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Towards Understanding Hybrid Retail - Insights into the challenges of developing a business model for a local online marketplace



The trend toward online shopping is putting pressure on local retailers to integrate digital shopping channels into their existing stationary business model. In recent years, many German cities and municipalities have started to set up local online marketplaces to help retailers digitize and create alternatives to international online marketplaces for the citizens of their city. The paper first addresses the motivations and goals behind the development of local online marketplaces. Then, the challenges of setting up these marketplaces and developing a business model to finance them are presented und discussed. A special focus is placed on the context of the establishment of a two-sided market. This is illustrated with a case study from the city of Aachen in Germany.
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
Towards Understanding Hybrid Retail -
Insights into the challenges of developing a business
model for a local online marketplace
Christopher Eck
RWTH Aachen University, Information Management in Mechanical
Engineering, Dennewartstr. 27, 52068 Aachen, Germany
Thomas Otte
RWTH Aachen University, Information Management in Mechanical
Engineering, Dennewartstr. 27, 52068 Aachen, Germany
Samira Khodaei
RWTH Aachen University, Information Management in Mechanical
Engineering, Dennewartstr. 27, 52068 Aachen, Germany
Sarah Müller-Abdelrazeq
RWTH Aachen University, Information Management in Mechanical
Engineering, Dennewartstr. 27, 52068 Aachen, Germany
Frank Hees
RWTH Aachen University, Information Management in Mechanical
Engineering, Dennewartstr. 27, 52068 Aachen, Germany
* Corresponding author
Abstract: The trend toward online shopping is putting pressure on local
retailers to integrate digital shopping channels into their existing stationary
business model. In recent years, many German cities and municipalities have
started to set up local online marketplaces to help retailers digitize and create
alternatives to international online marketplaces for the citizens of their city.
The paper first addresses the motivations and goals behind the development of
local online marketplaces. Then, the challenges of setting up these
marketplaces and developing a business model to finance them are presented
und discussed. A special focus is placed on the context of the establishment of
a two-sided market. This is illustrated with a case study from the city of
Aachen in Germany.
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
Keywords: Online Marketplace; Business Model Innovation; E-Commerce;
Smart City; Stationary Retail; Local Shopping Platform; Multi-Channel;
Consumer Behaviour; Two-Sided Market; Digital Transformation;
1 Introduction
The "Retail Scenario 2030" presented by the Institute for Trade Research (IFH) and the
federal government of North Rhine-Westphalia in Germany, forecasts significant changes
in the retail landscape over the next decade (IHF Köln, 2020). The study predicts an
increase in sales of 134 million euros for the German retail sector as a whole. However, a
closer look at the figures shows that e-commerce and food retailing account for the
majority of this growth. Only a small portion of 1.7 million euros is accounted for by
stationary retail and local owner-operated retail (Bärsch et al., 2021).
The structural changes towards online retailing are being influenced in particular by a
transformation in consumer behaviour and the increase in online shopping (Güsken et al.,
2021). While only 53% of internet users in the European Union were online shoppers in
2010, the share rose to 74% in 2021 and even to 87% in Germany (Güsken et al., 2021;
Statistisches Bundesamt, 2021). The developments of recent years have benefited large
online marketplaces in particular because they offer consumers convenient 24/7 access to
a wide range of products, low prices as well as fast and flexible delivery (Küffmann,
The structural changes in the market are putting local, stationary retailers under
pressure, as they are losing customers and revenue to online marketplaces. Consumers
demand multiple channels for their shopping experience allowing them to switch between
the merging boundaries of the virtual and physical worlds (Verhoef et al., 2015; Gallino
& Rooderkerk, 2020; Güsken et al., 2020). Therefore, the combination and integration of
online and offline channels, also called multi-channel or omni-channel strategies, has
become an important success factor for retailers (Nanda et al., 2021). Verhoef et al.
(2015) define omni-channel management as “the synergetic management of the numerous
available channels and customer touchpoints, in such a way that the customer experience
across channels and the performance over channels is optimised”. Multi-channel and
omni-channel approaches allow customers to be met at different touchpoints in the
purchasing process and thus adapt to changing consumer needs in the direction of online
shopping while at the same time continuing to operate the main business of stationary
sales in the store (Verhoef et al., 2015). Especially small owner-operated businesses have
difficulties with the transformation and digitalization of their business since they face
multiple barriers, such as limited capabilities to come up with the required time, budget
and technical know-how (Bollweg et al., 2020; Güsken et al., 2021).
The effects of the shift towards online shopping also concern cities, as estimations
predict that the number of retailers in Germany could decrease by more than one quarter
until 2030 (IHF Köln, 2020). Without appropriate countermeasures, cities risk losing
their appeal if uncompetitive stores are forced to close and retail shifts to the internet
(Heinemann, 2017). Various initiatives and EU, national and federal funding programs
have been launched to help retailers integrate digital sales channels (Haderlein, 2018a).
These have led to the establishment of local platforms in many German cities and
municipalities, where retailers can present themselves and their products under one local
umbrella brand of a city, opening up opportunities for digital sales channels. The
platforms launched by so-called digitalization initiatives range from simple retailer lists
to digital storefronts all the way up to transactional online marketplaces (Haderlein,
2018b). Of currently 558 listed digital (city-)initiatives in Germany 84 have shop
functions (, n.d.).
The launch of projects such as “Online City Wuppertal” or the cooperation of the city
of Mönchengladbach with eBay was closely observed by the public and researchers
because they were the first digital initivies in metropolitan cities trying to establish local
online marketplaces. However, the idea that local online marketplaces could "save" retail
from a loss of significance and become a competitor to international platforms such as
Amazon proved to be utopian (Heinemann, 2017; Gutknecht, 2018). The high number of
closures in recent years shows that local shopping platforms currently still lack proof of
concept (Bärsch et al., 2021). For example, a survey of 200 retailers who participated in
local online marketplace projects found that a large proportion would advise other
retailers not to take part in such projects (Wirtschaftswoche, 2018). Many platforms are
currently still lacking of concepts for using spatial proximity to the customer to their
advantage through cooperation and services and for setting themselves distinguish from
global online marketplaces (Schade et al., 2018; Bärsch et al., 2021). As a result, they
often fall short of their potential in terms of the added value they create for customers,
retailers and cities (Bärsch et al., 2021). Due to a lack of popularity among local
consumers, low measurable effects on the sales figures of retailers and financial
dependence on subsidies from cities there is still debate about what added value local
online marketplaces can actually generate (Haderlein, 2018a; Küffmann, 2020).
The question of added value, core activities and branding is central when developing
a business model for a local online marketplace. A business model is a model
representation of the logical relationships of how an organization can generate added
value for customers and secure a return for the organization (Gassmann et al., 2014). The
paper examines the question of whether digital city initiatives can succeed in developing
a business model that offers retailers high-turnover online sales channels increases the
attractiveness of the city centre and is fully self-financing. This question will be critically
reflected and discussed in the paper by addressing,
1. what the motivations, goals and approaches of cities are concerning the
development of local online marketplaces;
2. which challenges for the implementation of a business model of a local online
marketplace arise from the context of an online platform in e-commerce;
3. what implications does this has for the financing of projects aiming to establish
local online marketplaces.
The paper is structured as follows: Section 2 describes the motivation of cities to initiate
local online marketplaces and the goals for implementation. Section 3 presents the
challenges in the establishment of online marketplaces with a local focus. Section 4 uses
the case study of the "Smart Shopping Aachen" online marketplace, which is currently
being established, to show how these challenges affect the development of the business
model in practice. In section 5, it will be discussed whether a business model can meet
stakeholder needs and at the same time provide independent financing right from the
start. Furthermore, an outlook on the next steps is given.
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
2 Motivations and goals for developing local online marketplaces
As a living space for people cities is characterized by the existence of possibilities for
housing, various services and education, shopping, work, culture, recreation and
gastronomy (Stepper & Kurth, 2020). Local retail, therefore, plays an important role in
urban areas, as it shapes the attractiveness of central public places, influences the
functional mix of a city and is also an important employer (Stepper & Kurth, 2020). As
local businesses form a fundamental basis for the everyday life of neighbourhoods, the
loss of commercial activity and vacant buildings are thus seen as significant indicators of
the decline of urban centres (Delgado-de Miguel et al., 2019). Small, owner-operated
stores play a decisive role in German cities, but it is precisely these stores that need to
catch up in terms of digitalization and are therefore threatened in their future existence
(Güsken et al., 2020). Cities, including local politics and administration, therefore have a
great interest in the preservation of stationary stores and in supporting them through
establishing local online marketplaces (Haderlein, 2018a).
Local online marketplaces serve as intermediaries between local businesses and their
customers. They are characterized by the fact that they fulfil at least one of the three main
functions of e-marketplaces plus a local focus (Bärsch et al., 2019): 1) They match
buyers and sellers; 2) They facilitate the exchange of information; 3) They facilitate
transaction and fulfilment services. Additionally, local online marketplace is
geographically restricted and they target customers living in a defined region or city
distinguishing them from traditional e-marketplaces, like Amazon or eBay (Bärsch et al.,
2021). To create of creating a digital, shared infrastructure that can be used by retailers,
local online marketplaces have been developed in various cities in recent years.
A key idea of offering a local online marketplace to support retailers is to develop a
low-threshold, financially viable, step-by-step entry concept for local retailers so that
they can successively adapt to a multi-channel approach and benefit from marketing
under an umbrella brand "City X" (Küffmann, 2020). This form of cooperation between
retailers aims to present consumers with an attractive alternative to the international
online marketplaces and to increase the resilience of local businesses against online
competition (Delgado-de Miguel et al., 2019). Registration on global online marketplaces
such as Amazon and eBay is potentially open to every retailer in order to benefit from
their high visibility. For owner-operated stores with two to three employees, however,
local cooperative initiatives are an important way of gaining a foothold in the online
world without directly exposing oneself to the competition and price pressure of
international competition (Haderlein, 2018b).
The key elements consist of (see Figure 1),
offering a digital platform infrastructure;
increasing the digital competencies of retailers;
developing multi-channel concepts for revitalizing the city centre;
and building up a campaign to establish a joint marketing presence.
Figure 1 Key elements of local online marketplaces
The first goal of local online marketplace projects is the offering of a shared IT
infrastructure, which enables different levels of e-commerce. These include functions like
digital business cards with general information about the store, digital storefronts with
images of the store, and online services for customers to make contact or receive advice.
Even these first three levels of the e-commerce pyramid represent a new step towards
digitization for some businesses, since only around half of small businesses use tools
such as Google My Business to increase their digital visibility and findability through
Google search engines (Wittmann & Deichner, 2020).
The fourth stage is currently still a major leap for many retailers, as inventory
management systems that create interfaces between retailers' systems and the platform
are required to display the availability of products in real time. While such systems are
widespread among medium (91%) and large retailers (85%), this is much less common
among small retailers (56%) (Wittmann & Deichner, 2020). However, the availability of
information on a wide range of products is an extremely relevant aspect for customers
when they are browsing online marketplaces (Haderlein, 2018b). The availability and
integration of inventory management systems is a key factor and potential challenge in
the development of a local online marketplace, which is discussed further in chapter 3.
The next logical steps towards online retailing are then "click and reserve" (online
reservation with pickup and payment in the store) and "click and collect" (online payment
with pickup) and store functions (online purchase with delivery). A platform
infrastructure also includes technical interfaces that enable retailers to easily access other
service providers for the sales process, especially for logistics and payment processing.
A second goal for cities is to increase the digital competencies of retailers, enabling
them to reach their customer groups through digital channels and meet their needs by
offering new services. The establishment of local online marketplaces is usually coupled
with training and additional educational programs in order to provide retailers with the
knowledge they need to understand how these digitization tools work and what their
potential benefits are (Wölfel, 2018). Experience from the platform set-up for stationary
retailers in various cities shows that professional support and coaching are helpful in the
first steps as well as in the subsequent professionalization with regard to product data
management, software systems, delivery and returns processes, and services such as
marketing and advertising (Küffmann, 2020). Because digital city initiatives take a
holistic approach, this form of accompanying qualifying workshops make an important
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
contribution to creating the basis of acceptance and competence for participation in local
online marketplaces as well as multi-channel approaches as such (Güsken et al., 2021).
A third goal is not only to help retailers in using new digital sales channels, but also
to encourage consumers to visit the city. On the one hand, the visibility of products on the
online platform contributes to this. It has been shown that consumers inform themselves
about products on the internet before making a purchase decision, but still end up buying
them in stationary stores (Hesse, 2019). By making local products visible through local
online marketplaces, these so-called ROPO-effects (Research Online, Purchase Offline)
can be provoked (Funck, 2018). Although online retailing is growing, there is still a
desire for shopping experiences where products can be touched, tried and experienced,
which means that combinations of online and offline channels address customer needs
best (Güsken et al., 2021).
As a further measure, services have been established in various cities that take
advantage of the geographical proximity of the stores to the customer and cannot be
covered by other online marketplaces. These include logistics services such as same-day
delivery, click and collect, and the option of returning goods ordered online to the store
(Bärsch et al., 2021). For example, innovative urban space utilization concepts were tried
out as part of the project of the city of Wuppertal, during which centrally located logistics
hubs were set up and previously exclusively online retailers were given stationary sales
areas in a location set up specifically for this purpose (Haderlein, 2018a). Another
approach to creating added value is to expand the platform beyond retail to include
restaurants, services, and other city offerings, transforming the platform from a local
online marketplace to a digital city portal (Küffmann, 2020). Such strategic decisions as
well as the orientation of marketing are part of an overarching campaign management.
A fourth goal is to establish a local brand that is closely associated with the respective
city (Haderlein, 2018a). The local online marketplace is thus operated as a multi-vendor
platform, with individual retailers benefiting from the popularity and marketing activities
of the umbrella brand. In the context of the platform, multi-channel communication is
used for marketing in order to continuously increase the popularity of the brand.
Marketing is aligned with a campaign strategy in which, for example, occasions such as
holidays or events in the city, special promotions take place both online and offline.
3 Challenges in establishing online marketplaces with a local focus
To develop a business model for a local online marketplace, it is important to understand
the inherent challenges involved in setting up a platform and creating value for the
involved stakeholders. For this purpose, the logic of two-sided markets is first presented,
followed by a closer look at the way in which entry barriers among retailers and
consumer behaviour pose challenges for the development of a self-financing business
The logic of two-sided markets
With the development of a platform on which buyers search for products and sellers want
to reach the target group of buyers, a business model is located in the context of a two-
sided market in the area of e-commerce (Li et al., 2010). One of the characteristics of
such a two-sided market is that a certain minimum number of both potential customers
and retailers/products must be reached in order to make the market relevant for the other
side (Gassmann et al., 2014): Without products, there is no reason for customers to visit
the platform. Moreover, without sufficient customers, it is not worthwhile for retailers to
be present on the platform, because hardly any customer contacts and revenues can be
Projects for local online marketplaces initiated by cities often face the challenge of
starting from nothing (Heinemann, 2017). This means that they must first put the effort in
developing the technical infrastructure (or customizing a white-label solution from a
third-party provider), motivating retailers to participate and raising public interest
through continuous marketing measures via various channels. Particularly in the early
project phase, a platform must be promoted which is still in the phase of growth in terms
of technical functions, website clicks and product portfolio. At this stage, however, the
platform offers very little added value for custumers and retailers, which makes building
a two-sided market a time-consuming and complex process (Haderlein, 2018a).
Entry barriers for retailers
The way to overcome the circular relationship of a lack of customers and retailers is to
first acquire retailers to build up a product portfolio that is appealing to customers, then
build up a recognizable brand on top of that and finally attract customers (Heinemann,
2017). However, it is crucial that retailers do not offer the same products at higher prices
as large online retailers, but can distinguish themselves with special service and
assortments (Heinemann, 2017). In order to be able to present and manage a
comprehensive range of products, the use of an inventory management system is essential
to minimize the effort (Küffmann, 2020). However, as previously mentioned, only about
half of all smaller stores have such a system in use (Wittmann & Deichner, 2020). The
goal should be for retailers to be able to present themselves online with their entire
product range (Heinemann, 2017). Despite inventory management systems, the decision
to sell online is a labour-intensive task, as product images and texts have to be updated
and purchasing processes have to be handled, which is why it corresponds to a decision
for further business on the internet (Küffmann, 2020)
In various studies, it is shown that there are major differences between retailers in
terms of the level of digitization (Bollweg et al., 2020; Güsken et al., 2021). When
establishing a platform, these requirements in terms of available time, budget, expertise
and technical infrastructure have to be taken into account. Owner-operated businesses in
particular face major challenges as they are afraid that they cannot make this effort
(Güsken et al., 2021). In order to involve this important stakeholder group for a local
online marketplace, close supervision, supportive guidance and other measures are
required to lower entrance barriers (Bärsch et al., 2021). Part of a business model must
therefore be not only to acquire sufficient retailers but also to enable them to become part
of the platform with their products in the first place.
Consumer behavior and needs
The available technical infrastructure and the number of retailers and products are the
foundation for setting up a local online marketplace. However, the success of a platform
is in the end determined by customers and their purchase behaviur both online and
offline (Küffmann, 2020). Local online marketplaces are perceived by around two-thirds
of consumers as a regional, friendly and environmentally friendly alternative to
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
supraregional marketplaces, but the willingness to pay more for them is lower at 42%
(Küffmann, 2020). When it comes to purchasing decisions, solidarity and idealism play
only a minor role compared to product variety, prices and service (Heinemann, 2017).
In terms of product variety and price, the established, international platforms such as
Amazon and eBay are unmatched. Consumers have a small relevant set of stores for
online and offline purchasing decisions, which they visit at all, in which Amazon and
eBay have a fixed place (ECC Köln, n.d.; Küffmann, 2020). How little room is left
besides these large online platforms is shown by the fact that, 22% of consumers consider
only one retailer when buying online, and around three-quarters consider a maximum of
three retailers (ECC Köln, n.d.). The barriers for entry and successful establishment on
the market are therefore quite high for local online marketplaces.
Because consumers want the best of both worlds, they want customer orientation and
an authentic approach as well as an extensive product selection and constant availability
(Hesse, 2019). This means that a platform, in order to be relevant for the customer, must
on the one hand meet the needs for a sufficiently large and interesting product range,
well-functioning search functions and convenient payment and delivery options
(Küffmann, 2020). At the same time, local locational advantages and services built on
them must be utilized to create a shopping experience that makes the entire platform
relevant as a focal point for information and encourages customers to visit the city's
stores. Ways to use the proximity between retailers and their customers include, for
example, click and collect or same-day delivery offers or special discount deals and
vouchers for stationary stores as well as, for example, innovative concepts of urban
logistics and forms of using city spaces. (Bärsch et al., 2021). Such concepts can be in
some cases enabled by technical infrastructure, but they still need to be supported and
implemented bottom-up by the retailers and sometimes also require the involvement of
decision-makers in the municipal administration (Funck, 2018; Haderlein, 2018a).
4 Conceptual approach for the development of an online marketplace in the
city of Aachen
In 2020, the city of Aachen started to develop a local online marketplace called “Smart
Shopping Aachen”. The project is being implemented by the city of Aachen in
cooperation with the Information Management in Mechanical Engineering (IMA) of the
RWTH Aachen University and external service providers for infrastructure development
and marketing. The IT infrastructure was developed entirely from scratch and no white-
label platform from providers such as Atalanda, eBay or Locamo was used, as is the case
in many other German cities. Aachen is a city with a population of around 250,000
people in the west of Germany. With reference to the elements of local online
marketplace projects mentioned in chapter 2, the implementation of the project and the
business model developed in it are presented in the form of a business model canvas.
Subsequently, the considerations and boundaries for the design of a business model will
be presented.
Project implementation up to now
Prior to the start of the platform development, extensive literature research was carried
out, which included multi-channel approaches for stationary retail, and a requirements
analysis was conducted via surveys and workshops (Güsken et al., 2021). Consumers,
retailers, and restaurateurs were included in this process. Restaurants have been
integrated into the platform concept from the beginning, so that consumers have
information available to combine e.g. click and collect routes through the city with
restaurant visits.
With regard to the platform infrastructure for enabling digital sales channels, the
technical prerequisites for all of the aforementioned levels of the e-commerce pyramid
have been created successively. Corresponding functions have been implemented in the
frontend and backend of the platform, including options for creating a business profile
and product portfolio editing, reservation and store functions, information on onboarding
and FAQs, settings for payment and check-out options, and much more. The surveyed
consumers, retailers and gastronomists of the requirement analyses made various requests
and helpful suggestions to make it easier for customers to find specific information about
stores and products. These include:
Keyword filter for stores, e.g. for barrier-free access, nearby bus stops and e-bike
sharing stations or redeemability of local gift vouchers.
Keyword filter for products/food, e.g. sale of fair trade or regional products,
manufacturing of customized products.
Route planning with information on different transport options (busses, car/ parking
garage capacities, e-bike sharing). An implementation was possible through the
connection to a city-owned mobility dashboard.
Creation of events. Various registered stores and restaurants wished to draw attention
to their workshops, food tastings or other events. In perspective, this can lead to a
calendar informing about events in the city in which stores are also visible, and not
only concerts or similar events.
The functions were developed in an agile process over the course of the project in order
to be able to adjust the priorities in the development of functions, for example, based on
feedback from workshops with retailers. Over the course of the project, a participatory
design approach was used to take into account the interests and needs of the various
stakeholders and to develop a solution that would be relevant and accepted in practice
(Güsken et al., 2021). In this way, a "toolbox" of digital tools was created, which
businesses can make use of according to their level of digitalization and their needs. The
platform went online in the fall of 2021 and has been continuously developed since then.
During the project, a total of 27 trainings and workshops were held on a regular basis
with the aim of increasing the general competences of the stores and at the same time to
making them understand what added value the use of the developed tools can generate.
The topics of the workshops included the use of social media in the context of multi-
channel, the potential of web analytics and the use of inventory management systems.
Workshops and networking events are also seen as an important part of the future
operating model of the platform, as they add value in terms of gaining new skills,
learning from each other and developing ideas for cooperation. In addition, from the
operator's point of view, this offers the opportunity to establish personal contact with the
business owners, which allows their interests to be taken into account and customer
loyalty to be increased.
In terms of creating offerings that attract consumers to the city, there were challenges
posed by the repeated closures of stores due to the COVID-19 pandemic. In terms of
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
creating offerings that attract consumers to the city, there were challenges posed by the
repeated closures of stores due to the COVID-19 pandemic. It was therefore not possible
to organize larger events in the city centre, which is why the idea of "digital shopping
sprees" via social media live streams was born, in which several retailers can present
themselves and their products.
Click and reserve as well as click and collect functions were established as local
services for the sales process. The idea of a virtual mixed shopping cart, in which
consumers can place products from different stores and have them delivered together, has
not yet been realized, but is being considered in the future. However, a local bicycle
courier service is already integrated as a delivery option, which can pick up and deliver
products directly from the store. An advantage of this approach is that retailers are not
burdened with the additional work of packing packages in the store, since products are
picked up during business hours by the bicycle courier directly in the store.
The integration of restaurants is currently still difficult. It is assumed that these are
already frequently represented on Google MyBusiness and platforms for delivery
services, which have been become very popular due to the pandemic, leading to less
interest in a local platform that is still in the process of being created. New approaches
will need to be developed in the future to better involve restaurants. For example, it
would be conceivable to involve them in advertising campaigns shopping streets in the
With regard to the establishment of a locally known umbrella brand, it was possible
to benefit from the availability of various communication channels through which the city
of Aachen, as the initiator of the Smart Shopping Aachen project, could reach businesses
and citizens. Marketing for the platform as such, upcoming events as well as presentation
of retailers and their products was done through various offline and online channels, such
as billboard advertising, in local magazines, radio spots, as well as online advertising and
social media. The website traffic and sales figures for the platform, which was launched
in the fall of 2021, are still relatively low at present, but they are developing continuously
upwards. This can also be explained by the fact that the function of the inventory
management system was not available from the start and the number of the manually
entered products is not yet sufficient to be relevant enough for customers. This challenge
of building a platform will be discussed in more detail in the next chapter.
A business model for the future operation of Smart Shopping Aachen was developed
in internal workshops. Figure 2 shows a preliminary and simplified version of this in the
form of a business model canvas. In summary, Smart Shopping Aachen targets the
citizens of Aachen on the one hand and the retail, in particular small owner-operated
stores, as well as restaurants on the other. The key propositions are to make the variety of
local products and services visible to consumers and to provide businesses with a low-
threshold entry into e-commerce and multi-channelling, which can increase their
visibility and sales. Key activities for the platform operator include acquiring new
business, being available to answer questions, and fostering synergies and business
community progress through events. Key activities also include raising awareness of the
platform among consumers by carrying out various marketing measures via multi-
channel. A key resource is therefore a functioning online platform and other
communication channels.
Figure 2 Business model canvas for Smart Shopping Aachen
For the platform to function with its connected services, key partners such as payment
and logistics service providers are needed, and above all a service provider for the
operation and further development of the IT infrastructure. To reach customers and
businesses, it also needs support through channels of the city, the business federation or
other associations for trade. Another key partner is "Einkaufen in Aachen" (Shopping in
Aachen), a locally known website that has existed for several years and on which around
1000 stores are listed with their digital business cards. It is planned to merge this website
with Smart Shopping Aachen. Also of importance is the "Märkte u. Aktionskreis City
e.V.", an association that takes care of the marketing of the trade and the city and will
continue to operate Smart Shopping in the future.
During the project period of two and a half years, a technical infrastructure was
created, which offers local retailers, but also e.g. restaurants, the possibility to present
themselves and their products online. In total, almost one hundred businesses have
registered, which is a good figure compared to other platform projects. At the end of the
project's funding phase, however, the question now arises as to how the platform's
operation and the necessary IT infrastructure, personnel and marketing measures can be
financed and an added value for consumers, retailers and the city of Aachen can be
provided and even increased in the future. In analyses and discussions, it became clear
that at least half a man-year for personnel is needed for operation, and at least for the
beginning, more than half of the total budget must be invested in marketing activities.
Why self-financing is difficult right from the start is explained as follows.
Boundaries of the business model development for Smart Shopping Aachen
In the context of the establishment of a two-sided market and due to self-imposed
boundaries, the development of a business model for the continued financing of Smart
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
Shopping Aachen faces challenges in various areas. They are related to the aspects of
value creation, financing models, and the definition of the target customer group.
Surveys conducted during the project have shown that there are many retailers who
only want to display between ten and fifty products on the platform, either for technical
reasons or because of their specialized product portfolio. However, there are already
some stores that want to display all of their several thousand products through the
connection to an inventory management system. It remains to be seen how quickly this
initially selective and limited product range can gain relevance with customers. As
described above, the value generated by a platform results from the fact that many
potential customers and retailers and their products are represented on it. The
development of innovative approaches in the area of local service and urban logistics also
takes time, meaning that the added value offered is initially low and only grows over
The added value created in turn influences how much the costumer group of local
businesses are willing to pay. Since the decision was made to make platform use free of
charge for consumers, the group of paying customers consists of the businesses registered
on the platform. As financing models for local online marketplaces, usually a
subscription model is applied in which a basic fee is charged for the appearance on the
platform and an additional commission fee is charged for the products sold (Delgado-de
Miguel et al., 2019; Küffmann, 2020). This approach is also being pursued at Smart
Shopping Aachen, whereby the challenge lies in the fact that scaling effects via
commission fee can only unfold their full effect when a large number of products are sold
via the platform. Since the platform is co-operated by the city, other various hidden
sources of revenue such as data monetization or advertising revenue from external parties
were categorically disregarded but these would also only become significant when there
is sufficient activity on the platform (Gassmann et al., 2014).
Therefore, the number of registered companies and the subscription fees they pay
become the central factor for revenues. The potential for influencing the level of revenue
therefore lies in increasing the value of the platform and increasing the number of
registered businesses. Possible considerations for the future are to expand the target
group of businesses from (owner-managed) retailers and restaurants in Aachen by
including service providers, such as hairdressers, and also fialists and shopping centres,
or by approaching businesses in the region around Aachen. Such approaches for
developing comprehensive digital city portals or cross-regional platforms can also be
found in other local online marketplaces (Küffmann, 2020).
In summary, it can be said that the development of a self-financing business model
for a local online marketplace is extremely difficult, as the platform and associated
services must first grow in order to create relevance and added value for consumers and
registered businesses. Challenges are caused by the inherent logic of the two-sided
market as well as by self-restrictions regarding the geographic area and the target group
of the acquired businesses.
5 Discussion and Outlook
As described in chapter 2 and illustrated by the Smart Shopping Aachen case study, local
online marketplaces are a holistic approach to digitizing retail and enhancing the
attractiveness of cities. The motivations and the goals thus go beyond building a
transactional platform for e-commerce through which retailers can sell products. Rather,
the motivation of such projects is to make retailing as such more resilient to competition
from international online platforms by enabling retailers to transform their business
models and meet the needs of their customers both online and offline (Funck, 2018;
Delgado-de Miguel et al., 2019). The added value created for the city's consumers and the
success of such a local online platform is thus largely based on a transformation of the
local retail trade, cooperation and joint strategies in the sense of city management. Since
the prerequisites for this have yet to be created both by the individual retailer and by the
city itself, the innovation resulting from local online marketplaces is less a "static end
product" and more a "dynamic process, sometimes a tiresome learning by doing that
knows no end" (Haderlein, 2018a).
The processual nature and the inevitability of organic growth were exemplified in the
challenges of building a two-sided market. The development of a local online
marketplace, which is established through its relevance in the everyday shopping practice
of consumers, generates online and offline sales of the stores and increases the
attractiveness of the city through innovative concepts, is a time-consuming and resource-
intensive project. Although the potential of projects to establish local online marketplaces
for retailers and cities is recognized because they offer businesses a low-threshold, low-
risk and easily scalable entry into digital and sales channels, their financing remains a
challenge (Küffmann, 2020; Bärsch et al., 2021). Haderlein, a former consultant to the
Online City Wuppertal project, describes the pressure to be profitable from the start as
an "exaggerated expectation" and sees local online marketplaces in the context of city
management and city marketing, which is why they need political support and funding
(Haderlein, 2018a). This financial support is necessary so that, in addition to managing
the platform, an operator can initiate change processes in the city by acquiring funding,
organizing training for retailers, developing marketing campaigns and moderating the
retailer community (Haderlein, 2018a).
The authors of the paper share the assessment that external funding is inevitable, as it
seems unrealistic that Smart Shopping Aachen's operations can be fully financed by the
activities of consumers and registered businesses right from the start. In the context of the
two-sided market and strong competition from established international platforms, it is
also difficult to predict whether this will be possible, and if so, in what timeframe. The
reason for this is that success depends on how the offers created within the framework of
the platform are accepted by the consumers and the retailers. Furthermore, this depends
on the extent to which the individual retailers and the platform as such can offer local
services and concepts with which they can differentiate themselves from international
online marketplaces and establish a recognizable umbrella brand. Building a suitable IT
infrastructure for a platform is therefore a relatively small challenge compared to gaining
relevance as a brand and being able to finance itself.
In order to ensure the continuation Smart Shopping Aachen, talks are currently being
held with municipal funding providers. In order to acquire further funding, an attempt is
made to make it clear to the relevant decision-makers in what overall context local online
marketplaces are to be seen: By having the infrastructure of a local online platform, a city
gains opportunities to integrate it into city management and to shape the development of
the city. They should therefore not be seen solely as a project for a sales platform aimed
purely at commercial success, but rather a future-relevant infrastructure that, in
conjunction with accompanying activities, enables opportunities for social change.
This paper was presented at The XXXIII ISPIM Innovation Conference "Innovating in a Digital
World", held in Copenhagen, Denmark on 05 June to 08 June 2022.
Event Proceedings: LUT Scientific and Expertise Publications: ISBN 978-952-335-694-8
This research was conducted as part of the research project “Smart Shopping Aachen”
(formerly “Hybrider Einzelhandel”, Hybrid Retail). The research project is funded by the
Ministry of Economic Affairs, Innovation, Digitization and Energy of North Rhine-
Westphalia (MWIDE) and is part of the project fund “Digitale Modellregion Aachen”
(Digital Model Region Aachen). More information about the project can be found at
Funded by:
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