The Marketplace of Broken Dreams
There are many definitions of marketplaces out there. As someone who has thought about marketplaces for the past 20 years of my life, I’ve come up with a new definition. Well, not a definition precisely.
A Marketplace Is a Promise.
Here are but a few promises you make when you setup a new vendor with products to sell to your consumers. Let’s start with the seller and work forward. What are you promising to the buyer as a marketplace operator?
1 - You promise that the seller is who you say they are.
What is it:
Sometimes, a seller says they are a specific entity, but they are really not. Ever had your credit card stolen by a website you thought was your bank? It’s called phishing. It looks like your bank’s site, but it’s not. There is a subtle misspelling and suddenly bad actors have your information to resell to criminals.
Many marketplace seller brands are unknown to consumers. It’s supposed to be about the product, and the seller trust is assumed because the retailer trusts them. But what if that trust breaks down?
Then you have a dangerous situation where a bad actor is trading on your brand as a marketplace, but the consumer doesn’t realize it.
Why it matters:
Most people talk about buyer fraud as a bad problem. But in a marketplace, the worst type of fraud you can imagine is actually seller fraud. Because your consumers think they are getting a good experience, but they are not. Meanwhile, the seller is long-gone with the buyer’s money.
What to do about it:
Validate the bank account of your sellers, or establish proof of business or personal identity in your country of business.
Establish trading limits early in a seller’s history to limit the damage a bad actor can cause.
Don’t add (unknown) new sellers during or right before peak seasons.
Limit the amount of marketing exposure new sellers can get before they prove themselves to be trustworthy. Give it time. The new generation of fraudsters are more patient than the last generation I’ve found.
2 - You promise that the items you say are available to purchase, are actually available to ship.
What is it:
Inventory integrity is at the core of a virtual inventory arrangement, especially a marketplace. After all, your killer business idea is that you just need to get consumers to the website — no inventory risk for you!
What would happen if suddenly you would found out that every item you are selling, you would have to end up canceling every single order that is placed? That’s called overselling.
Why it matters:
All you have in a marketplace is your customer experience. And each time you have to cancel a customer’s order because the item is not in stock, it is completely preventable. And each of these cancellations will most likely cause that buyer to never come back.
What to do about it:
Ensure you are synchronizing inventory on a very regular basis - at least hourly for your top vendors, and at least daily for your infrequent vendors. Some may recommend more, but if you can get this at a minimum, it will serve you. Good luck getting more integration work out of sellers without it coming from a channel integration provider in the middle.
Ensure that all the products your vendor promised you are actually in your assortment.
Double-check that products you’re offering consumers are still in the inventory feed and have not fallen off.
3 - You promise that your vendors will ship when they say they will.
What is it:
Even if inventory is accurate, it doesn’t mean that your vendors are shipping on time. One of the biggest issues that some brands have is that they are new to dropshipping. This means, their shipping facilities are optimized for pallets and not pieces; it can take between two and five days just to get a parcel out the door!
Why it matters:
The WISMO (“Where is My Order?”) question is the bane of eCommerce merchants everywhere. The gold standard for eCommerce today is in and out the same day. The longer a buyer has to wait for their tracking number, the more upset and worried they have the chance of getting.
What to do about it:
Ensure that you have normal and emergency contact information for customer service and warehouse contacts at each vendor.
Setup bi-weekly touchpoints with your vendors to review upcoming promotions, operational issues, and improvement plans.
Institute a vendor scorecard and chargeback mechanism for late or missed shipments as part of your dropship program.
Institute a secret shopper program to validate the shipping performance of your vendors.
Integrate with the various shipping APIs so you can automatically track when items hit the consumer’s door.
4 - You promise that the seller has legal possession of authentic product.
What is it:
What’s worse than having product in stock on your marketplace? Being a fence for illegal goods from unauthorized sources. When I was at Barnes & Noble, I used to work with the Director of Stores Loss Prevention. It was eye-opening to see people who would steal from Barnes & Noble stores attempt to sell the same merchandise on Amazon and B&N marketplaces. Imagine the nerve of someone trying to use your own channel to sell merchandise they stole from you!
Just because someone has the product, doesn’t mean they obtained it legally.
Why it matters:
Quality goes to the core of any marketplace. It goes without saying that selling you want your products to be authentic and legally obtained. Ultimately, you don’t want your buyers to be your authenticity police — you need to find any issues with your merchandise before they do.
Another story: before AI was terribly common, I used to do my own spot-checks on marketplace sellers offering products on key items. For any new condition best-selling item over $50, for example at the time is was the Lord of the Rings Trilogy box set, any marketplace item at 40% of the list price is always fraud. Always. I can’t tell you how many of these sellers I prevented and shut down, and never received a single e-mail from them.
What to do about it:
Ensure that any resellers on your marketplace by making them produce valid purchase orders or authorized reseller agreements.
Get the merchant to ship samples of key merchandise to your team in order to verify their authenticity.
Don’t assume you can’t set this and forget it. Setup ongoing quality checks at random intervals to keep your vendors on their toes.
But there’s even more …
You can write forever on this topic, almost! Here are a few more that I would think about too:
You promise that the seller’s product has matched to the right SKU in your inventory.
You promise that the product’s attributes listed on your website are accurate and match the actual product.
You promise that the products you are offering are not defective, expired, or in the wrong condition.
What others can you think of?
I’ll wrap this up with a true story ….
I once had someone reach out to me because they wanted to start a marketplace. My first question was a softball.
Question: “Why do you want to start a marketplace?”
Answer: “I don’t like doing customer service.”
Ugh. No. Just, no. Suffice to say, customer service on a marketplace is an order of magnitude more difficult than a normal eCommerce site. Trust me on this.
Next time,
Rick
PS - I write about dropshipping quite a bit. Here are a few articles for you to peruse:
