How Product Marketplaces Can and Should Evolve

In an age in which consumer retail is undergoing some painful transformation, the sector is becoming dominated by platform companies like Amazon, Alibaba, Jet, eBay, Mercari, and a handful of other product marketplaces.

Linear retailers like Sears, Macy’s, JCPenney, and many more are convulsing in response to the shifts in market trends, largely due to their lack of innovation, and are now closing stores as a result. Many smaller retailers, such as Gymboree, are packing it in and filing for bankruptcy.

Now that it’s clear which way the tide is rolling in retail, it’s helpful to think about how the leading product marketplaces can edge each other out and drive more organic sales. Platforms like Amazon and Alibaba should examine business and technological innovations to continue growing rapidly and to seize even larger shares of their respective markets.

Old Dogs Like New Tricks

By this point, it’s almost hopeless to expect any major platform innovations to come out of Macy’s and its ilk – those executives are likely too focused on shoring up their declining share prices.

Instead, smaller and nimbler retailers could prove a lucrative opportunity for partnerships. As these companies face declining margins, they’ll surely jump at the opportunity to make more sales, even if they don’t come at the typical margins they desire.

For an example, look at Tuft & Needle. The budding mattress seller does most of its business online, but is finding enough brick-and-mortar success that it’s opening a fourth location and revamping what its physical footprint looks like.

Tuft & Needle is going all in on Amazon, adding Echo devices to address questions from customers, offering 1-click purchases through Amazon with QR codes, and even posting tablets for customers to read Amazon reviews of Tuft & Needle.

While there isn’t a formal partnership on the books, this tactic illustrates the essential nature of Amazon to the retail world. Enterprising marketplaces should investigate how they can best interact and integrate with retailers who are gasping for air. They’ll probably beg for an opportunity to capture more sales with less of the typical associated headaches.

Inversely, retailers need to also examine these partnerships, especially if they hope to survive the next five years of looming disruption.

Lightning in a Bottle (or a Poké Ball)

Another strategy worth exploring is partnering more with companies like Niantic, the owners of Pokémon Go, one of the most popular apps ever created.

While it was merely a social game, Niantic bungled the game’s potential stickiness and ultimately missed the mark on monetizing, which has led to fiascos like last month’s failed Fest. A company like Jet or Amazon should have reached out and proposed a deep linking relationship.

A possible scenario would run like this: Pokémon Go players would be prompted with an opportunity to purchase related gear in-app, like water bottles and hats themed after the Pokémon property. Perhaps, after catching a water-type, the player would be prompted to look at products related to the captured beast. Niantic would then be awarded a finder’s fee for any purchases made this way.

On the flip side, whenever customers made a Pokémon-related purchase, they would be prompted to download the game and join in the zeitgeist game, a very targeted pitch that might actually have yielded high conversion rates.

Obviously the game has become more passé as of late, again due to the lack of stickiness, but it’s an opportunity worth pondering and looking for in the future.

See the World As It Could Be

Augmented reality (AR) is slowing entering the mainstream, largely thanks to social platforms like Snap and Facebook introducing such features in their respective camera interfaces. However, few appear to be utilizing AR for driving purchases.

One clever startup doing this is Hutch, which has an app that scans photos of rooms and empower users to decorate them using prefabricated themes and connecting users with related products from a growing list of retail partners.

While Hutch is largely focused on home furnishings, a similar feat could be accomplished for fashion and apparel. Snap a selfie and see how those earrings look or take a mirror photo and get an idea of how that new dress would fit.

It would surely require complex algorithms to match the fit of millions of unique body types and shapes, but machine learning is more than capable of accomplishing this. If mustaches can be rendered, so can clothing.

Even though it’s not ready for the mass market yet, virtual reality (VR) is also promising. Just as Hutch can render a room and enable additions on the smartphone, it should also look at VR for opportunities to expand its offerings.

An expectant mother looking to decorate her nursery could take a photo of the room, then go to a store and explore decorating options for that room on a VR headset. It would be much faster and cheaper than hiring a designer and far more convenient.

The mother could browse through available products with gestures and see what her new baby’s room would look like, place her order, then potentially have everything waiting on her porch by the time she gets home, depending on the pace of logistical innovations in this scenario.

Again, VR could be applied to fashion and many other product categories. All it takes is some spirited innovation.

eBay and Pinterest should be credited for launching visual search tools designed to aid users in better connecting with their prospective purchases.

On eBay, users can select an original photo or an image found on the web and hunt for similar listings on the auction platform. Pinterest has a similar feature, but only for photos taken by users, but it is working with OEMs to better integrate the software with the smartphone cameras.

Chatting Up Customers

Any e-commerce site worth its salt is using recommendations to drive more and larger customer purchases. Amazon is certainly leading the pack, but eBay and others are putting in good efforts to maximize the opportunity.

As a direct result of deploying recommendations, these companies should understand a lot about natural language and buying patterns. What would be interesting is if Amazon or eBay built or bought a chatbot system for helping customers navigate the marketplace and identify the best items to purchase.

While it might seem gamy initially, it’s likely that online shoppers would embrace the technology. They’re increasingly comfortable chatting with machines to get what they want, thanks to Amazon’s Alexa, Apple’s Siri, Google, and many more.

It would be a worthwhile experiment for a comfortable e-tailer to deploy chatbot shopping assistants in a closed beta and examine the resultant conversion rates. Software is making more and more decisions for users, so it doesn’t seem too far-fetched that it can learn more about a consumer’s preferences and conversationally make suggestions.

Many product marketplaces are chugging along at full steam, but they’ll soon start to rub elbows as they capture more and more off the addressable market. It’s crucial that they continue to look forward for innovations that drive more sales in order to remain relevant and competitive, be it through deploying new business tactics or technologies.

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