from what we were,” she recalls. It was poised to supplement the company's distribution business and add categories. And for a number of colleagues, “[t]he fear of trusting in categories that we didn't control was difficult to embrace.” A bigger commitment early on to change management, she says, would have made the transition easier.

At Mirakl, we offer workshops to help employees envision the future, and find their own place in it. One useful approach is to build a simulation of a marketplace, one that shows the changing dynamics. Studying this simulation, employees will see rising traffic, and – importantly – the accelerating flow of commissions.

But how to divvy up that money? There are benchmarks and best practices for establishing new incentives and pay structures, and communicating them to stakeholders. Numbers and specific mechanisms vary across companies. But the key point is that the teams that materially influence the performance of the marketplace, both in traffic and commissions, are rewarded.

As an example, in B2B organizations such as wholesalers or manufacturers, successful marketplaces incentivize their sales teams on marketplace performance. In the early days, this may take the form of sales challenges. As marketplace transactions increase, the company should fully incorporate marketplace transactions (either GMV or commissions) into the compensation plan of sales representatives.

These solutions, however, do not usually bring the questioning, or employee concerns, to an immediate end. The dialogue with these key shareholders must continue through the launch of the marketplace and beyond.

Recruiting and On‐Boarding High‐Quality Sellers

Sellers, in many ways, will define your marketplace and your brand. Selecting the right ones, matching your culture, your quality, and your customers' needs, is essential.

Many of them can be sourced and on‐boarded quickly. Since this new model of commerce is already large and prospering, thousands of sellers are already familiar with marketplaces and do business on many of them. When a promising new marketplace pops up on their screen, they can sign up easily, usually without quibbles or negotiations. The standard terms apply. They select a few defaults – the terms, the ground rules, the guarantees – and they can create their marketplace store quickly.

This won't be true of all sellers, as we'll see. Some are yet to be discovered. Some want special treatment and guarantees. If you want Nike to sell on your site, or a brand‐name luxury icon like Tiffany & Co., you've got some serious outreach to do. Such exceptions, both big and small, are important because they will likely help to make your marketplace stand out, and provide what others cannot.

But it's also important to establish a solid base, to be covered in key categories. Here, we offer our marketplace ecosystem, Mirakl Connect. It's similar in function and design to a networking site, designed to help marketplace operators and sellers meet and start working together seamlessly.

Increasingly, this type of networking service has become essential to provide marketplaces with a greater selection of vetted sellers. With the growing streams of data coursing through the marketplace ecosystem, such services will offer even more detailed criteria for each seller's product assortment, quality, and service. And it will be possible to sort them, with ever greater precision, by geography, industry, reputation, and brand value.

The ultimate goal, beyond simply lining up sellers with marketplaces, is to automate as much of the seller recruitment process as possible. From sourcing the necessary volume of sellers for your Minimum Viable Ecosystem (MVE) to accelerating recruitment via centralized communications, today, you can reduce these previously lengthy processes to a few clicks.

These shortcuts provide the seller recruiting team with more time and bandwidth to land a curated mix of sellers. The team can find some of the prospects simply by browsing on other eCommerce sites. The company's buying and merchandising teams are also a vital resource for recruiters. These teams know the market, including what customers are buying from other vendors. Whatever they're buying, they could be buying from you – if you can get those sellers on the marketplace.

Social media provides another vast arena for making connections. In the physical world, trade shows and conferences provide good opportunities for button‐holing vendors. A personal approach might be needed to land regional or specialty purveyors, many of them still new to marketplaces. Big brands are also likely to demand personal treatment. They often want to carefully manage their presence on a site, or negotiate the terms of promotions or commission.

This is the work, outside the default options, where recruiting teams can bring an assortment of sellers to give a marketplace its special flavor and brand. The range of available sellers is as wide as can be. Some offer virtually everything within a very specific niche. Melior, for example, is a UK‐based company that specializes in environmentally safe cleaning products. Initially, it connected with many of its customers on eBay, but is now finding growth on different marketplaces using Mirakl Connect.

Other sellers use marketplaces to extend local or luxury brands. Spain's Lottusse, for example, a maker of fine footwear since 1877, is driving its online business by expanding from its website to marketplaces powered by Mirakl Connect.

A good number of marketplaces attract lots of sellers. In some cases, they're banging on the door, and it's just a question of picking the ones that fit, and then vetting and on‐boarding them. When United Natural Foods (UNFI), the mammoth distributor of health and specialty foods, was readying its marketplace, the company faced issues of scale. UNFI is a major supplier to Whole Foods and other grocery stores. Food companies big and small wanted their products on those shelves. The backlog of suppliers who had applied to UNFI, says Tom Kraus, the eCommerce leader, was in the thousands.

The first job was to screen them. “We'd send an email to 500 of them,” says Tom. Many responded. Those went into the pile of interested parties. The next job was to qualify them, seeing which categories they fit into, and if they were needed. If so, did the food companies have the capability to fulfill orders?

Many of them were small organic specialty suppliers. Perhaps a decade ago, they might have had trouble in this area. But Tom and his team found that many were already selling on marketplaces, including Amazon. “What we found was that a huge percentage of those suppliers could meet the marketplace requirements,” Tom says. UNFI organized the new sellers in groups of 20, and then on‐boarded them in waves.

This is an example of how the marketplace ecosystem grows and extends. Skills, technologies, and business practices that until recently would have been a challenge are becoming common. This enables further marketplace growth.

The Dropship Question

By this point, you already have the profile of the customers, in all their personas, and the scope of products you plan to include within the MVE. You'll want to sign up a thriving network of sellers to fit the new marketplace's profile and strategy. But sometimes the categories you want to go into require different seller strategies.

This often hinges on how much of a hand, if any, you want to have in your pricing and brand experience. There are a host of options and platforms, and each company finds its own balance. For those who seek to control more of the experience, from pricing to customer care, dropshipping is an option that is increasingly paired with marketplace.

Much like the marketplace model, dropshipping involves outsourcing fulfillment work to third‐party suppliers. A furniture store in Chicago, for example, might sell a $2,499 leather recliner to an online customer in Phoenix. But instead of buying and warehousing that line of furniture, the Chicago operation sends the order straight to its supplier, a boutique furniture manufacturer in North Carolina. Unlike with marketplace, when the shop sends the couch to Arizona, it can use the branding and packaging of the Chicago store if the retailer so chooses. Each party receives its agreed‐on share, and the buyer's experience is seamless.

Dropshipping is a logical system, and it has worked for a long time. It enables companies to maintain direct relations with customers and avoid logistical work, all while maintaining a measure of control. Historically, though, it hasn't been as efficient as it can be. It can generate a lot of paperwork, seller on‐boarding is slower, and margins are usually thinner than those from similar transactions on an online marketplace.

In recent years, we've developed tools to eliminate friction, adding efficiency, scale, and agility to the dropship model. The tools offer automated catalog data mapping, seller performance dashboards, and simplified catalog management. The goal is to offload a lot of the behind‐the‐scenes work that has historically been on the shoulders of the operators, while making it easier for sellers to be part of the process.

Thanks, in part, to improved performance, many teams incorporate dropshipping into their marketplaces. How to allocate the share between dropshipping and third‐party sellers? Our advice: Keep your highest‐margin products on dropship, and leverage the marketplace for new categories, less profitable products, and products with more volatile demand. Then, respond to the economic and feedback data when the operations commence. Adam Powell, former chief digital officer at Canada's The Bay, says that dropshipping and third‐party sales on the marketplace go “hand in hand.” As data pours in, he says, “we'll identify the most profitable route by category, and ultimately by SKU, as to marketplace versus dropship.”

For now, dropship is something to discuss with consultants for your marketplace or software providers. They can present its advantages and disadvantages within your industry, and can build projections of its financials alongside marketplace sellers.

The Brand: Protecting and Enhancing It

We've already stressed the importance of establishing a clear vision and brand for a marketplace. It's a blueprint that helps guide the team through the various stages we've been describing, from recruiting sellers to establishing ground rules for the marketplace.

But for some companies, the challenge is less to establish a new brand than to safeguard the valuable one they already have. The ramifications of this are many. But one of the clearest, and most challenging, involves the design of the site. What do shoppers see to indicate that a product comes from a third‐party seller? Does it reflect the brand?

This was an especially difficult challenge for Derek Yarbrough, chief marketing officer for Madewell and J.Crew. The sister brands are both known for casual but stylish fashion. Their marketing, whether in advertisements, catalogs, or store windows, exudes beauty and high production value. This look is central to the brands.

When Madewell was preparing to launch its marketplace, its established look and feel posed a thorny challenge. How does a marketplace stay true to its brand experience while inviting in a host of other sellers, some of them with different tastes and aesthetics?

“This was the scariest aspect of a marketplace for a brand like ours,” Derek says. “We do all of our creative in‐house. It's probably our strongest capability.” For its product catalogs, stores, promotions, and website, Madewell takes great pains to produce its own visuals. The photographs' lighting, quality, and mood all contribute to the brand.

Derek had the same idea for the Madewell marketplace. “Initially,” he says, “we had an idea to shoot the whole marketplace.” But this idea, they soon saw, was never going to scale. It would add delays and dramatically drive up costs.

The next idea was to provide marketplace sellers with creative guides, giving them instructions for producing photos that fit the Madewell marketplace. This helped. But maintaining the look and feel of the site remains an ongoing job.

“Even if a brand shoots a lot of beautiful images with the model, the model might be different from what we would choose, or our aesthetic,” Derek says. “In some cases we had to make a decision, either to walk away, or to shoot it ourselves and bear that cost. Every seller is different.”

Establishing this procedure was an important step prior to the launch of the marketplace. But the work continues. Every day, the Madewell team pores over the marketplace, checking images, and sometimes rejecting them. On some items they're pickier than others. “A sneaker is easier to shoot than a dress,” Derek says. Occasionally, when the team is planning to promote a marketplace product, they'll go to the trouble and expense of shooting it themselves.

Every marketplace with an established brand will face this issue. In fact, even businesses that start as marketplaces have to grapple with it. Every site, after all, has its look and feel. Each one communicates the taste and values of its marketplace.

This leads to another design issue: How much does a marketplace want to sell itself as one? Should visitors understand right away that they're on something much bigger and broader than a single company site? Or should they only discover that when they search for something – whether a cashmere sweater or a fork caliper – and notice that a third party is selling it to them?

The answer varies greatly among our customers. One key variable is whether the company's eCommerce site is a destination. Do shoppers type in the name, looking for a specific product or service, or are they more likely to land on the site following a web search? In the first case, they're looking for the brand; in the second, the item.

Fashion marketplaces, like Madewell, have a healthy flow of destination shoppers. These people know the brand and most of them are looking for something Madewell manufactures. Madewell, like a number of others in its field, shows largely first‐party products to visitors. It uses the marketplace to fill gaps.

You might think that a fashion marketplace would prioritize first‐party sales to achieve higher margins. That's not necessarily the case, at least directly. In some cases, commissions deliver higher margins. However, an apparel company often has a strategic interest in selling its own things. This is because its markets move fast, and inventoried clothing loses value from one season to the next. Unloading it at a discount pummels the bottom line.

So while our advice for effective and profitable marketplaces calls for unfettered competition, and to promote first‐ and third‐party goods equally, there is a logic in certain cases to treating them differently. Even so, the sellers on the marketplace provide advantages. First, the fashion company doesn't have to produce as much of its own goods – and run the risk of remaindered inventory. Its sellers provide backup. What's more, while the featured brands might dominate the welcome page, plenty of shoppers arrive from search engines, many of them landing right on what they're looking for, from either the first party or the sellers. It's like an entirely new business.

Getting the Word Out

Your company exists within an ecosystem of suppliers, retailers, and buyers. Now that you're planning to launch a marketplace, big changes are ahead for all of them. This creates a communications challenge. In many cases, the potential customers, sellers, and suppliers don't even know that the new marketplace exists, much less that they'll benefit from it.

So you have to get the word out. When we work with customers on marketing their marketplaces, we start with stakeholder groups, including not just customers, but also sellers, industry, and internal teams.

Your marketplace strategy, and the market research you have conducted to define it, is an essential input to your marketing plan. You've defined where you're going to grow, how that will benefit your existing customers, and how it might also help you reach new ones. A food and beverage distributor might have a long history of selling to restaurants, and look to extend its strategy to other businesses that feed people, from retirement homes to rehab centers.

Reaching your existing customers is a relatively simple (though not always easy) matter: use the channels you already know are successful. Promote the upcoming marketplace on your website to build excitement and drive awareness. Whether you use a microsite, landing page, pop up, or banners, spreading the word early can fuel your launch. (Add a contact form, and you can also start to build a pipeline of sellers interested in joining your marketplace, supporting seller recruitment efforts to establish your MVE.)

The same strategy applies to your live marketplace. Once your marketplace products are available for sale on your website, treat them like any other product by integrating them into your assortment and your campaigns. Include them in promotions, and make them discoverable via website search. You've invested the time and resources to define an assortment strategy that will resonate with your customers. Show them that you're offering them more value.

This is a strong start. But beyond deepening existing relationships, the marketplace opportunity can also help you grow by finding new customers, those who have never spent time on your website. In many cases, reaching a new audience means bringing your marketplace into social media and search engine marketing. Another crucial channel is to invest the time in search engine optimization strategies for marketplace products. While the initial promotion raises awareness for the coming marketplace, the real impact comes after the launch, when your marketplace is open for business. The most impressive growth surges occur when a marketplace's offerings start popping up in search engine results. In fact, in a recent analysis of 60 Mirakl‐powered marketplaces, traffic grew at four times the rate of top retailers without a marketplace.

Once a marketplace is up and running, some of our customers also run highly successful referral models. They encourage other organizations to point their members, partners, or entire networks back to the new marketplace. In exchange, they get a share of the revenue produced. In this way, a marketplace can grow by piggybacking on other brands and their networks.

Reaching current and potential customers can help you drive marketplace sales. But beyond sales, marketing supports ongoing efforts to bolster your company's long‐term success. Here's where your communications team and your field teams come in. Partner with them to issue press releases, send one‐to‐one and one‐to‐many emails to stakeholders, and make announcements at trade shows. You'll demonstrate both the short‐term value and the long‐term vision behind how your business is evolving to stay ahead of the pressures that it faces.

Chapter Summary

This chapter details five best practices to keep in mind once you've launched the marketplace. One key is to widen your focus regarding customers. Sellers are customers, too. They produce revenue, and more of it, naturally, if they thrive on the marketplace. Making them successful is paramount.

The change of the business model will no doubt disrupt your company. It requires a dedication to change management. Fears around potential cannibalization of your core market are common. It is necessary to debunk them as myths.

Marketplaces add growth. So it's important to grow them. Many marketplace managers start out worrying that adding too many sellers will inundate shoppers with too many choices. But more offerings bring more customers, and they're more likely to find what they want. It is possible – and necessary – to curate at scale.