"We don't want to sell online because we want to protect our brick-and-mortar retailers." I've heard this sentence over and over again in the last 9 years since I started selling online. However, I hear it less and less in the fashion industry. But just look at another industry and we're back to the same starting point. It seems that only the fashion industry started a process of change towards online marketplaces for fashion a few years ago. I would say that this is a brave attitude, considering that we are talking about brick-and-mortar retailers. And have you ever thought about what's best for your end customer? I mean, after all, they are buying your products. Can the end customer get your products where they prefer and where they normally shop?
I would like to share my knowledge from the last 9 years in online sales with you. In a "real, in-depth conversation" about exactly this topic and at the same time give you more insights and expertise along the way. I have seen all the sites Amazon internally, the brand sites internally and the own online shops externally and now have this 360 degree view. I have also noticed that online sales no longer pose such big questions. It's now more about the business with online marketplaces, which always poses difficulties for brands because there is a huge lack of knowledge here. Why? Because it's a relatively new topic and also complex.
"The question with online sales is no longer "if", but rather "when and how?". Especially when it comes to online marketplaces."
So it's time to take a brief look at the world of online fashion marketplaces.
Two options for online sales channels with online shops such as Amazon, Zalando & Co.
Online marketplaces for fashion are different sales channels for brands and retailers to sell their products online via large online shops, e.g. Amazon. There is the wholesale business, which is still a B2B business. You have a buyer who pre-orders your items and sells them on behalf of the online shop. At Amazon this is called Amazon Vendors, for Zalando it is the normal wholesale business.
In addition to wholesale, you can also sell your products as a brand via the marketplace itself - you use the online shop for this. You have to stock the product yourself and sell it via the online shop, e.g. as a seller on Amazon, and also send it to your end customer. The good thing for you as a brand is that you can decide where you want to sell your products and at what retail price. If you sell via the wholesale business, the online shop itself decides on the retail price and sells your products.
In Germany and Europe, there are several online marketplaces for fashion, which are also known as partner programmes of online shops such as Amazon, Zalando, About you, Otto, Klingel, Ebay, Sportscheck, Mytoys, Limango, Mirapodo, Galeria, La Redoute, Douglas, BOL and Allegro and many more. This small selection focuses mainly on fashion and lifestyle products.
What online marketplaces for fashion tell us about future growth
Marketplaces have become growth engines for large online shops. Zalando therefore declared in its 2019 annual report that it would increase its GMV share of the partner programme (marketplace) from 10% in 2018 to 40% in 2023/24, and to 50% in the long term. In 2019, they already increased the share of their 2019 annual report from 10% to 15% and in 2020 even to 24%. According to estimates, Amazon's sellers already generated 60% of total sales in 2019. These examples show that sales via online marketplaces for fashion will become significant in the near future.
"Marketplaces where you can sell all the products you want, depending on your selection"
I would like to use the graphic above to explain a case study in more detail. You are a retail brand that already sells its products via the wholesale buyer on Zalando (marked in dark blue).
- Your wholesale buyer orders 12 of your 20 bestselling models -> marked dark blue
- You add your 20 bestsellers via the marketplace / affiliate programme and sell them yourself
- 8 out of 20 bestsellers that have not yet been ordered are now available at Zalando -> marked green
- 12 of your 20 bestsellers were ordered via wholesale and you also sell them as soon as they are no longer in stock at Zalando due to high demand, lack of repeat orders or off-season -> marked light blue
This hybrid model offers you the opportunity to generate additional sales through items that have not yet been ordered wholesale or are out of stock. This gives you the opportunity to expand your online sales business by selling your products via the marketplace model.
The past has already shown that sales via the partner programme and the wholesale business benefit from each other. It helps you as a brand to sell new categories and styles that the wholesale buyer didn't want or misjudged in terms of demand for the pieces ordered. In my experience, you can usually achieve a market turnover of at least +10% if you are already selling a large selection of your range through wholesale. I have also seen market growth rates of +30% within 3 months of selling an additional category through the market. This was a test case for the buyer and afterwards they started to order this category in wholesale as well. If you still want to sell your products via wholesale and you are already selling via a marketplace at the same time, this is slightly different. In my experience, wholesale and marketplace benefit from each other.
Not all marketplaces are the same - two ways to open and close online marketplaces for fashion
Not all marketplaces are the same. Within the marketplaces there are differences in how they are set up.
Open marketplaces are open to everything and everyone
Open marketplaces are those that are open to any product without restrictions or pre-selection. This means that anyone can sell anything on these marketplaces. Amazon is a pretty good example here. There are many offers from all over the world, especially from Asia. At the same time, a single product (with the same EAN code) can be offered by multiple sellers. This leads to price competition for the same product. At the same time, you have no barriers to entry, so you can theoretically start selling tomorrow. You don't even have to have a well-known brand. On these online marketplaces for fashion, you can easily enter the market and start your business. Good examples of open marketplaces are Amazon, ebay, BOL (NL) and Real/Kaufland.
Closed marketplaces are more exclusive and less competitive
Closed marketplaces are subject to restrictions and are more exclusive. You need a sales permit to sell your products on these online fashion marketplaces for each brand from the marketplace teams or buyers. After this one-time permission, you are allowed to sell all products of your brand on these marketplaces. You can decide which product you sell. Not "everyone" sells there, so you can have a good brand experience. At the same time, there is also less competition, as only one EAN is (usually) offered by one seller at a time. This means that your recommended retail price is also more stable compared to open marketplaces. The barrier to entry for fashion is also slightly higher than when selling via open marketplaces. Good examples of closed online marketplaces for fashion are Zalando, About you, Klingel, Sportscheck, Mytoys and Mirapodo.
Which online fashion marketplaces are better for my brand?
This depends a lot on your brand, products, prices and strategy. I have already started the fashion marketplace business with several brands and opened this business with a well-known underwear brand. With this underwear brand, we had several challenges in terms of marketplace business. We were already a wholesale partner of all major online shops and now we wanted to start with the marketplace. We wanted to expand our selection and be our own backup when the products are out of stock.
- The number one challenge was our logistics headquarters in Hungary, which focussed mainly on B2B orders.
- Challenge number two was a lack of capacity in the e-commerce team.
It took us a long time to get an overview of the market. I was the only person responsible for the online business in Sales (without our own online shop). We made several decisions:
- Initially with online marketplaces for fashion at Amazon, Zalando, About you, Klingel and Otto, where we also had permission to sell our brand.
- We do not want and cannot ship B2C from Eastern Europe and we need a partner who can do this for us in Germany with a consignment stock
- We need a full-service partner who manages the main processes to save our team capacity and who is an expert in the marketplace business
Once we had made these decisions and selected a full-service partner, we launched on all five marketplaces four months later and increased online sales for our brand. We benefited from the mix of wholesale and marketplace business. On the one hand, this gave us the opportunity to expand our selection, secure our own stock and increase sales. I would recommend starting on a marketplace soon, as this is an important sales channel in the near future.
Do you need help setting up your marketplace business?
We from the Marketplace Uni are specialised in the marketplace business and offer various marketplace courses depending on the current state of development. In these courses, we teach you and your team in a practical way what you need to do to sell successfully on Europe's most interesting online marketplaces and thus increase your turnover. To the current Course overview.
