Don’t Let Platforms Commoditize Your Business

Large Multisided Platforms(MSP)s like Amazon, Alibaba, Apple’s App store have a powerful influence on the markets both in drawing the sellers as well as buyers onto their platforms. They have made it very easy for the sellers to find their customers.

As more and more sellers join the MSPs, they realise that doing business on them carries more risk and costs. They are drawn into a price war as more and more sellers join the MSP fighting for the same customer segment.

the MSPs in turn take advantage of this dependency by raising prices, changing their search or recommendation algorithms to put more emphasis on price. they ask sellers to advertise to maintain visibility in search results. They may even compete with sellers by imitating their products and they may change their rules and design ways that weaken sellers connection with customers.

Sellers can employ various techniques to avoid being exploited or commoditised.

Develop and invest in your direct channel

Even when you maintain a presence on major MSPS, Sellers should reduce the dependence on MSPs by investing in their channels, reach out and serve customers directly. Many business-in-a-box solutions are creating a fully functional online store easy and affordable. The main differentiator is that you fully control your relationship with your customer.

On the other side, this requires that you plan everything from getting the customers to your sites and selling them your products. It becomes another channel for attracting and retaining customers and you need to plan in-depth every step. The solution providers like Shopify, Magento can help to some extent through partnerships.

Another way of reducing your dependence on MSPs is “multihoming” being present in multiple MSPs which makes you less dependent on a particular MSP. This can keep MSPs in check especially if the seller is important to the MSP.

Use MSPs like a showroom

Very few sellers can become independent of MSPs given the number of customers they attract. Sellers can set up their storefronts and use MSPs as a funnel to draw new customers. This gives them more ownership over their customers, the data enabling them to make customised offers and differentiate themselves.

A typical way of doing this would be to offer deals and direct the customer to the sellers’ channel when booking orders at MSPs. Many companies offer free coupons that can be utilised at the sellers’ storefronts.

Sellers can also consider offering a broader range of products on their storefronts while limiting the product range on MSPs. A powerful way to pull customers to the direct channel would be to offer a better price there. But many MSPs do not allow this. many sellers get around this restriction by offering coupons or loyalty points that can be used for future orders and gets converted into substantial savings.

Go deep or go broad.

Companies can adopt one of the following strategies to build a competitive advantage and avoid competition on MSPs. They can either go deep or go broad. Go deep requires the company to offer a very highly specific product or service on MSP and use its economies of scale. They can go broad by offering a wide variety of products or services leveraging their economies of scale.

Go deep: Specialisation in a product or service is a very good strategy while selling on MSPs. The deep specialisation can create a reinforcing cycle. The more it meets the customers’ expectations the better its ratings would be increasing the chances of driving more customers to it. This can have a cumulative effect and help sellers build a sustainable competitive advantage over time.

Go broad: Alternatively, they can leverage across multiple products and services to take advantages of the economics of scale. Some sellers have developed a highly efficient process for listing, marketing, selling products allowing them to resell products from smaller merchants.

Although this strategy ideally involves aggregating a large number of products. The idea is to develop processes to take advantage of MSPs strengths.

Choose an optimal strategy: Going deep is the best strategy for small sellers to differentiate themselves from the crowd and build up a loyal following. Niche products on anMSPs is a very powerful combination as the reach can be wide on an MSP and the chances of gaining more customers are much better here for a specialised offering.

It is also the best option for sellers with established business outside the MSP. As it already has a successful business they can easily adapt it to an MSP that build expertise around a specific MSP expertise they could leverage.

Going broad can be adopted for MSP players that have specialised offering but run out of room to grow in that niche. They already have a successful offering and they can more easily adapt it to the MSP than build expertise around specific features.