The benefits of platform technology and thinking
A platform is a combination of online and offline selling points that offer services or products. You give the customer a multi-entrance sales channel where the buying experience is uniform. The information, the prices, the purchasing process, and the image are consistently implemented so that it no longer matters where the purchase takes place.
But platform working and thinking is more than just the multiplicity of channels. The biggest difference between a platform-based company and a traditional company is that platforms do not purchase anything. On a platform, you sell a product or service and only pay the supplier the agreed purchase price after the sale.
No stock risk
Traditional shops take a lot of risk. They buy something and if they don't sell it they get stuck with it or have to incur costs to return the product to the supplier. With the rise of several online marketplaces, the so-called platform thinking arose where the platform no longer wanted to take purchasing risk and therefore stock risk.
Suppliers are thus partly responsible for the success in the number of sales because they bear the full stock risk.
Distributed content management
An online store has to spend a lot of time and effort to offer good and unique content to their customers. You want to inform the customer well and you need unique content to be ranked high by search engines. This costs a lot of time and money.
By making the supplier not only responsible for sufficient stock, but also for the right content, you save a lot of costs and the content gets better. The supplier generally knows a lot more about his product than you do and therefore writes better content.
You don't have to keep track of the prices and specifications yourself anymore. If your product is too expensive, there will be no sales for which the supplier is responsible.
Because you are only a kind of gateway for your supplier to the potential customer, you can fully focus on the underlying technology, the buying experience, and the brand. The supplier is responsible for the price and promotion.
In addition, you can do certain joint promotions to draw extra attention to a specific product or service. Most platforms will only do this if it contributes to the brand value of the platform.
Shop in shops
Amazon is a good example of a platform that continues to grow rapidly and globally by creating shop-in-shops. This principle was already a success with the more traditional retailers who rented out shop space to suppliers to sell products.
However, the concept became even more popular when online stores started offering special pages to start establishing dedicated online stores within their platform. Without a lot of technical knowledge, everyone could start their own online store. The advantage is that the platform generates traffic for the store and in turn benefits from the traffic that the online store attracts.
If the online shop-in-shop sells nothing, it costs nothing and if there is a sale, the platform will charge a commission on it. Usually, this is 10% to 15% of the purchase value. In some cases, platforms charge a subscription fee to start their own shop-in-shop, but most do not.
Online platforms are scalable
Alibaba.com is the largest marketplace in the world. Anyone can offer anything and therefore the platform continues to grow. If a new supplier subscribes to Alibaba, it costs nothing more than maybe a little server capacity. The underlying technology implies that the costs are virtually the same when 1 million or 1 billion suppliers subscribe.
For convenience's sake, we do not take into account the service department and the financial administration, but proportionally this is a fraction of the exponential increase in revenue.
Traditional companies keep logistics in their own hands. This means that they either deliver their products themselves using trucks and couriers or they use a logistics partner. This partner comes daily or a few times a week to collect the sold products from the central warehouse and delivers them to the customer within the time agreed.
With dropshipping the stock is spread over various logistic parties at the expense of the suppliers. The delivery of a product is a matter between the supplier and the logistic partners. In some cases, the platform's only role is to make clear agreements with the supplier about how quickly a delivery must take place.
Because the platform is also not part of the financial and return process, a lot of time and costs are saved. This allows the platform to fully focus on what it is good at. Namely: attracting customers and implementing technological innovations.
Service and warranty
A service department costs a lot of money to set up and scale as the business grows. Platforms shift everything related to service and warranty to the supplier. If a product is returned, a customer has questions or if there is a problem with the warranty, it is the responsibility of the supplier to solve.
This ensures that the supplier must provide good quality and service. Most platforms have a certain quality standard. If the supplier does not meet this standard, he is no longer allowed to sell via the platform and he even risks a fine.
Earning without risk
Etsy.com is a platform where many creatives offer their art and products. The platform has become popular partly because artists and designers discovered that they could offer their paintings, handmade clothing or jewelry and other objects.
Thanks to the platform they were able to test whether there is a demand for them after the production of 1 piece. If there was sufficient demand, they could start up a small production with little investment and therefore only incur costs when the demand was guaranteed.