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How can e-commerce benefit from the platform economy?

Due to the massive loss of the point of sale, retailers are increasingly turning to online marketplaces. But what do they need to pay attention to? And as a company, can I sell on any platform?

Why is there no alternative to the platform economy?

The answer is quite simple: Online shoppers love platforms. The market development in the last few years indicates that the platform economy is becoming a relevant place for online shoppers. More than 50 percent of all product search queries take place on Amazon and not Google. This trend will probably continue, customers will more likely use online platforms as their first stop. And it will change the business model of many brands. In 2000, revenue form online sales in Germany were only 1.3 billion Euros. In 2019, it grew to 57.8 billion Euros. „The question for manufacturers is no longer whether they work with platforms, but HOW". This quote from a study by the management consultancy McKinsey makes clear, that platforms are not an intermediate scenario in an increasingly changing world, but rather the "end game".

Platform business is not an isolated issue that is handled in silos, because it is just another channel. The world of platforms will become more complex and the effects more serious. The earlier you face and accept this challenge, the less fear and anxiety it will spread. For suppliers and manufacturers in particular, it is therefore essential to examine the rules and success factors of the platform economy. Digital platforms are growing extremely fast, sometimes monopolizing entire markets and creating new global networks – whether marketplaces, multichannel providers or pure online providers. The examples are well known: Amazon, About You, ebay, Zalando and many more like OTTO have become global players. For the two-sided business model of commerce platforms, it means that the expansion of supplier contacts on the one hand and customers on the other increase the benefits of a platform for both parties. In addition to reach and relevance, brands and retailers on platforms are benefiting from customer trust. Furthermore suppliers are more self-sufficient than in retail, i.e. they can choose their own product range and can determine their own prices. Another advantage for brands is the global reach making it easier to sell in foreign countries.

Why do companies need a Chief Platform Officer (CPO)?

Access: Brands often underestimate the growing complexity of  e-commerce. The more platforms you use the more the complexity grows. Some marketplaces – like About You, Amazon, ebay, Otto or Zalando – are not immediately and easily accessible for every brand. This is due to the different requirements of the platforms in terms of product presentation and strict logistics requirements in B2C shipping. In addition, the technical connection of the data interfaces requires a high level of IT know-how. This has an enormous impact on many different business areas: in addition to marketing and sales, it also affects IT, content development, customer management/CRM, logistics and much more.

Management attention: Platform business can only be successful by being integrated in the corporate strategy. We are talking about digital transformation! The CPO needs access to all business areas within the organisation to structure the whole process. Otherwise there is a risk that the urgent issues will always be prioritized over the important ones.

What skills does a CPO need?

In addition to a comprehensive knowledge of the market, which empowers him to make an impact on his business, the CPO needs a high level of organisational competence and project management know-how, to support the change process within a company. This should be paired with communication skills and the ability to deal with conflicts. The requirements of the platform economy are often diametrically opposed to the convictions of the existing business model and generate resistance in the company. However, the role can be taken over by interim managers, especially because it may no longer be used in the same form after two years. Have you heard about „The prophet in his own country …”?

When is the right time to participate in the platform economy?

NOW. Platform economy will become more complex, the effects more serious. The requirements for successful platform business are high, but with the right long-term planning and strategy and the right attention in management, it can be implemented well. As I mentioned before: Manufacturers and retailers need a very good reason not to participate in the platform economy. But when they start – think about having a CPO on your side.

About Marcel Brindöpke:

Marcel Brindöpke, Managing director and co-founder of heyconnect – a company based in Hamburg. heyconnect supports more than 150 brands in all terms of platform economy: from content creation, technical support up to fulfillment. With access to more than 30 marketplaces in ten countries heyconnect works for more than 150 brands like Lloyd, Cinque, Colmar, Mephisto und Hugo Boss Home.