“You can’t just open a website and expect people to flood in. If you really want to succeed, you have to create traffic.”
— Joel Anderson
Being the most democratic channel with no gatekeeping, most consumer brands will invariably be present on marketplaces. But presence doesn’t equal winning. Marketplaces don’t reward presence. They reward those who understand their mechanics deeply – the invisible algorithms, the buyer psychology, and the very different ways these platforms operate, not just from each other, but from D2C and traditional retail.
In the journey of scaling Atomberg into a Rs 300 crore-plus business on Amazon and Flipkart, everything I learnt about marketplaces was on the job, and I never found a playbook I could refer to. I’ve tried to distil most of these learnings and fundamentals in this chapter.
E-commerce marketplaces are broadly of two types: horizontal and vertical.
Horizontal marketplaces are those that host products across a wide range of categories, virtually anything legal and feasible. Amazon and Flipkart are the biggest examples in India.
Vertical marketplaces are confined to certain categories. Nykaa for beauty, Myntra for fashion, Croma for electronics, Firstcry for baby care, etc. are some examples. As some niches gain market size, more such vertical marketplaces will emerge. The leading ones catering to sustainable products, baby care, and pet care, for instance, can become much larger in the coming years.
As the market matures, more niche platforms will emerge, but for most brands, the horizontal giants will remain the battlegrounds that matter. Most of what I’ve explained in this chapter is keeping Amazon and Flipkart in mind, but the fundamental thought process would apply to any e-commerce platform.
The e-commerce growth equation
All e-commerce platforms follow a simple fundamental growth equation:
Sales = Traffic x Conversion rate x Average Order Value (AOV)
Although this equation looks absurdly simple and obvious, you won’t believe the number of founders who don’t grasp it. So many of them have come to me, asking for a solution to “My revenue isn’t increasing. What should I do?”
I always ask, “What’s the problem - traffic or conversion?” and they rarely have the answer on top of their mind
Traffic, conversion rate, and AOV are the only three levers that can help you grow.
First lever: How can you increase traffic? There could broadly be two ways: organic and paid.
Organic:
Rank on top in generic searches for your category. For me, if someone searches “fan” on Amazon, we want to be the first brand that the customer sees. This is the most desirable and the hardest position to achieve. It takes high volumes of sales, hundreds (if not thousands) of ratings and reviews, and usually a lot of time to get there.
Brand searches. This is when the customer specifically searches for your brand. This is again the behaviour you most desire from your prospective customers and can be achieved only if you’ve delivered quality over time and built sufficient awareness about your brand. This is often a direct result of the marketing campaigns you’ve done outside the platform or the result of positive word-of-mouth.
Discovered on category pages while browsing. This happens when the platform recommends them to customers looking for the category, and instead of searching, they are browsing through the category nodes. Again, good prior performance makes it easier to win here.
Paid:
Search ads. These could be either for generic terms related to your category, or could be run on searches for your competing brands.
Display ads. These ads could be present on the home page, category page, as well as on the product pages of other products in the category.
Ultimately, you have to know that the customer is unlikely to scroll too far down, and being on the second page of search results is equivalent to being invisible. You must always be visible. If you aren’t, low sales and growth shouldn’t be a surprise.
Second lever: How can you increase conversion?
By giving the customer the confidence that your product is indeed what they’re looking for, is at a price point they’re comfortable with, and will be delivered quickly.
Broadly, these will be the parameters:
Listing quality. Have the right, high-quality product images, a professionally written, detailed description, Q&As, A+ content, and a Prime tag if Amazon. All of these are now basic hygiene factors for any listed product.
Operations. Delivery timelines should be minimal. Items should be Fulfilled By Amazon (FBA) or Fulfilled by Flipkart (FBF) on these two platforms, respectively.
Reviews and Ratings. One way to increase them is to send review request emails from the seller dashboard. You could also nudge them through a message or a QR code on or inside the packaging of your product. Another tactic brands are increasingly adopting is seeding the product with influencers and reviewers to get more reviews.
Deals and Discounts. This gives additional visibility on the deals page and nudges the customer to make a purchase. However, one should be careful not to overdo it or it becomes the reference pricing.
The third lever is Average Order Value. But this is very difficult to influence on marketplaces. It’s better to optimise the two levers discussed for this channel.
While this basic equation will always stay the same, every e-commerce platform has its own characteristics that make it different from the others. And because of these subtle variations, some platforms are more suited to certain categories and target markets than others.
In the subsequent sections, I've explained Amazon and Flipkart in some detail. Although there are tens of other platforms, I believe that if you understand these two well, it would cover most of what you need to know about marketplaces in general.
Excerpted with permission from Zero To Scale: A Playbook To Build Consumer Brands In India, Arindam Paul, Wyzr.
