Council Post: The Prevalence Of The Online Marketplace Model And Its Impact On E-Commerce

President and COO of Avalara, a cloud-based compliance solutions provider that helps businesses of all sizes get tax compliance right. 

2020 accelerated the use of e-commerce at a pace never seen before. While the adoption of online shopping has been steadily climbing for years, the pandemic pushed more consumers and businesses online for all types of transactions. This rapid shift has had a direct impact on consumer behavior, creating a demand for convenience, personalization and options when shopping online.

As consumer behavior has changed, e-commerce retailers have had to shift their approaches accordingly. Due to the demand for convenient online shopping experiences that provide ample options, we’re in the midst of another shift where traditional e-commerce sellers are adopting the marketplace model.

This isn’t to say that retailers are trading traditional e-commerce methods for marketplaces completely. In fact, more e-commerce sellers are moving toward an omnichannel model where they sell through multiple in-person and online sales channels. The shift to marketplaces should be thought of as an expansion strategy for many established and existing e-commerce retailers.

In recent years, we’ve seen the growth of existing marketplaces skyrocket, while more traditional e-retailers have partnered with marketplaces or launched their own. For example, popular denim retailer Madewell established a partnership with online consignment marketplace thredUP to sell a selection of pre-owned jeans.

While new partnerships and marketplaces have sprung up, existing marketplaces have seen ample growth. Walmart’s marketplace, for example, reported that the number of sellers on its platform more than doubled in July 2020, adding more than 50,000 new sellers since July 2019. Further, some experts predict that B2C marketplace sales worldwide could reach an estimated $3.5 trillion by 2024. 

So, what are the factors driving the expansion and adoption of the marketplace model?

Digital-First Consumerism

Even before the pandemic, shoppers were turning to digital commerce in droves because of its always-on nature. Beyond convenience, expectations for intuitive experiences, seamless checkout and quick deliveries, coupled with consumer desire for one-stop shopping, finding the best deals and personalized shopping, are driving marketplace sales at a rapid rate.

In the world of digital consumerism, marketplaces have become the first stop for product searches and discovery. According to eMarketer, 53% of U.S. adults said they began product searches on Amazon when planning to make a digital purchase. The breadth and depth of product options on marketplaces make it easier for consumers to find the products they’re looking for and uncover the best prices before making a purchase.

Additionally, as digital shopping has increased, so has the need for consumer reviews as part of the purchasing journey. Marketplaces make it easy to read the opinions and experiences of other consumers before making a purchase. Given the amount of purchasing options available through marketplaces, consumers can leverage reviews to learn more about the product, customer service and other factors before making the decision to purchase.

Shifting Omnichannel Priorities

The modern consumer has the world at their fingertips. This unparalleled access to goods and services has shifted most, if not all, of the power to the consumer, prompting retailers to go where the consumers are. As retailers expand into new sales channels, marketplaces continue to grow in appeal with greater reach, access to a range of tools and services and insights into customer data and analytics.

With the pandemic pushing more retailers online, the ability to meet customers where they are has become increasingly important. The reach that marketplaces provide offers ample opportunities for retailers to not only reach new customers but also glean insights into what potential and existing buyers are thinking.

Data and analytics have become top priorities for retailers as they look to deliver against growing consumer expectations for personalization, convenience and relevance. Most marketplace platforms give sellers access to data and analytics tools that provide in-depth insights into the shopping behaviors of customers on the platform. These insights not only help retailers optimize their marketplace strategy but also adapt their entire omnichannel strategy to best reach their customers.

The changes in consumer behavior that we’ve witnessed in recent years are here to stay. That means the importance and influence of marketplaces will only continue to grow with time.

For e-commerce as a whole, the marketplace effect will increase the importance of omnichannel strategies to meet and exceed the expectations of consumers. We can expect to see more retailers join the ranks of thousands of other sellers on popular marketplaces in an effort to reach more customers and derive critical insights. At the same time, more big-box retailers may embrace the marketplace model by creating their own platforms and establishing partnerships with existing marketplaces to drive customer loyalty and expand product options associated with their brands.

Whether your business just recently got started in e-commerce or has been a tenant of digital shopping for years, retailers with the most effective marketplace strategies will stand out as the winners in this new era of global commerce.


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