Are marketplaces only for small brands? Answers Dr Somdutta Singh

Updated on Nov 29, 2021 07:39 PM IST

E-commerce is the future and with consumers increasingly banking on online shopping, E-commerce is opening doors of opportunity to millions of entrepreneurs

The luxury E-commerce industry is seeing a much larger growth than many other areas of E-commerce.
The luxury E-commerce industry is seeing a much larger growth than many other areas of E-commerce.
ByHT Brand Studio

In 2020, worldwide retail E-commerce sales added up to $4.28 trillion and e-retail revenues are being projected to grow to $5.4 trillion by the end of 2022.

In addition, the global luxury goods market sized at $257.26 billion in 2020 is being projected to grow to $352.84 billion by 2027.

Online marketplaces have massive global customers, in which massive is probably an understatement. There are more than 100 marketplaces globally. You can do the math yourself.

Let's get one thing straight, E-commerce is the future and with consumers banking on online shopping increasingly —95% of worldwide purchases will be made online by 2040 — E-commerce is opening doors of opportunity to millions of entrepreneurs.

But, as E-commerce takes over, are online marketplaces only relevant for smaller or mass brands? What about luxury brands?

While in the 1st quarter of 2020, Amazon reached the $1 trillion market cap with Q1 sales up to $46bn, at the same time, some of the world's high-street retailers were announcing job losses and store closures, declaring an end to their era.

This raises the question, should luxury brands embrace marketplaces? Should they develop sustainable strategies specific to marketplaces as part of a broader channel strategy? Can luxury actually work on marketplaces?

Despite Amazon’s universal existence, how many high-end design brands do we see on the platform? Are they missing an opportunity?

If you can't beat them, join them!

Why weren't luxury brands keen on selling online?

As an E-commerce entrepreneur and having studied markets closely, here's one thing I have realised. When it comes to luxury buying, demand is not interrelated to price in the conventional sense. In fact, higher price is an indication of quality and elevated social value, consequently generating greater demand. But, price is still not the most significant aspect for generating demand in the premium goods segment. Product quality and brand value are perhaps two most critical factors for success. This clearly means that for large luxury brands, the thrust, until now was not on generating volume sales.

But today, premium brands are racing to embrace E-commerce. What changed?

According to a McKinsey report, luxury E-commerce sales are being touted to reach $21 billion over the next five years; furthermore, the luxury E-commerce industry is seeing a much larger growth than many other areas of E-commerce.

Let's get one thing straight. Marketplaces are massive assets. Who wants to miss a piece of this pie after all right?

And, this structure works vice versa. Amazon, after all did launch Luxury Stores on its mobile app for select Prime customers right? This move also mirrors Alibaba's push into luxury retail with Tmall Luxury Pavilion that carries more than 180 brands. Once deep into the luxury segment, Amazon can further extend its reach in the retail market and capitalize on the recent E-commerce surge.

Anuj Jain, Board Advisor to Assiduus Global and CEO of Singapore based global venture platform Startup-O adds, "For brands in the luxury space, if they can smartly strike the right balance between generating high volume sales and continuing to develop brand equity and customer loyalty, they might have unlocked enormous value that marketplaces provide for their brands. Conversions go a long way to strengthen a brand's bottom line."

At present, more than ever, it’s imperative to do what it takes to expand to customers where they are and offer what they demand. And, with the kind of steps marketplaces are taking to ensure brands' integrity remain intact; it’s promising for luxury brands to sell via marketplaces without having to lose their shine.

You cannot ignore E-commerce and marketplaces. Even if you have shied away all this while, exclusive features from Amazon and other marketplaces are making it totally worthwhile and effective.

Brands, no matter what their size, need to improve their digital touchpoints with customers. Luxury brand or otherwise, you need to think about your customers and maximise your value proposition. Consumers love E-commerce, they remain King are and they aren't going to relinquish this increasingly powerful freedom.


Disclaimer: This is a company press release. No HT journalist is involved in creation of this content.

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