Platform economy: Successful in tomorrow's market

*The fourth industrial revolution, the wide-ranging digitization, is in full progress. Digital platforms are a major driver of significant changes in the market. Platforms redefine processes and value creation through all-round networking and revolutionize them both in a groundbreaking way. This does, however, pose new challenges for platforms as well. *

Amazon, Alibaba, Uber, Netflix and Airbnb are well-known examples for companies that have grown exponentially through the use of new, lucrative business models. It is no coincidence that founders of globally successful platforms represent a large part of the self-made billionaires. The rapid success and rapid growth of Google, Spotify and other players is profitable, but also turns the market upside down. They all have revolutionized their industry within a very short time. And providers are experiencing the revolution just as much as those who use the platforms.

Successful Swiss platforms such as Digitec Galaxus, Ricardo or Tutti.ch show that you don't have to be Silicon Valley based to reach consumers. But experience, however, shows that new platforms have a hard time competing with established national and international players. In 2018, for example, the open online marketplace Siroop - a joint venture between Swisscom and Coop - was shut down only three years after its launch.

Platform landscape Switzerland

At Accarda's Swiss Billing and Card Forum, hosted by Aileen Zumstein, the topic of platform economics was examined from a scientific and practice-oriented perspective. Marcus Schögel, Professor of Marketing at the University of St. Gallen, illustrated the status quo of the Swiss platform landscape with the results of his study. For this purpose, 67 platforms active in Switzerland were compared. The most important findings are as follows:

• Almost half (43%) of the platforms have a global reach and around a third (37%) operate regionally. This helps managers to assess whether platforms have an influence on their own business area.
• Most of the revenue stems from customers (57%), followed by suppliers (31%). The remaining income derives from third-party sources such as advertising placed on the platforms.
• Most platforms (82%) offer an advantage through price-benefit efficiency and create no emotional or social added value. This means that the benefit of the platform is more important than its brand.
• The majority of customer value (75%) results from the transparency of price and offer. In the future, however, convenience and social added value could gain in importance.
• Platforms have strong control over the suppliers who sell their products via the platform.
• Almost half of the platforms are operated by established companies. It will therefore be more difficult to assert oneself as a non-established company in the platform market.
• Although there are already many established platforms, the market continues to grow. Especially platforms that are operated by artificial intelligence (AI-driven platforms) will define the next wave.

These results show: Platforms are a highly competitive market. This makes it all the more important to differentiate oneself from others. This can be achieved through pricing, platform openness, differentiation with a unique offering and by taking over certain functions from other platforms. It is precisely this integration that offers growth opportunities. In addition to functions from other players, customer services, supplier services and services from other industries can also be integrated.

New services in demand

Marcel Brindöpke, co-founder and managing director of Heyconnect GmbH, also spoke about platform economy at the forum. He also confirmed: Platforms can still improve in certain areas. For example, there is a high discrepancy between the accepted shipping time on the customer side (72 hours) and the realized time until the live release of an article (2 weeks). Thus, smooth and efficient cooperation with suppliers will also become more important. Just as with customers, platforms must also have a pull function here and act as intermediaries.

According to Brindöpke, the platform competition will change as follows by 2025:

• Real-time live delivery of articles in high data quality
• Control of the platform assortment by partners
• Real-time adjustments of commissions, similar to share prices
• Early detection of customers with excessively frequent returns and preparation of sales forecasts
• Transaction-oriented marketing in self-service and branding campaigns that can be controlled according to customer groups
• Platforms will establish their own shipping services through partners
• Partners benefit from platform services such as hire purchase and product financing

From Wholesale to Platform

Change is also important because platform competition itself is constantly gaining in importance. After all, we are in the midst of the development from trade competition to platform competition. In more specific terms, this means that wholesale is being overpowered. Platforms are particularly popular in online retailing: The Wunderman Thompson E-Commerce Study 2019 shows that in Switzerland - across all age groups - an average of around 40% of respondents shop online once to three times a month. Only when it comes to smartphone purchases the 14- to 29-year-olds are well ahead with just about 40% who shop at least once a week via applications. Especially shopping for fashion, with the Zalando app at the top, is particularly popular.

This trend is causing problems for the stationary fashion trade and puts even established companies under pressure. As current media coverage shows, sales in the Swiss retail sector fell by five billion compared to ten years ago. As a result, over 330 fashion and shoe shops have closed in just one year. As an economically strong country, Switzerland is an exceptional case in comparison with other European countries, with a sharp decline in retail sales. Reasons for this include the increasing online trade and purchases abroad.

Friederike von Waldenfels, CEO of the Swiss platform SwissCommerce, provides more information on platform economics. The entrepreneur is counting on niches to compete against Amazon, Alibaba and other big players.