Fashion Marketplace Management: Strategies, Experts tips and Best Practices for selling online on fashion maketplaces

Online Fashion Marketplaces have recently made the news for reaching a stunning ~50% of the total sales of fashion and luxury online.

With large pure players like Farfetch, MyTheresa, Yoox, Zalando and many more expanding their marketshare, fashion brands struggle to define their strategies to tackle this vast digital market.

If you work in a fashion brands and you wonder if you should sell on marketplaces or you need to decide which marketplace is right for your company read on.

10 questions about fashion marketplaces that we answered in our online course.

Before we deep dive into the business models of fashion marketplaces and we tackle specific aspects such as business planning and integration, you can find some straightforward answers the most common questions about fashion marketplaces:

1. In which situations online marketplaces are an advantage?
   • Marketplaces allow brands to open new markets where the brand doesn’t have specific local competences or they lack brand awareness. In this case brands can use marketplaces to expand brand awareness and sales.
   • Another situation is when the brand’s product are already available for sale on the marketplace but they are sold by many different sellers, in this case the brand may want to take control of the channel by selling directly.
2. Is there cannibalization between marketplace and Direct To Consumer (DTC) e-commerce?
   • In order to establish if there is cannibalization we need to analyze the sell out prices and the products sold by Category and Best Sellers. Depending on the results of this analysis you may conclude if there is a potential cannibalization or synergy between the different channels. To find out more about this topic see the marketplace course.
3. How to control the prices on online marketplaces?
   • Brands can monitor the sellout prices on marketplaces by using specific applications that scan the marketplaces and provide the brands with results. In alternative fashion brands can delegate this analysis to service providers who manage marketplaces for fashion brands in outsourcing.
4. What are the benefits of selling on digital marketplaces?
   • Gather data about product preferences in different markets;
   • Exploit fashion product lifecycle by selling new products on premium channels and off-season products on discount marketplaces;
   • Marketplaces that are specialized for local markets can help the brands to grow brand awareness and sales in that specific market.
   • Marketplaces allow brands to acquire new customers who generally buy on those specific marketplaces and turning them into brand loyalists.
5. What are the rules to sell on marketplaces?
   • In order to sell on marketplaces we need to follow the marketplaces Service Level Agreements (SLAs) for example for shipping and customer service
   • Technical integration: connector software, datafeed and mapping specifications
   • Content guidelines: product images description, marketplace brand page content;
   • Implement Marketing and Advertising campaigns where possible and required.
6. What are the pre-requisites to sell on marketplaces?
   • Before selling on marketplaces the seller company needs to be ready to support the standard drop shipping processes which include:
   • Logistics B2C capabilities: pick, pack, ship, stock management.
   • Customer Service capabilities.
   • Digital Production capabilities (Product images and descriptions).
7. How to avoid price competition on Marketplaces?
   • Price competition on marketplaces happens when multiple sellers list the same product on one or more marketplaces. The most frequent case is when a Wholesale client or Retailer also sells on marketplaces, for example when multi-brand boutiques sell on Farfetch. To avoid this situation brands may open their channel directly on the marketplace. By doing so the brand occupies organically the brand space on marketplace. (see use case D)
8. In house or outsourcing, which one is best?
   • One of the biggest challenges when starting to sell on a marketplaces is to learn all the specifications of the marketplace to create a product catalog that complies with the standards set by the marketplace. This process can take several months if the brand doesn’t have the skills in house and if there isn’t dedicated staff who can spend most of their time to work on the marketplace. Using an external service provider for integration of marketplaces can speed up to time to market significantly.
9. What KPIs should we monitor on marketplaces?
   • The overall goal of the marketplaces is to increase sales however there are some critical metrics that can determine the success of the brand on the marketplace. For example, a high return rate can negatively impact on the profitability of the channel due to the cost of shipping that are generally 100% paid by the brand. Therefore you need to look at the net margin or profit margin of the channel to evaluate the financial sustainability of the project itself.
10. How to choose the right marketplaces for my brand?
    • You need to choose the marketplace that fits your business model.
    • You should choose different marketplaces for different geographical markets and for different product lifecycle, e.g. in-season, off-season.
    • Do a benchmarking analysis of your competitors and analyse on which marketplaces they are selling.

Use cases: why brands sell on marketplaces.

A) The shoes brands A that is very strong in the southern Europe may utilize marketplaces in US and in the North of Europe to investigate the market potential leveraging the traffic of the marketplaces. For example the brand could integrate with Zalando, Galeries Lafayette and Miinto for the North of Europe and Neimann Marcus and Sacks Fifth Avenue for the US.

B) The clothing brand B needs to acquire new customers who may become brand lovers if they only tried the brand B products. The brand B decides to run a sales event on VeePee network where new customers can try the brand B products by buying the products with 50% to 70% discount. The happy customers will then become brands customer and buy also from the DTC ecommerce.

C) Brand C sells well jeans in North of Europe market but want to target people who buy total looks from luxury department stores, therefore Brand C decides to activate the Breuninger Marketplace and list a selection of products on the Department store’s marketplace so that the customers of the Department store can buy also the Brand C products when they shop for Looks

D) Brand D sees that its products are sold on a marketplace by a multitude of sellers who sell both second hand and new prodcuts, the Gross Merchandise value is estimated around 1 million Euros per year. The Brand D decides to open the official brand channel directly on the marketplace and acquired 75 percent of share of the brand sales on that specific marketplace.

For any further information you can reach out to the authors: Enrico Fantaguzzi, Filippo Quattrone. About the authors

Marketplaces such as Farfetch, Zalando and Nordstrom offer a significant opportunity for fashion & luxury brands to reach new customers across the world. However, succeeding in this competitive landscape requires a strategic approach, tailored to the unique challenges of the fashion and luxury industries and a careful planning of costs and revenues.

How do the marketplaces work?

A marketplace is an online platform that connects buyers and sellers where the sellers are the brands and the customers are the final consumers of the products, it’s a B2C business business model for the Brands.

Marketplaces allow brands to virtually multiply the visibility of the products by publishing them on multiple sales channels (the marketplaces) while the products are sitting in the brand’s warehouse (Drop Shipping).

Stock, prices, descriptions, images and marketing strategy are controlled by the brand

Every time there is a sale on the marketplace the product is sold to the customer and shipped to the customer from the supplier – the brand or the seller.

Why fashion marketplaces are an opportunity for fashion brands?

Selling on Marketplace is important for fashion and Luxury brands for a number of reasons:

1. Internationalization: Marketplaces allow brands to reach new customers in many different countries;
2. Low capex investments: Selling on marketplaces don’t require the set-up of an e-commerce platform and the costs are mainly variable
3. Low stock risk (Dropship Model): fashion brands can sell the stock that they already have in their warehouse;
4. New customer base: Markeplaces allow fashion brands to reach new customers;
5. Reduce inventories: Markeplaces allow fashion brands to sell the same stock on different channels;
6. Brand Image Control: The advantage of Marketplaces compared to resellers is that fashion brands can control price and image;
7. Collecting Data: selling on Markeplaces will allow you to collect more sales data to analyse.

A list of Fashion & Luxury Marketplaces with a brief description

• Farfetch: A global marketplace for luxury fashion brands. It connects customers with brands from all over the world, and it offers a high-end shopping experience. Recently some brands from Kering Group have started to reduce their direct presence on this markeplace. Read more on Fashion Network.
• Breuninger: A German department store chain that has an online marketplace. It offers a wide variety of fashion brands, as well as home goods and accessories.
• Yoox: An Italian online retailer that sells a variety of fashion brands, including both luxury and contemporary. It also offers a resale marketplace for secondhand clothing.
• Zalando: A German online fashion retailer that sells a wide variety of brands, from affordable to high-end. It also offers a marketplace for independent brands.
• Miinto: A Danish online marketplace for fashion brands. It connects customers with brands from all over Europe, and it offers a wide variety of styles.
• Saks Fifth Avenue: An American luxury department store that has an online marketplace. It offers a wide variety of fashion brands, as well as home goods and accessories.
• Otrium: A European flash sale marketplace that offers discounts of up to 70% on fashion brands from all over the world.
• Veepee: A French flash sale marketplace that offers discounts of up to 70% on fashion brands from all over the world.
• 24s.com: A European luxury fashion marketplace that offers a curated selection of brands from all over the world.
• Tmall: A Chinese marketplace that offers a wide variety of products, including fashion, home goods, and electronics. It has a luxury section for high-end brands.
• Macy’s: An American department store chain that has an online marketplace. It offers a wide variety of fashion brands, as well as home goods and accessories.

What are the difference between Drop shipping and Concession models?

Here is a table summarising the key differences between drop shipping and concessions:

Feature	Drop shipping	Concessions
Ownership of products	Merchant does not own the products	Merchant does not own the products
Inventory management	Merchant does not manage inventory	Merchant does not manage inventory
Shipping	Merchant does not handle shipping	Merchant does not handle shipping
Pricing	Merchant sets the prices	Supplier sets the prices
Commission	Merchant does not receive a commission	Merchant receives a commission on each sale
Marketing	Merchant is responsible for marketing	Supplier is responsible for marketing
Customer service	Merchant is responsible for customer service	Supplier is responsible for customer service

Pros and cons of Drop Shipping and Concession models

Both drop shipping and concessions have their own advantages and disadvantages. Drop shipping is a more hands-off approach, but it can be more difficult to control the customer experience. Concessions give the merchant more control over the customer experience, but it can be more time-consuming and require more upfront investment.

The best approach for a particular merchant will depend on their specific goals and circumstances. If a merchant is looking for a low-cost, hands-off approach, then drop shipping may be the best approach. If a merchant is looking for more control over the customer experience, then concessions may be the best approach.

Here are some additional factors to consider when choosing between drop shipping and concessions:

Markeplaces integration and workflow

The order management and the integration with marketplaces, can be quite complex and requires accurate planning, definition and organisation.

You can learn now how to organise the sales of your brand on markeplaces in the markeplaces online course by Digital Fashion Academy.

About the authors

Check list: is your brand ready to sell on fashion marketplaces?

1. Introduction
   • What are your goals and how are you going to measure success?
   • Do a benchmarking analysis of your competitors
2. Selecting the right marketplaces
   • Understand your target audience and market reach
   • Evaluating marketplace reputation, audience demographics and volumes of sales
   • Understanding platform fees and policies
3. Optimizing Product Listings
   • Crafting marketplaces-friendly product titles and descriptions
   • Create or edit product images to adapt to the marketplace
   • Leveraging keywords and SEO to increase discoverability
   • Implement the product feed following the technical specifications
4. Pricing Strategies for Fashion & Luxury Markeplaces
   • Understand and agreen on the discount policy
   • Integrate the prices data flow via data feed / catalog or API
   • Discuss and define the commercial and promotional calendar
   • Agree on special promotions and sales events
5. Branding and Visual Identity
   • Create assets for marketplace brand home page
   • Telling your brand story through product listings
   • Create banners and other assets for advertising and communication
6. Inventory Management
   • Integrate the stock flow via a third party marketplace integrator or direct integration
   • Avoiding stockouts and overstocking
   • Strategies for seasonal collections and limited editions
   • Fulfillment and logistics considerations
7. Customer Service & Operations
   • Integrate and test the order data flow: sales and returns
   • Ensure the customer service is able to handle the marketplaces customers enquiries
   • Handling customer inquiries and complaints on marketplaces
   • Utilize customer feedback to improve brand reputation
8. Marketing and Promotions
   • Leveraging marketplace advertising and sponsored listings
   • Cross-promotion with social media and other channels
   • Collaborating with influencers and brand ambassadors
9. Monitoring Performance and Analytics
   • Tracking sales, conversion rates, and key metrics
   • Using data insights to refine strategies and decision-making
   • Identifying growth opportunities and potential challenges
10. Intellectual Property Protection
    • Strategies to safeguard your brand’s intellectual property
    • Dealing with counterfeit products and unauthorized sellers
    • Enforcing brand guidelines on marketplaces