In 2024, it comes as no surprise that retailers are continuing to invest in building omnichannel approaches to customer acquisition and retention. However, retailers are experiencing increasing pressures from international marketplace businesses offering price competitive offerings that are often direct from manufacturers or other international aggregators.

In a short period, these marketplaces now make up the largest portion of the product discovery for customers in 2024 (34% of all online discovery). This rapid transition has introduced a new challenge for retailers to look for ways to compete in the digital world with rapidly expanding marketplace businesses who continue to put significant pressure on growth and profitability. The large international marketplace businesses have reset consumer expectations when purchasing online, turning what were differentiators for some brands into table stakes for all digital experiences.

The rapid evolution of consumer preference is a result of marketplaces investing heavily in their digital offering across three key areas: range, price and customer experience. To be able to effectively compete in the digital space, retailers must create differentiation and strengthen their own offerings to meet the re-defined consumer expectations.

Using digital in new ways to spark growth

Traditionally, digital has been looked at as primarily a lever to acquire new customers who either were not geographically located to purchase in-store or to capture customers from other competitors offering similar products and services. Whilst this is still prevalent, the cost to acquire new customers using traditional mechanisms (typically price) has begun to put significant cost pressures on retailers trying to grow through only new customer acquisition online. By shifting marketing focus to how to unlock growth through existing customers in the digital space, retailers can capture a larger share of their existing customer’s wallet in a more efficient and profitable way.

To be able to do this effectively, one of the strategies that is becoming increasingly popular (particularly in the fashion industry) is creating differentiation based on range when compared to the large marketplace businesses. Because of the geographical coverage that digital channels offer without a significant capital investment required to create in store experiences, retailers can create unique, exclusive and limited time product offerings to re-engage their existing customers with limited downside risk.

This is increasingly effective when combined with partnerships with other businesses. The Teaching Tools (one of our clients) has been using different partnership strategies to create unique collections to differentiate a traditionally commoditised product (marking stamps) to create differentiation in its product line with great success. Most recently, partnering with “The hungry caterpillar” to create a unique set of designs that cannot be found on other sites.

The fashion industry has been leading the way with this strategy over the past two years to combat the growing preference to use platforms like The Iconic, ASOS, Shein and other major marketplaces.

This is a pillar that Uniqlo has leveraged on multiple occasions to attract and re-engage users (like its collaboration with Christophe Lemaire). This isn’t just an opportunity for larger businesses with global relationships, fashion brands locally are partnering with creators of all sizes to create unique product drops that tap into both audiences and create products that strengthen brand and preference.

Another client of ours, The Littl partnered with one of the more popular contestants on The Bachelor and Australian fashion influencer, Bella Varelis to create a unique line of jewellery that sold off the shelves at launch.

We should expect to see this trend continue and evolve quickly in the retail space as CPMs continue to rise across digital marketing channels and privacy constraints continue to put pressure on the digital marketing industry.

Loyalty programs

Whilst loyalty programs have been a key component of a lot of retailer’s strategies to retain clients, there’s been an accelerating trend to deepen this connection with their customers.

In response to the continued pressure from marketplace retailers, Australia’s big retail players like Westfarmers have looked to increase the stickiness of their customers both in store and online by introducing powerful membership programs like OnePass and Coles and Woolworths expand their respective offerings online with an integrated loyalty and subscription offering.

Whilst available in store, these memberships have been designed digital first, which is a significant pivot from the previous loyalty programs (flybuys and Woolworths rewards) which focused on in store purchasing.

We’re expecting this trend to continue in the longer tail of enterprise retailers across Australia and should expect to see strategic partnerships form based on certain buying personas (vs. a one size fits all membership program) to “lock” customers into a group of aligned retailers.

Whilst it’s still early days in the rise of marketplace businesses in Australia, one thing is for certain – the competition to attract and retain customers online is not slowing down and brands need to innovate quickly and start building the right strategic partnerships to ensure they don’t get caught out in a price war with marketplaces with much more sophisticated supplier relationships, distribution networks, customer databases and ecommerce capabilities.

Veronica Cremen is the founder and managing director of Vonnimedia. She was recently named on Forbes’ 30 Under 30 Asia list as one of the most influential young entrepreneurs in Asia.