A question that often arises with the topic of online marketplaces is, “how do you determine their value?” These channels for multiple sources of product are lauded for their ironclad business models and money-making prowess which seems to be unstoppable. “The online retail industry in Europe is expected to be worth around 602 billion euros in 2017, which would mean e-commerce in Europe will grow 14 percent compared to the situation in 2016,” according to E-commerce News. But the bottom line isn’t enough to determine the big value picture.
Success for these centres of e-commerce means a keen awareness of metrics beyond the monetary, but more in the operational structure and how it creates an environment of mutual benefit for brand, buyers, and sellers. Probably the most critical glue binding these three players together is trust.
How do you determine trust levels in the e-commerce realm? Trust metrics can be calculated in a few ways:
A solid customer review system
A 2017 Bright Local survey discovered that “85% of consumers trust online reviews as much as personal recommendations.” Amazon is probably at the forefront of this process, including both commentary and a star rating system for each product on their website. Amazon also offered a Vine Program in 2007 which, “was created to provide customers with more information including honest and unbiased feedback from some of Amazon’s most trusted reviewers.” This was an answer to the growing trend of paid online reviewers and scammers turning heads towards specific items using glowing reviews. While bad eggs are a common problem in marketplaces with a broader influence, developing a transparent system in a business reliant on a community is always a good idea.
A study by Cornell University found that “failure to respond at all to reviews is costly. Results showed that organisations that did not acknowledge or respond to reviews and customer feedback experienced lower review scores and overall ratings.” The study recommended further that successful management means focusing on the most negative reviews. “Ratings improve more substantially in connection with constructive responses to negative reviews than simple acknowledgment of positive comments.”
Third party sellers will have their product on multiple marketplaces, and the responsibility falls on the overseeing marketplace to make sure these sellers are always front of mind. The general complaint among independent businesses selling on global marketplaces is the high take rate. “The key issue with take rate in online marketplaces is the tug-of-war between maximising profit and keeping customers within the network,” says The Motley Fool. Consulting with sellers regarding take rates is a necessary procedure, since losing sellers and increasing buyers is a common chicken and egg issue facing online marketplaces. At the end of the day, having a balanced ecosystem of buying and selling is the goal of most online retailers.
Trust metrics isn’t something set in stone, merely a suggestion. Though it seems more and more that in e-commerce, value is determined in multiple ways but always controlled by the community that creates it.
Via: Amazon, The Motley Fool, Cornell University, Bright Local, E-Commerce News.