Ten years ago, the international e-commerce market began to transform towards marketplaces. In 2019, sales of goods through the largest marketplaces in the world amounted to more than $2 trillion (57% of the total online retail market in the world). In 2020, the sales of the largest marketplaces in the world reached $2.67 trillion, while Alibaba, Amazon, eBay, and others accounted for 62% of global online sales in 2020. While the top-3 players (Taobao, Tmall, and Amazon) generated nearly 2/3 of the revenue in the top-100, several other marketplaces around the world have grown by almost 100% in the past year, including Etsy in the US.
Why is it time to close the online store? Because it’s time for marketplaces. That is why such companies as Scallium.pro – the service for the transformation of the online shop into the marketplace – became a solution for many online retailers.
The Rise of Marketplaces
Digital marketplaces are one of the emerging channels of communication with consumers. Marketplace products and services are more personalized than traditional venues, which attracts customers. Meanwhile, advanced technologies provide flexibility for these new market players.
Marketplaces operate in many areas – from selling various items to providing financial services. Sellers offer products and services under their brands and independently determine their prices. The same product or service from different sellers can be offered at different prices. Marketplace offers its partners a platform with a wide network of consumers, and a stable flow of customers. The platform earns by collecting commissions from sellers of goods and services. The client can compare offers from different sellers, characteristics of goods, read reviews, and choose the most suitable option for himself.
According to a study “The Future of Ecommerce Report 2021”, the key drivers of online shopping were:
- 63% of buyers purchase online due to a convenient “home delivery”;
- 57% select online purchases because of a lower price;
- 54% choose marketplaces for more convenient shopping;
- 50% of people enjoy a round-the-clock mode.
Just look at Amazon to see that the model works. The fact that it is not a store, but a marketplace helps the company to remain the number one platform for selling goods.
Why Don’t All Stores Become Marketplaces?
The key difference between a marketplace and an online store is that the marketplace is not the owner of the product. It provides product owners with the technology and infrastructure for online commerce. All decent online stores that have certain resources and technological capabilities have turned into marketplaces a long time ago, or are in the process of transformation. The aforementioned Amazon was once a regular bookstore. In Europe, these are eBay, PriceMinister, La Redoutte, Cdiscount, Rue du Сommerce, Home24, Yatego, Rakuten, and a bunch of smaller marketplaces.
The marketplace provides uninterrupted, fast, and cheap delivery due to a huge number of orders. If you have an online store, you will not be able to compete in terms of speed, quality, and delivery geography with marketplace giants, and you will certainly be the loser by this criterion.
Marketplaces are driving a huge amount of traffic, spending on marketing usually more than your entire annual turnover. Thinking about LTV, we already know that marketplaces can afford to spend more than the average check per customer, and it’s silly to think that you can compete with them.
Therefore, if you are thinking about launching your marketplace keep in mind that only those with a fresh unique idea can survive. But a good niche is not enough, you still need to attract investment. Try your chances, and perhaps, your marketplace will become the next Amazon.
