New Trends in Digital Marketplaces

Marketplaces, digital platforms that are open to third-party merchants, have steadily increased their share of global digital commerce. In 2017, digital marketplaces totalled USD$567 billion and accounted for 41% of all digital commerce sales, up from USD$290 billion and 17% in 2008 – a share gain of 24 percentage points.

 

What is a marketplace?

  • Pure – Only third-party merchants sell inventory, i.e. eBay
  • Hybrid – Traditional retail model with a marketplace, i.e. Flipkart
  • Hybrid + Physical – Traditional retail, marketplace and stores, i.e. Walmart

 

Why shop on marketplaces vs direct with retailers

 

The benefits of a marketplace model

Product assortment

Third-party merchants bring a wide selection of products, which attracts more customers, and enables greater sales possibilities.

No inventory risk

Third-party merchants hold the inventory, taking the risk that they may not sell everything.

Additional revenue

A marketplace model means new products to sell to its third-party merchants, such as advertising and logistics.

Higher margins

As the marketplace neither holds the inventory nor is responsible for marketing or shipping the product, the marketplace transaction has a higher margin.

Ease of expansion

Without inventory, it is easier for a marketplace to set up in a new market. Its unique selection also encourages cross-border selection.

 

Risks to the marketplace model

Loss of control

The owner of a marketplace can be limited in its ability to dictate pricing, delivery times or how a product is presented.

Counterfeits

The openness of the marketplace can lead to counterfeit products being sold.

Unsatisfactory sellers

Third-party merchants can engage in poor behaviour, such as not shipping the product or shipping a product that does not match the description.

Internal competition

If the retailer has a hybrid model, the third-party merchants put more competition on the traditional wholesale model.

Customer confusion

The customer may not understand that they are ordering from a third-party merchant, so if there is an issue the customer may blame the marketplace.

 

The 10 largest countries for the marketplace model

 

Amazon takes the global lead

 

Trends in the marketplace

Marketplaces focus on speedy delivery, growing into the trend of instant delivery compared to previously taking several days.

International expansion plays the crucial role as the marketplace’s growth drives, leveraging loyalty to lock in customers.

Marketplaces embrace omnichannel retail through click-and-collect, product assortment, and loyalty integration tactics.

 

Key differentiators in a marketplace world

  • Loyalty
  • Experience
  • Merchandising

 

Top Digital Marketplaces Ranking

  • World: Amazon
  • Asia Pacific: Alibaba
  • Western Markets: Amazon with eBay following
  • Eastern Europe: Mixed Bag of Grupa Allegro, Alibaba, and eBay
  • Latin America: MercadoLibre followed by Lojas Americanas
  • Middle East and Africa: Amazon, eBay, Alibaba, and Jabbar Internet Group FZ LLC
  • Australasia: eBay (Amazon entered Australia in 2017)

 

To learn about more trends in marketplaces operating in the digital age, watch Euromonitor International’s New Trends in Digital Marketplaces webinar on demand now!