3 Key Takeaways for Marketplaces in a Post-Pandemic World
In the two decades since online shopping first emerged in the early 2000s, no year was more unpredictable than 2020. According to data from the U.S. Department of Commerce, total e-commerce sales for 2020 reached an estimated $791.7 billion, an increase of 32.4 percent from 2019. Especially notable is the growth of e-commerce in industries that traditionally relied heavily on in-person consultations. For example, hardware and home improvement businesses saw their online sales grow by 52 percent, while the health and beauty industry experienced a 34.9 percent increase.
However, as the dust settles on the pandemic year in e-commerce, are these trends here to stay? It remains to be seen whether U.S. consumers will continue to order power tools and vitamins online; however, one area of the e-commerce ecosystem that likely saw long-lasting growth was online marketplaces. According to Mirakl’s recently released Enterprise Marketplace Index, marketplaces grew at more than twice the overall e-commerce rate. Marketplaces saw an 81 percent increase year-over-year in gross merchandise value (GMV) in the fourth quarter of 2020, bolstered by an eye-popping 106 percent increase in marketplace purchases.
Here are three indicators that marketplaces will continue to reshape the face of commerce going forward:
Long-Lasting Resilience Through Third-Party Products
For the majority of 2020, e-commerce offered a case study in the importance of product availability and logistics. With consumers complaining of product shortages (from toilet paper to home improvement equipment) and shipping delays, retailers struggled to keep pace with demand. Marketplaces provided brands with both resilience and agility, allowing well-known retailers to rely on third-parties to fill in the gaps during periods of increased interest. The benefit of this resilience will likely echo beyond the current pandemic retail environment, as customers will remain loyal to marketplaces that previously demonstrated their value in terms of reliability. The agility of marketplaces also puts them in pole position when a new trend emerges: while first-party retailers are limited by the scope of their supply chain, marketplaces can source and integrate hot products from third-party suppliers within a matter of hours.
Benefits Across Multiple Channels
The addition of third-party products resulted in knock-on benefits beyond just sales and GMV. According to the Enterprise Marketplace Index, retailers that use a marketplace model benefit from a 34 percent increase in site visits. By diversifying product assortments with third-party items, not only do shoppers gain a greater sense of price transparency and product quality, but retailers can organically drive brand awareness and traffic growth on top of their existing marketing efforts. And as consumers return to in-person shopping, that brand lift will also transfer to in-store visits and overall sales performance.
No One-Size-Fits-All Approach to Success
The past year demonstrated that retailers can take different paths to success with their marketplace strategies. With the addition of thousands of new products from third-party suppliers, brands have the scope and flexibility to be more creative with introducing new product lines. The constantly changing assortments provided by third-party sellers allow retailers to test out new items and react quickly to emerging trends.
Brands can also choose to experiment with the ways in which they integrate and market products from partner suppliers. While some may use marketplaces to bolster supplies of existing products and reduce the likelihood of a shortage, others choose to highlight third-party items as curated extensions of the brand’s first-party product lines. Of course, retailers aren’t limited to one or the other — strategic brands can use marketplaces to strengthen their existing product lines while simultaneously expanding into new categories.
As consumers across the country get their COVID vaccines, return to the workplace, and book long-awaited vacations, e-commerce will likely experience severe aftershocks from the earthquake that was COVID-19. Marketplaces will be well positioned to stay above the fray.
Adrien Nussenbaum is the U.S. CEO and co-founder of Mirakl, an online marketplace platform and drop-ship solution.
Related story: Why Amazon Keeps Winning: A Third-Party Marketplace Analysis