Are Third-Party Marketplaces the Growth Driver Legacy Retail is Looking for?
If you’ve noticed a lot of new third-party marketplaces popping up lately, you’re not imagining things. More and more retailers are jumping on the marketplace bandwagon — Lands’ End, Hudson’s Bay and Woolworths in Australia are just a few of the new entrants this year alone. They join a growing roster of retailers that are expanding their online reach by allowing third-party brands to sell directly through their ecommerce sites, bypassing traditional wholesale relationships. That list includes a host of familiar names: Walmart, Target, Michaels, Anthropologie, Sears, Ahold Delhaize and Urban Outfitters, with new players entering the field every day.
The Financial Reality of Marketplace Growth
Marketplace SaaS solution Mirakl alone was responsible for the launch of 55 new online marketplaces over the course of 2020, for the likes of Carrefour in France, H&M Home in Sweden and Kroger in the U.S. Marketplaces grew by 81% YoY in Q4 2020, more than double the already impressive rate of overall ecommerce growth, according to Mirakl’s 2021 Enterprise Marketplace Index, which analyzed benchmark metrics from 60 global retailer marketplaces.
So why the mad rush to build marketplaces? It all comes down to growth and speed — for companies with an established online presence, a third-party marketplace offers a quick, relatively easy way to boost top-line sales and bottom-line profits. It’s that financial reality that’s making companies realize this isn’t just a visionary thing, it’s a must-have.
Key Advantages for Retailers
Beyond the financial benefits, marketplaces also offer retailers and other players looking for a piece of the ecommerce pie several strategic advantages:
- A relatively low-risk way to expand the breadth and depth of their offerings;
- A critical tool to capture consumers’ attention for longer as first-party data becomes table stakes;
- The potential to build out the flywheel, à la Amazon, and bring in additional revenue by offering advertising and fulfillment services to sellers;
- An opportunity to transform their ecommerce business in a way that is easily scalable and reactive to consumer demand.
Marketplace Performance Metrics
To understand the scale of this shift, consider the following data based on recent industry reports:
| Metric | Value / Detail |
|---|---|
| Marketplace Growth Rate (Q4 2020) | 81% Year-over-Year |
| New Marketplaces via Mirakl (2020) | 55 launches |
| Notable Recent Entrants | Lands’ End, Hudson’s Bay, Woolworths |
| Established Platform Players | Walmart, Target, Google, Facebook |
Strategy Beyond Chasing Amazon
It’s nearly impossible to talk about marketplaces without mentioning the marketplace — Amazon. In practice, however, most of the new third-party marketplaces being launched don’t look anything like Amazon. Rather than turning their online shops into digital department stores, most retailers are using marketplaces to expand the depth of their product offerings in a way that is seamless to their existing brand experience. It allows you to enrich the value proposition from a service standpoint without the limitation of having to buy and sell stuff.
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