“Hailing a new era in ecommerce” as online marketplace sales set to exceed $7 trillion within 5 years
Thu 31 Oct 2019Internet online shopping concept with laptop and shopping-cart. Vintage tone retro filter effect,soft focus(selective focus)
European financial advisory firm iBe has identified online marketplaces as the best opportunity for growth in ecommerce. Sam Tidmarsh talks to Onogo.com CEO Paul Murphy and Evan’s Cycles Marketplace manager George Schofield about the impact marketplaces have on their ecommerce strategies, and the opportunities they provide looking forward.
Marketplaces currently contribute $1.7 trillion to the global economy each year, making up as much as half of ecommerce sales.
According to Q4 2019 research from iBe, if organisations continue to build on the upwards trend of marketplace sales, this could grow by over 300 percent, “hailing a new era in ecommerce”.
The rise is driven primarily by companies aspiring to reach new audiences, test and improve product ranges, while also scaling delivery, fulfilment and cross border operations.
Complemented by 8 percent estimated annual growth in ecommerce, the marketplace model is set to present growth opportunities currently unavailable in owned channels.
Variations & market cap
Marketplaces tend to fall into three categories: B2B, B2C and P2P (peer-to-peer, e.g. Airbnb, eBay).
Currently 56 percent of marketplaces in Europe are globally recognised companies like eBay, Amazon and Alibaba, but there is also significant growth in local marketplace choices.
The business-to-consumer sector currently form the most developed area of online marketplaces, responsible for $1.1 trillion (over 70 percent) of marketplace sales. But by 2024, iBe predict that this could be overtaken by the rise of B2B marketplaces.
B2B marketplaces, like Alibaba in China and Conrad in Germany, present the biggest growth opportunity. While currently representing 7.5 percent of annual online B2B sales at a $600 million market cap, iBe expects marketplace sales to grow to $3.6 trillion by 2024.
iBe explains this is because businesses can improve their operations by “replacing legacy paper reconciliation processes with state-of-the-art marketplace platforms, consequently increasing liquidity, improving speed to market and saving costs.”
P2P marketplaces, while best known to consumers, are significantly lower in terms of sales volumes at $30 billion. These types of marketplaces are expected to grow to $240 billion by 2024, an eightfold increase on the current market cap.
Evan’s Cycles: Where do marketplaces sit within your ecommerce strategy?
For George Schofield, Marketplace manager at Evan’s Cycles, “marketplaces play a key role in our ecommerce strategy, fulfilling two business needs.”
“The first is to be present in the initial stages of the decision-making process by ensuring we get our products into that consideration phase, regardless of the first touch point.”
“The second is to allow us an outlet to clear through out of season product, end of line or ex-display products without down-selling or distracting customers on our own website.”
“We want every cyclist to have the best buying experience possible, through our marketplace channels or otherwise, so we want to own that journey in as much detail as possible. The more established marketplaces allow us to ensure a customer benefits from our high standards of support and service.”
Onogo.com: How should a brand introduce a product to a marketplace successfully?
Brands should ensure their approach to marketplaces is clear, whilst supporting their values and aspirations, says Paul Murphy, CEO of Onogo.com, a top 1000 global marketplace seller.
Working with partners and brands who serve more than 5 million customers globally, Paul has “seen a lack of strategy for sales, channel and pricing too often. It’s a point of frustration, but one that we have found can be developed to drive successful outcomes.”
Masha Cilliers, who moderated the Marketplace strategy panel with Murphy and Schofield at eCommerce Expo, adds, “what is key is to do it smartly. It is not a channel which a brand owns — so making sure that the mix of other channels provides direct interaction with the consumer.”
Evan’s Cycles: What advice do you have for brands who want to improve their marketplace offering?
“Build a strategy and utilise the knowledge you already have internally. For example, a well-managed Amazon PPC campaign can give a substantial uplift to sales and is important to stand out amongst the competition. Use the technical know-how of your internal PPC team. They’re the experts.”
“Deal with issues quickly – and learn from them. Maintain your service metrics – they’re key to performance and discoverability.”
Onogo.com: Will marketplaces be significant in your ecommerce strategy moving forwards?
For Murphy, “Retail marketplaces continue to grow across the globe and have a model that is trusted and well supported, driven by continued improvements in delivery, availability and simplicity for the consumer globally.”
“This data cements our 11 years of marketplace trading strategy. Our continued investment in product, software and process will drive our continued expansion alongside the growth of marketplaces.”
Evan’s Cycles: What is the future of the marketplace?
Schofield explains, “[I]n three years, I’d envisage marketplaces being more than just a place to purchase goods – they become a branded opportunity to sell services and experiences.”
Much like websites today, they’ll be a place where a presence is key to building that extra level of trust – where you can find everything from tradesmen to holidays.”