The Shopping Mall vs Department Store Misconception: Why Brands Misunderstand Online Marketplaces
How misunderstanding the true nature of online marketplaces leads to flawed strategies and missed opportunities
By Muliadi Jeo
Omnichannel expert & eCommerce strategist
The Costly Misconception That's Undermining Retail Strategy
Every revolutionary technology builds upon or disrupts an existing traditional process. Online marketplaces are no exception. Yet one of the most pervasive misconceptions in retail today is how brands perceive these digital platforms—and this misunderstanding is costing them dearly.
The misconception? Brands believe online marketplaces are digital shopping malls. They're not. They're department stores.
This isn't merely a semantic difference. It's a fundamental misunderstanding that leads to wrong strategies, misaligned expectations, and ultimately, lost control over customer relationships and brand positioning.
The Shopping Mall Illusion: What Marketplaces Want You to Believe
Online marketplaces actively promote themselves as digital shopping malls, and it's easy to understand why brands fall for this narrative:
"We bring you traffic" - Just like a mall brings foot traffic to stores
"Focus on your products, we'll handle the customers" - Similar to how malls handle parking, security, and common areas
"Benefit from our marketing campaigns" - Like mall-wide promotional events
This positioning appeals to brands because shopping malls, in the traditional sense, offer several attractive characteristics:
What Shopping Malls Actually Provide:
Neutral ground: The mall doesn't compete with individual stores
Transparent relationships: Stores maintain direct relationships with their customers
Payment independence: Each store processes its own transactions
Customer visibility: Stores can see and interact with their customers directly
Brand control: Each store controls its own experience, pricing, and customer service
Brands entering online marketplaces expect these same dynamics. They want the traffic that malls provide while maintaining the independence that traditional retail spaces offer.
But that's not what they get.
The Department Store Reality: What Marketplaces Actually Are
Online marketplaces don't operate like shopping malls—they operate like department stores. And understanding this difference is crucial for developing effective strategies.
How Department Stores Actually Function:
Customer Ownership: Department stores own the customer relationship entirely. When you shop at Macy's or Nordstrom, you're shopping with Macy's or Nordstrom, not with the individual brands they carry.
Payment Control: All transactions go through the department store's payment system. The customer pays the store, not the brand.
Customer Data Monopoly: The department store collects, owns, and controls all customer information. Brands get limited visibility into who their customers actually are.
Influence Over Purchase Decisions: Department stores can actively steer customers toward specific brands through placement, recommendations, and promotional strategies.
Competing Interests: Department stores can (and do) promote their private label products over name brands when it serves their interests.
Why This Misunderstanding Matters: Real-World Implications
Let me illustrate with examples from my work with brands across Southeast Asia and beyond:
Case Study 1: The Fashion Brand That Lost Its Identity
A premium fashion brand I consulted with initially treated Shopee and Lazada as their "digital mall presence." They expected these platforms to simply bring them customers while they maintained their premium positioning.
What happened instead:
The marketplace algorithms pushed them to compete on price with lower-tier brands
Customer service inquiries went through the marketplace, preventing direct brand relationship building
The brand had no visibility into repeat customers or purchase patterns
During promotional periods, the marketplace highlighted competing brands alongside their products
The realization: They weren't operating a boutique in a digital mall—they were a vendor in someone else's department store.
Case Study 2: The Electronics Brand's Channel Conflict
An electronics manufacturer expanded to online marketplaces while maintaining their own e-commerce site. They treated both as "different locations in the same digital mall."
The conflict that emerged:
Marketplace customers expected the same low prices they saw during platform sales events
The brand's own website felt "overpriced" compared to marketplace listings
Customer service became confusing when customers contacted the brand directly about marketplace purchases
The brand found themselves competing with their own products
The insight: Their marketplace presence wasn't complementing their direct sales—it was cannibalizing them, just as a department store would compete with the brand's own retail location.
The Strategic Shift: From Mall Thinking to Department Store Strategy
Once brands understand that marketplaces are department stores, not shopping malls, they can develop more effective strategies:
1. Product Portfolio Differentiation
Traditional retail wisdom applies: Just as brands create different products for department stores versus their own boutiques, online requires the same strategic thinking.
For Marketplaces (Department Store Strategy):
Entry-level products that introduce customers to your brand
High-volume SKUs that benefit from marketplace visibility
Products optimized for price competition and mass appeal
For Brand.com (Your Own Boutique Strategy):
Premium exclusives that create compelling reasons to visit your site
Full product lines with detailed brand storytelling
Personalized offerings that leverage direct customer relationships
2. Customer Acquisition vs. Retention Strategy
Marketplace Strategy: Treat marketplaces as customer acquisition channels, not retention platforms. Use them to introduce new customers to your brand, knowing you won't control the ongoing relationship.
Brand.com Strategy: Focus on converting marketplace-acquired customers to direct relationships through:
Exclusive member benefits
Personalized experiences
Direct customer service
Brand community building
3. Redefining Competition
The Mall Mindset (Wrong): "Our marketplace store and our website serve different purposes and don't compete."
The Department Store Reality (Correct): "Our marketplace presence competes with our direct sales, just like selling through Nordstrom competes with our own retail stores. We need to manage this conflict strategically."
Brand.com as Your Digital Flagship: The Extension Strategy
Here's where the analogy becomes particularly powerful for strategic planning:
Physical Retail Parallel:
Department store presence = marketplace presence (customer acquisition, mass exposure)
Brand flagship store = brand.com (brand experience, customer retention, premium positioning)
Outlet stores = clearance/promotional channels
The Integration Opportunity:
When brands understand this structure, brand.com becomes the natural extension of their physical flagship stores, not a competitor to them. This creates a cohesive omnichannel experience:
Physical Store ↔ Brand.com Integration:
Consistent brand experience and messaging
Inventory visibility across channels
Unified loyalty programs
Seamless customer service
Complementary product offerings (online exclusives, in-store experiences)
Marketplace as Acquisition Channel:
Introduce customers to the brand
Drive traffic to physical locations and brand.com
Handle price-sensitive segments
Manage market expansion and testing
The Indonesian E-Commerce Reality Check
The Indonesian e-commerce landscape perfectly illustrates this department store dynamic:
Over 80% of transactions occur on marketplaces (customers shop "with" Shopee/TikTok-Tokopedia/Lazada)
Less than 20% happen through DTC channels (customers shop "with" brands directly)
Shopee and TikTok-Tokopedia ecosystem dominate with combined 70%+ market share (department store duopoly)
The TikTok-Tokopedia merger demonstrates how "department stores" are consolidating power and integrating social commerce with traditional marketplace models
Indonesian consumers are even more marketplace-dependent than other Southeast Asian markets, with consumers showing 4x higher likelihood to purchase from unknown brands on trusted marketplaces versus brand websites—textbook department store customer behavior in the world's largest archipelago economy.
Strategic Framework: The Four-Tier Approach
Based on this understanding, here's a framework for brands to optimize their digital presence:
Tier 1: Marketplace Optimization (Department Store Strategy)
Focus on volume and visibility
Optimize for platform algorithms
Accept lower margins for customer acquisition
Use marketplace tools and advertising
Tier 2: Brand.com Development (Flagship Strategy)
Premium experience and pricing
Direct customer relationships
Higher margins and exclusive products
Brand storytelling and community building
Tier 3: Channel Symphony Integration
Move customers from marketplace to direct channels
Unified inventory and customer service
Cross-channel loyalty programs
Consistent brand messaging with channel-appropriate execution
Tier 4: Physical-Digital Integration
Treat brand.com as digital flagship extension
Unified omnichannel experience
Complementary rather than competing channels
Integrated customer journey optimization
Moving Forward: Embracing the Department Store Reality
The goal isn't to avoid marketplaces—department stores serve an important function in retail ecosystems. The goal is to:
Understand what you're signing up for when you enter a marketplace
Develop strategies appropriate to the channel rather than trying to force mall dynamics onto department store platforms
Build your own digital flagship (brand.com) as aggressively as you build your marketplace presence
Create complementary rather than competing experiences across all channels
The Bottom Line
Every successful brand in traditional retail understands the difference between selling through Macy's and operating their own flagship store. The same strategic thinking must apply to digital channels.
Marketplaces aren't digital malls—they're digital department stores. Once brands embrace this reality, they can develop strategies that leverage the strengths of each channel while building sustainable, profitable, long-term customer relationships.
The brands that succeed in today's e-commerce landscape won't be those that choose between marketplaces and direct channels. They'll be those that master the art of using each channel for its intended purpose while building toward independent brand strength.
The question isn't whether to use marketplaces or build your own site. The question is: How will you strategically balance department store partnerships with flagship brand experiences?
