If it’s not a marketplace don’t call it that
The recent demise of the much-vaulted Suncorp Marketplace and the restructure of the team under acting chief executive Steven Johnson to a Platform Business is a good case study for enterprises who are deciding whether or not to implement a marketplace strategy for their business and whether this strategy is indeed the right way to achieve their goals of consolidation and providing, as Suncorp called it, “A single pane of glass” approach” to their house of brands.
I want to start off by underscoring a couple of things
- The purpose of this article is to demonstrate when to use a specific multi-vendor strategy, such as a Marketplace, Vs when to adopt a Platform Business Model
- It is not to point out mistakes or necessarily analyse the failure of Suncorp in their approach
- I’m merely using the Suncorp example as an illustrative case
Now that that’s established, let’s push on.
When Suncorp laid out its plans and announced that it was going to create an “Amazon” for financial brands with the quiet launch of its app in mid-2018, the goal of Pip Marlow and team was to provide customers with a unified view of all of their brands and enable customers to browse, select, compare and purchase financial services such as Insurance from its many brands that include AAMI, Shannons, Vero Insurance, Bingle Insurance and GIO.
At face value the idea has its merits, the idea of getting a 360 view of your customers and their engagement across all of your brands, and providing a single interface through which to engage without the need to replicate processes such as KYC, Credit Scoring etc. The concept is also not new and is something that most Fashion retailers such as GAP have had to content with for years.
At Omnyfy, we’ve come across this idea from enterprises multiple times – the underlying question that we always ask is “What are you looking to achieve out of implementing the initiative” and “Is the initiative really a marketplace or are you looking at simply streamlining acquisition and client engagement across your brands”.
The reasoning behind this is simple – Marketplaces are a very specific form of eCommerce and calling something a Marketplace simply because there are multiple brands across which customers can shop, may not be the right thing to do. Determining which route to take when implementing a Multi-Vendor initiative has a significant impact with decisions taken through the design phase as well as in communicating the goals and objectives of the initiative across the organisations internal and external stakeholder groups.
Going the Marketplace Vs. Platform Business route
First off, is there a difference? From the experience I’ve had at Omnyfy and working with major enterprise brands advising and consulting on marketplace implementations – the answer is Yes.
- Who are the Sellers:
- A Marketplace by definition requires multiple vendors, each selling its own products or services, where customers are able to purchase from multiple vendors in a single transaction. The sellers on a Marketplace are usually external to the marketplace owner’s business and are third-party vendors or brands.
- A Platform Business model, especially in an enterprise, is a technology solution that transforms customers engagement or supply chain processes within the business, primarily with owned brands and affiliated businesses. It’s about changing the way the organisations existing customer segments shop across their house of brands.
- The role of the Operator / Owner
- With Marketplaces, The operator of the marketplace is usually not associated or affiliated with the vendors or sellers on the marketplace and the role of the marketplace operator is to provide the marketplace platform, facilitate engagement between the buyers and sellers and promote the overall marketplace to customers and new vendors alike.
- In a Platform Business model, because the Operator is associated with the Vendors on the platform, their role extends to the operational integration of the platform with their respective brand participants.
- The Revenue Model
- In most Marketplace models, the Marketplace Owner or Operator is looking to drive revenue for itself through commissions or subscription fees from Vendors.
- For Platform Business models, the Operator is not necessarily trying to drive revenues for itself, rather its goal is to improve cross-sell and up-sell opportunities for its participating brands and to offer its customers a single place to access its full range of service or product offering.
- The goals of the platform
- The goals of a marketplace are usually to open up new business opportunities, consolidate fragmented industries, drive leads and sales for discrete vendors of products or services and provide these vendors with a platform that brings buyers for the specific category to one place.
- With Platform businesses, the goals are to improve efficiency, operative effectiveness, provide more cross-selling opportunities and to streamline the supply chain process. With a Platform Business model. The enterprise is not seeking external vendor participation – this makes sense as the goal of a Platform Business model is to replace manual engagement processes with technology that enables scale and growth.
Understanding this difference is critical and will save enterprises from what is perceived to be a failed project, as was the case with Suncorp. This is further evidenced in an AFR article on the matter with Steve Johnston stating that he would no longer be using the term “marketplace” and would no longer be talking about a “financial services supermarket”.
“You won’t hear me talking about that. What you’ll hear me talking about is a digital business, creating a digital platform. People have called the platform a marketplace. I call it a digital distribution platform. But equally, if you want to call it a marketplace, I don’t have a problem with that,” he said.
Determining what type of solution to implement
Making a call on whether to implement a Marketplace vs a Platform Business requires discovery into understanding the sector, the organisations goals and the outcomes it is looking to achieve.
However, following on from the differences we’ve illustrated above, the decision is relatively straightforward:
- If the initiative targets a new business opportunity where the business is facilitating a platform where primarily external vendors are selling on the platform, with a goal to drive revenues via commissions, charges, subscriptions and fees, then create a Marketplace.
- If the initiative targets improving efficiencies, creating a better experience for customers with access to a range of brands, departments or areas of affiliated businesses and the revenue objective is to drive increased revenue for these businesses rather than the platform itself, then you’re transforming your existing business with a Platform Business model.
One of the main reasons in getting the definition of what you’re trying to do right is that it has implications in the decision making as well as managing the perception of your customers.
When customers engage with a marketplace, they are expecting a large number of vendors where they can compare and buy products or services, view ratings and reviews with a user experience focussed on transparency – i.e. every vendor is competing on an equal footing and their success is dependent on the quality, price and customer value delivered.
However, on a Platform Business, it’s different. Customer know that they’re engaging with a house of brands – the primary goal is cross selling and ease of access, purchase and engagement across products or services. This makes perfect sense and aligns with expectations, reducing any form of cognitive dissonance.
Calling something a Marketplace and then delivering a Platform Business experience only leads to dissatisfied customers. With Suncorp this affected more than its customers – its own board and financial analysts were also confused with what they were looking to achieve. A note from Morgan Stanley stated, “We struggle with the cost and complexity of the multi-brand offering and challenges to realising benefits from the marketplace strategy, likely further complicated by shifts in regulation.”
So, what does a Financial Services Supermarket look like?
Well in the true definition of the Marketplace term, there aren’t any Financial Services marketplaces. The majority are merely comparison websites which at most drive leads to financial services institutions. Platforms such as Compare the Market, Ratecity, Mozo and Finder from Australia, Moneyhero, Money101, SingSaver etc – all of which are part of the Compare Asia Group are good examples – where they cover multiple categories each with a large enough assortment of Vendors to provide their customers with access to transparency of pricing and engagement.
A true financial service marketplace should enable customers to do more than just compare:
- Customers should be able to receive quotes from multiple providers
- Customers should be able to procure and sign up via the marketplace itself for the service from their preferred provider
- The marketplace acts as a conduit for funds enabling transactions across multiple integrated service providers
- The customer is effectively engaging with the providers through the marketplace
With increasing regulatory pressure on financial institutions, privacy mandates and the significant impact of Cyber Crime, the changes that we’ll see a true financial marketplace is very unlikely, through sectors such as P2P lending and Short-term financing are prime candidates for true marketplace implementations.
This article first appeared on omnyfy.com.