At the beginning, marketplaces were the anti-Amazon club. However, many retailers worldwide have now invested in similar developments. As e-commerce has gained unprecedent traction for the last two years, all retailers want to enhance online market share, via a wider offer, customer traffic, deeper data or second-hand opportunities. Meanwhile, marketplaces also affect consumer experience. Do they offer better profitability than stocked e-commerce? How can retailers play the synergy alongside a store network?
DEFINITION
A digital marketplace hosts a computer technology (a platform) hired to use for third-party vendors seeking new customers and higher sales. Similar to a business partner, the host is paid with a percentage share but typically does not hold any physical goods. This is different to direct e-commerce, where a retailer purchases goods and then resells these for a margin using their own website.
KEY FIGURES
In Asia, 80% of online sales goes through marketplaces. In Europe, marketplaces have grown from 30% of e-commerce in 2017 to 40% in 2020. They are expected to reach 67% by 2022 (source Gartner). Marketplaces are outperforming e-commerce. In 2020, they grew by 27%, twice as fast as 2019.
For several online retailers, they win the bulk of sales business. At Amazon, marketplaces accounted for 60% of retail sales in H1 2021. At Cdiscount, “It’s close to 50% in the first half,” said Stanislas Prigent, Chief Operating Officer at Octopia. “The marketplace is driving growth, with a more than 20% or even 25% on certain product families, whilst standard e-commerce remains below 10% growth.”
PROFITABILITY
In non-food retail like fashion or sports, marketplaces take between 10% and 15% commission. In luxury, Farfetch disclosed to mind Retail that they earn a 30% margin on platform turnover (April 2019). An answer to “what is more profitable, e-commerce or marketplace?”, differs according to the size of the company.