The Total Economic Impact™ Of Rithum Managed Marketplaces

Marketplace Scaling And Speed To Market

Evidence and data. With the investment in Rithum, the interviewees’ organizations scaled their marketplace programs more quickly than what was possible by adding directly managed marketplaces. Interviewees said online marketplaces (e-commerce destinations that connect sellers and consumers) have gained a tremendous share in digital retail in the last decade and that they realized the need for their organizations to engage in marketplace channels in an efficient way.

Interviewees noted several ways that the Rithum investment enabled their organizations to scale their businesses more easily, including:

• Utilizing Rithum integrations with marketplaces to scale rapidly. The interviewees’ organizations rolled out between one and eight marketplaces in the first year of their investments with Rithum. By the third year of their investments, the interviewees’ organizations had scaled to between two and 18 marketplaces. The ability to expand to new marketplaces was aided by the existing relationships and integrations that Rithum has with marketplaces across the globe. Interviewees noted that if their organizations set up directly managed marketplaces on their own, it would take months to stand up and require them to build their own integrations and prepare data appropriately for each individual marketplace. Taking advantage of the prebuilt Rithum integrations and data standardization cut the time to market by half.

• Simplifying business requirements with a managed-marketplace approach. When the interviewees’ organizations wanted to expand to new directly managed marketplaces, they needed to justify the investments with business cases. E-commerce leaders needed to demonstrate that the value of adding a new marketplace would outweigh the significant amount of effort to integrate and run the new marketplace. But interviewees said that after the investment in Rithum, the ease of adding new marketplaces allowed e-commerce leaders to avoid making new business cases for each additional marketplace.
  
  The VP of global digital product and consumer experience at a footwear retailer shared: “[Integrating a directly managed marketplace] is more complex, and the level of effort is higher. Rithum lowers the level of effort to get into these opportunities so we can do more of them without needing a business case to validate or justify it. Our business cases would be bigger if we didn’t have [Rithum] as an integrator.”  
• Collaborating with Rithum to identify marketplace opportunities. Rithum recommends new marketplace opportunities to managed marketplace customers, which relieves them of the need to do all of this research and relationship building independently. The VP of omnichannel at a fashion retailer said, “Rithum presents us with opportunities for expansion within [its] portfolio of marketplaces that [its] connected to.”

• Expanding to profitable marketplaces that fit brand strategies. Interviewees noted that brand strategy and marketplace profitability determine how many marketplaces their organizations add to their marketplace programs along with which ones. The director of innovation and product at an office equipment brand shared: “We can’t be everywhere. We haven’t got the dollars for that.”
  
  More importantly, interviewees said their organizations select marketplaces that ensure the least product cannibalization, protect brand perception, and offer the largest opportunity to gain market share. The organizations also evaluated the purpose of each market such as, for example, expanding to eBay as a liquidation channel and Amazon as a premium channel.
• Expanding channel reaches to new geographies. Interviewees noted that Rithum offered integrations with marketplace partners in regions where their organizations historically had not operated. They said Rithum reduced the complexity and effort to expand to new geographies and enabled their organizations to permeate new regions.
  
  The VP of global digital product and consumer experience at a footwear retailer said: “The big opportunity is market expansion into markets via marketplaces that we don’t necessarily have a team behind to go in from an owned perspective. Global expansion should be much easier and quicker with Rithum. If we think about it, even though we don’t have an owned presence in those markets, we can leverage an integration [and] then sell there.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• The composite organization scales to new marketplaces each year, adding three, one, and three individual new marketplaces in Years 1, 2, and 3, respectively. The cumulative total number of managed marketplaces is four, five, and eight in Years 1, 2, and 3, respectively.

• In its prior environment, adding a directly managed marketplace took the organization 24 weeks.
• By using the existing relationship and integration with marketplaces through Rithum, adding a new marketplace takes only 12 weeks, which is a 50% faster speed to market.
• The implementation team, which includes a mix of both technical and business resources, has a weighted average weekly burdened cost of $14,234. More information on the implementation team is detailed in Cost F.
• Another way to evaluate this benefit is to calculate the additional GMV driven by the faster time to market. For the composite organization, this benefit includes both the time savings of implementation resources plus the value of 12 additional weeks of GMV per marketplace added. Because the number of GMV added per marketplace varies greatly between marketplace and product mix, Forrester conservatively modeled only the implementation resource cost savings for the composite organization.

Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:

• The number of marketplaces that the organization expands to, which depends on brand strategy. Because the value of this benefit depends on the number of marketplaces added, the benefit will increase or decrease proportionally with the number of marketplaces added.
• The organization’s culture, adaptability, and appetite for change. The acceleration of the organization’s speed to market will reflect the organization’s ability to take advantage of the Rithum’s prebuilt integrations, degree of customization, and extent of business requirements that are still required regardless of the Rithum investment.
• Whether or not the organization wants to sell into specialty marketplaces that are not within the existing portfolio. This benefit does not apply to channels that are directly managed.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $893,000.

Marketplace GMV And Profit Growth

Evidence and data. Interviewees said Rithum helps their brands connect with digital selling channels to drive incremental sales and GMV. They noted several ways that the Rithum investment enabled their organizations to capture additional GMV, including:

• Reaching customers in their channels of choice. Interviewees shared that their organizations’ marketplace strategies revolve around putting products in front of customers in their channels of choice. The VP of global digital product and consumer experience at a footwear retailer said: “If a consumer wants to shop somewhere, we should be present in the channel in which that consumer is shopping. We should not be dictating where they find our product. They should be dictating where we show up for them. Rithum offers that opportunity for us.”

• Improving Amazon Featured Offer and preferred listing win percentages. In the organizations’ prior environments, directly managed marketplaces struggled to maintain Featured Offer positions because of listing errors or failure to meet marketplace requirements that resulted in search-ranking suppression. Interviewees noted that with Rithum, automated repricing strategies enabled their organizations to win the Amazon Featured Offer, increase the visibility of their products, and protect margins. Interviewees cited Featured Offer win percentages ranging from 85% to 98% after the Rithum investment that corresponded with GMV growth. The senior manager of business operations at a fashion retailer shared, “Rithum has a business rule and repricer tool on [its] platform so we can create a business rule for Amazon that allows us to win the Featured Offer, but still maintain margin level. We wouldn’t be able to do that without Rithum.”
• Using reporting and analytics capabilities to make better decisions. Interviewees said that with holistic reporting across marketplaces, their organizations were able to make data-driven decisions about growth opportunities, product mix, and pricing strategies to better win business. The director of innovation and product at an office equipment brand shared: “Now, we have dashboards on how the marketplaces are measuring us. We can see if we are hitting SLAs in terms of timeliness, catalog updates, and order management. Are we doing what the marketplaces expect from us? And overall, it’s a good story because it is automated with Rithum. It is effective as a solution. The benefit is we get ranked higher above other entities or other resellers on some of these marketplaces because they know that [my company] is going to do the right thing."
• Being better enabled to protect margins to ensure profitability. Interviewees noted that a mandate of their organizations’ growing marketplace programs was to grow revenue without sacrificing margins. With Rithum, the interviewees’ organizations automated profitability calculations to help protect margins.
  
  The vice president of omnichannel at a fashion retailer shared: “If we have products that we want to move through Amazon, we have an internal tool that we use on the planning side that allows us to take into account the floor price of that product, our cost of goods, and the Rithum and Amazon fees that are associated with each unit sale. And then we can internally aim to target let’s say 10% operating income at the product level. Rithum allows us to do that in a very automated fashion that allows us to scale up and down.”
• Being able to liquidate products through discount marketplaces. Interviewees’ organizations selected discount marketplaces to liquidate remaining inventory, which appealed to new channels of buyers and controlled the brands’ reputations. The senior manager of business operations at a fashion retailer shared: “Instead of having our products sit at our warehouse and not be exposed, the whole goal of the marketplace is to expose on multiple channels. If we are doing liquidation every quarter, at least can get more money listing on eBay and get 50 cents on the dollar instead of taking a penny.”

Interviewees also noted several nuances in their organizations’ marketplace growth:

• Interviewees estimated that the additional GMV driven through marketplaces could be attributed only partially to their organizations’ Rithum investments. They attributed between 45% and 75% of the GMV growth to the Rithum investments and the rest to other factors like macro adding a marketplace, which an organization would enjoy with or without being directly managed. The director of innovation and product at an office equipment brand shared, “I would say three- quarters of that [GMV growth] number is purely from Rithum because we need them in order to get into those markets.”

• Interviewees said that in general, their organizations focused on initial expansion to primary marketplaces with the largest impact on profitability. They typically added secondary marketplaces to establish regional presences or for targeted selling motions (e.g., liquidation sales), and this led to diminishing returns. 
• The average three-year compound annual growth rate (CAGR) of the interviewees’ organizations was 49%. Interviewees noted that factors like the COVID-19 pandemic, supply-chain disruptions, and rapidly shifting buyer preferences contributed to both the growth and contraction of GMV during the first three years of their organizations’ investment in Rithum. The largest CAGR among the interviewees’ organizations was 114% while the smallest was a contraction of 13%.

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• Before investing in Rithum, the composite organization directly managed a single marketplace with an annual GMV of $3.5 million.

• Without Rithum, the composite would realize 10% year-over-year organic growth in its directly managed marketplace (see B3 in the calculation table).
• With the investment in Rithum and the expansion to new marketplaces, the composite organization realizes 60%, 33%, and 25% year-over-year increases in GMV in Years 1, 2, and 3, respectively.

• The composite organization makes several investments in its e-commerce and marketplace tech stacks, adjusts its business strategy, and faces macroeconomic factors. Because of these variables, the composite attributes 50% of the GMV growth to Rithum.
• The composite has a 10% profit margin.  

Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:

• The amount of attribution the organization credits to Rithum, which depends on other investments and strategies that simultaneously impact marketplace outcomes. Organizations may attribute more or less percent of the impact to the Rithum investment, which would increase or decrease the impact on the ROI calculation.
• The organization’s actual growth in GMV, which depends on the organization’s prior environment, specifically if it has an existing marketplace and the marketplace it uses. For example, an organization with a preexisting Amazon presence may experience a less significant Year 1 impact than one that sold into Amazon for the first time with the help of Rithum.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $175,000.

Marketplace Integration Efficiencies

Evidence and data. In addition to expanding to new marketplaces and driving year-over-year GMV growth, interviewees also noted that Rithum enabled their organizations to operate their marketplace integrations more efficiently. Interviewees noted several ways that the Rithum investment enabled their organizations to streamline technical operations, including:

• Simplifying data integrations, which reduced efforts to adjust to requirement changes. Interviewees said that in their organizations’ prior environments, the highly manual nature of directly managing a marketplace required dedicated time from technical resources to react to changing marketplace requirements. They noted that requirement changes happened at least once a year per marketplace and that each change resulted in weeks of manual efforts to comply with new requirements — typically around data formatting.
  
  With Rithum, the interviewees’ organizations normalized the data pumped into marketplaces and standardized and transformed product content to comply with the unique requirements of each marketplace with minimal effort. The senior manager of business operations at a fashion retailer shared: “We utilize Rithum because we can send all of our product info to one location on their platform. We can utilize their tools and]business rules and look up lists to help standardize data to fit what is required from eBay or Amazon as they might have more fields or values required, depending on the category. That has helped us to standardize our data because we have a large breadth, and it comes from multiple vendors. It has made it a lot easier to clean up our data.”

• Standardizing integrations to reduce the time to resolve technical errors. Interviewees also noted that responding to break-fix issues with the technical integrations between marketplaces was much easier with Rithum. In their prior environments, issues with integrations required at least a week and a half to identify the source and to respond appropriately. After the investment in Rithum, the ability to manage multiple marketplaces through a single integration resulted in additional operating efficiencies. The VP of global digital product and consumer experience at a footwear retailer shared: “Rithum handles the actual feed and order integrations. If a feed breaks, we can leverage them, and the response is very standardized.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• The composite sells through four, five, and eight marketplaces in Years 1, 2, and 3, respectively. Each marketplace has a single requirement change each year and one break-fix issue per month.

• With a directly managed marketplace, responding to a requirement change would require the time of two full-time equivalent (FTE) resources working 16 weeks to make the required change, and resolving a break-fix integration issue would take those resources 1.5 weeks.
• With Rithum, technical resources respond to requirement changes 90% faster, which reduces manual efforts per marketplace change by 14 weeks. The composite resolves break-fix issues 75% faster, which allows it to avoid a week per issue per marketplace.
• The weekly burdened cost of a marketplace technical resource is $2,596.

Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:

• The organization’s number of marketplaces. Because the value of this benefit depends on the number of marketplaces the organization adds, the benefit will increase or decrease in proportion to the number of marketplaces managed by Rithum.
• The number and type of requirement changes requested per marketplace.
• The number of break-fix issues with marketplace integrations.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.7 million.

Marketplace Management Efficiencies

Interviewees said that in addition to operating the technical integrations with multiple marketplaces more efficiently, their organizations’ marketplace operations also recognized additional efficiencies from working with Rithum. They noted several ways that the Rithum investment enabled them to streamline marketplace operations:

Evidence and data. Interviewees noted several ways that the Rithum investment enabled their organizations to make their marketplace management more efficient, including:

• Reducing manual data feed management. Rithum has data transformation and inventory management built in, which interviewees said alleviated a major pain point for teams that were spending significant time on managing feeds and inventory. The senior manager of business operations at a fashion retailer shared: “We have a large product file because our business model has a large breadth of inventory that turns over constantly. Managing the product feeds, going through updates, [and] going through partners was very, very time-consuming. [It took] up to 5 hours a day just ensure that the products were going through correctly.”

• Being able to manage marketplace programs with leaner teams. While many of the interviewees’ organizations hired additional headcount to support their growing marketplace businesses, the interviewees noted that without Rithum, the sizes of their teams would have needed to grow another two-fold. They said Rithum enabled their organizations to scale their marketplace businesses while keeping operating costs in check. The senior manager of business operations at a fashion retailer shared: “With Rithum, we have the ease of connecting to multiple partners [and] consolidating everything into one platform, and [we] can manipulate our data set to fit a partner’s requirements. It really is the only way we would be able to do our business with a team of two.”

• Unlocking capacity for value-add activities. Interviewees noted that their organizations were able to manage much larger marketplace programs without proportionally adding headcount. The added efficiency also provided additional bandwidth for e-commerce and marketplace leaders to spend more time on strategic planning and growth projects. The senior manager of business operations at a fashion retailer shared: “[We now have time for] overall, high-level strategic planning — strategically merchandizing our products, partnering with our marketplaces to run promotions, and spending more time on business development.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• The composite organization scales to new marketplaces each year by adding three, one, and three individual new marketplaces in Years 1, 2, and 3, respectively. The cumulative total number of managed marketplaces is four, five, and eight in Years 1, 2, and 3, respectively.

• In a directly managed marketplace environment, each marketplace regardless of size requires a fully dedicated marketplace manager. In the composite’s prior environment, the organization would have needed to add seven additional headcount to support its growing marketplace business.

• With Rithum automations, the composite organization realizes economies of scales with its additional marketplaces by gaining 75% more efficiency in Year 1, 80% more efficiency in Year 2, and 85% more efficiency in Year 3. With the back-end automations, the composite organization avoids hiring an additional 5.6 headcount.

• The average burdened annual cost of a marketplace manager is $135,000.

Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:

• The number of marketplaces that an organization expands to, which will depend on brand strategy. Because the value of this benefit depends on the number of marketplaces added, the benefit will increase or decrease in proportion with the number of marketplaces added.
• The annual burdened cost of marketplace managers.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $562,000.

UNQUANTIFIED BENEFITS

Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify for this study:

• Working with Rithum on the roadmap for adding marketplaces onto the platform. Interviewees noted that their organization’s relationship with Rithum included participating in identifying new marketplaces around the globe for Rithum to partner with and providing input on the product roadmap. The VP of omnichannel at a fashion retailer shared: “We’re also involved in forming [Rithum’s] strategic roadmap on who could be a good partner going forward. There are conversations around who we’d like to see them target to add to the portfolio.”
• Receiving advice and guidance from Rithum as part of the managed service. Some interviewees said that as part of the managed service, their organization received advice and guidance from Rithum around elements of its marketplace strategy. The VP of omnichannel at a fashion retailer shared, “Through our managed services representation, we get business recommendations around pricing structure and product information, and we get some reporting on where we are currently ranking with brand share.”

• Gaining more visibility into two common marketplace challenges: channel conflict with traditional retail and grey-market concerns. Interviewees said Rithum helped their organizations mitigate risks that come with selling through a marketplace. First, channel conflict issues are closely tied to marketplaces and that marketplaces often procure inventory without a brand’s explicit approval, so traditional retailers (e.g., wholesale partners) are at a disadvantage because they must generally comply with brand standards and terms of sale while marketplace sellers with unauthorized products do not.⁴ This situation creates a nonlevel playing field between traditional distribution and marketplaces and often lets marketplaces win on price. Secondly, because there are generally no limits around who can sell and few limits on what can be offered for sale, online marketplaces often carry unauthorized or counterfeit goods that are advertised at prices frequently lower than what is available elsewhere in retail. The VP of omnichannel at a fashion retailer shared: “Rithum allows us to control where products end up because we have agreements with liquidators. Otherwise, you don’t necessarily know where products could end up. What ends up happening is products could end up on a marketplace where we’re not controlling the sale of that product, and they enable cross-border shipping. So, the product could even end up in another region, which then impacts sales within that region.”

FLEXIBILITY

The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Rithum and later realize additional uses and business opportunities, including:

• Future investment in Rithum’s Marketing Solutions. Rithum offers Marketing Solutions that provide retail media, paid search, paid social, and product feed management to support media and marketing efforts, and one of the interviewees said their organization used it to implement a digital marketing use case. The interviewee shared, “We decided to consolidate advertising services into our current contract because of Rithum’s offering, expertise, the strong partnership we already had, and because [Rithum] already understood our brand from working [us] for several years.”
  
  The interviewee said this use case helped their organization:
  • Drive more GMV growth. The digital marketing use case helped the organization increase its GMV by boosting visibility on marketplaces with retail media advertising, which theoretically drove increases in site traffic and helped the organization acquire new customers.
  • Augment a small team of digital marketers. Instead of using a marketing agency, the interviewee’s organization chose to partner with Rithum and utilize its managed service to extend the reach and augment the expertise of the organization’s small marketing team. The interviewee shared: “Rithum has been a really good partner in helping us identify opportunities on where we can spend top- and mid-funnel, which is very helpful considering our team internally is two people on the marketing side that manages this relationship. [The team is] able to provide us with a lot of keyword research [and] competitor trends that help us figure out where to place that budget. We probably wouldn’t have been able to be as efficient in those top- and mid-funnels without the Rithum relationship.”
  • Set targets and help monitor return on ad spend (ROAS). The interviewee said the Rithum team helped their organization maximize budget and understand competitor trends to make sure it used advertising dollars effectively. The interviewee shared, “On the paid search side of things, Rithum is very involved in helping us set our ROAS targets on an annualized and monthly basis as we enter our budgeting process.”
  • Push into emerging marketing technologies. The interviewee said the added expertise of the Rithum managed services team resulted in new digital marketing opportunities. The interviewee shared, “Rithum also provides us new channels and opportunities such as video advertisements, YouTube TV, and things of that nature that are emerging technologies in the marketing spaces.”
• Future adoption of additional Rithum solutions. Interviewees said the recent convergence of CommerceHub and ChannelAdvisor as Rithum presents organizations with the opportunity to use a single vendor partner to support the entire e-commerce lifecycle — from connecting, marketing, and selling through channels to consumers to fulfilling orders and optimizing the consumer shopping journey from beginning to end.

Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).