Alarm bells often ring when reading about e-commerce these days. That is, many companies that specialize in e-commerce are not doing so well or are doing really badly. Hence: BCG Boston Consulting Group recommends e-commerce via marketplaces.
I read a document from BCG Boston Consulting Group that fits this.
Here is a short summary in German for speed readers:
- Technology is changing e-commerce and fundamentally influencing consumer behavior.
- 60% of leading retailers are prioritizing e-commerce investments, but many US retailers are lagging behind Amazon and Walmart.
- Marketplace models enable product range expansions and offer efficiency advantages.
- Social commerce is gaining in importance, especially for addressing younger target groups (e.g. via TikTok).
- AI and GenAI help to accelerate processes, increase efficiency and optimize creative content.
- Innovation in e-commerce requires a mix of marketplaces, social commerce and AI to stay competitive.
Or in prose:
Technology is fundamentally changing e-commerce and influencing consumer behavior. According to a survey, 60% of leading retailers are prioritizing investments in e-commerce, but many are lagging behind market leaders such as Amazon and Walmart, which will account for over 38% of the e-commerce market in the US by 2023. In addition, Asian platforms such as Temu are rapidly gaining in importance.
A key success factor for retailers is the introduction of third-party marketplaces that expand the range and make operations more efficient. Social commerce is also becoming increasingly important for reaching younger target groups, while artificial intelligence (AI) helps to boost efficiency.
Successful retailers are relying on a mix of innovations such as marketplaces, social commerce and AI. To remain competitive in e-commerce, they need to implement and scale innovations quickly.
Are these really good tips from BCG colleagues?
I read that with very mixed feelings, invest more in marketplaces and more in technology?
I think not, because the vast majority of companies that are active in marketplaces tend to lose margin rather than gain it. Sales may increase through marketplaces or they may just shift. Only the very big players are really happy.
And then there’s MarTech Law.
The MarTech – Law (I deliberately write it a little differently than Scott) means in a few words: Technology is developing much faster than companies can follow this development. But is that always a problem? Clearly: No!
Why?
First of all, not every technological development is synonymous with an advantage for the customer and/or the company. Of course, this is touted by the software companies. But the user or customer experience often tells a different story.
Secondly, IT departments are hopelessly overburdened and sometimes overwhelmed by the demands of digitalization. This is due to the need to deal with legacy issues, integrate different systems, and set up data hubs such as DMPs or CDPs. At the same time, the costs for service providers are spiraling out of control.
Thirdly, the implementation is unfortunately not always accepted by users immediately. There is often a lack of training and education here, so that the innovations also arrive in the processes as an effectiveness or efficiency advantage.
This means that BCG is welcome to write it, but the small and medium-sized entrepreneur has completely different concerns.
- The costs for acquiring new customers are increasing.
- The ROI of these new customers is realized late or not at all because…
- repeat purchases (keyword: loyalty) are not made.
- This leads to the dilemma of insufficient customer loyalty.
In addition, you increasingly lose control over customer relationships in marketplaces, which is essential for CRM measures. However, marketplace operators want to have these relationships with all their might.
So will these fundamental problems be solved by the BCG recommendation?
Certainly not. Because first of all it must be clarified
- which customers are unprofitable and which are profitable,
- is it due to the offer or the assortments or
- to the webshop or
- to the communication
- What prevents customers from buying from this company?
- And certainly a few other aspects.
This means that investing even more in technology is certainly the wrong approach.
The following should take place first:
- a customer value analysis (20 to 30% of customers are certainly unprofitable)
- an assortment analysis (in some cases, up to 35% of products are so-called “bums” or do not lead to a call to action)
- an analysis of communication with the valuable target and customer
- , etc.
But with these results alone, every e-commerce provider can, for example,
- save advertising and catalog costs in particular
- and refine the organizational structure, i.e. streamline and improve collaboration and processes
- reduce storage and purchasing costs
- better select the available addresses for future campaigns
- better utilize the available technology and possibly consider new technology.
Finally, a quote from Philipp Westermeyer:
More than 10 years ago, he was asked whether he could recommend that a forklift truck company establish itself on Amazon.
His answer (in essence): “You are welcome to do that. But you have to expect that if you start as the market leader, your competitors will follow suit. In the end, your industry will only take place on this one marketplace (e.g. Amazon).
In plain language, this means that the big ones will get bigger and bigger, and thus more powerful.
