Investors, it seems, rather like marketplaces. According to new research published by analyst Dealroom in collaboration with Adevinta Ventures and Speedinvest, investment in online marketplaces tripled year-on-year to $28 billion in the first quarter of 2021. Meanwhile, the collective value of the world’s unicorn marketplaces has rocketed by 70% to $5 Trillion since January 2020.
That’s probably not surprising. From Amazon to more specialist platforms such as Etsy, most of us have probably used online marketplaces to buy goods and services. It’s a tried and trusted business model and one that still has plenty of potential for growth.
But starting and running a marketplace doesn’t necessarily require multi-million dollar funding rounds or even much of an investment in new software. Small companies can create their own profitable ecosystems by partnering with other complementary businesses.
At least that’s what the experience of U.K. furniture designer and seller, Swoon Editions suggests. Established eight years ago, the business specializes – according to co-founder Debbie Williamson – in designing furniture that “people fall in love with. Great design but at affordable prices.”
The Accessory Factor
But as Williamson explains, the focus on furniture left a gap in the company’s offer to consumers. Unlike say John Lewis – a retail sector magnet for Britain’s aspirant middle classes – Swoon was simply selling furniture. It was not in the business of designing accessories such as lamps, cushions or paintings. In other words, it wasn’t a one-stop shop and that was a limiting factor not only in terms of sales but also in its ability to fully service style-hungry customers.
This is where the marketplace idea came into play. “Our sales rose during the pandemic because offline retail was closed and people’s attention had been redirected to their homes,” says Williamson. “The marketplace idea spun out of that. We realized that people were also looking for accessories such as lights and curtains.”
Swoon’s game plan was to identify designers offering products that would align with the company’s own design-led aesthetic. Products that would sit comfortably together on the site.
The Personal Touch
“I approached the brands myself,” recalls Williamson. “And I selected them because they were people who cared about design. The approach was very personal. We set to out to find common ground.”
There was a bit of pitching to do. Swoon took the time to mock up website designs to show the prospective partners how their own products would be displayed on the website. “We demonstrated how we would showcase their brands,” says Williamson.
To date, Swoon has raised £20.2 million according but very little additional money was required to create the marketplace. “We used the technology we were already using,” says Williamson. “At the same time, we made it simple for our partners. We made it easy to list and we helped create their brand image.”
In terms of the financial arrangements, Swoon charges commission of between 10 and 15% while also handling all the fulfillment, a fairly typical marketplace model..
So what has this meant in business terms? “We have seen an increase in average order value,” says Williamson Brands using the platform have seen sales grow by an average of 42% between the final quarter of 2020 and the first three months of this year. Some have seen 75% sales growth. Williamson says the reaction from consumers has been good but more research needs to be done into what they would like to see.
With a focus on careful selection of marketplace partners, Williamson expects the number of participants to grow to around 30 in the medium term and there will be more investment in the functionality of the site. The aim she says is to create a design-led ecosystem.”
The likelihood is that relatively small initiatives such as Swoon’s market will not be on the radar of global analysts looking at massive investments in the marketplace sector. But for SMEs , it’s an example of how the marketplace concept can simply be a means to bring together a range of companies in a mutually beneficial arrangement.