What Surging Marketplace Growth Means for SMBs and Large Retailers
With the majority of millennials regularly shopping online and driving e-commerce growth well into the double-digits, more and more businesses are emerging and connecting with consumers on digital marketplaces. And with nearly $1.6 trillion spent globally on the top 75 online marketplaces in 2017, the market is growing fast.
As we grow closer to 2019, the skyrocketing growth of online marketplaces will undoubtedly have huge implications on the retail industry in the years ahead. Businesses that don’t see online marketplaces as a core sales channel will struggle as consumers shop on these platforms with increasing frequency. Small businesses and large retailers both have an opportunity to capitalize on the growing trend, albeit in different ways.
Small Businesses Can Use Online Marketplaces to Build a Strong Foundation
Marketplaces have allowed small retailers and brands to get their products into customers’ hands without needing to make large investments in marketing. And because many marketplaces have a niche following of dedicated and engaged shoppers, finding marketplaces that fit squarely within a small retailer’s target demographic can help eliminate some of the upfront costs of promoting products at larger retailers.
Online marketplaces also allow burgeoning digital businesses to build a strong base of customers whose positive experiences can empower continued success. Small retailers should thoroughly analyze marketplace customers and their reviews to identify strengths and weaknesses.
Starting off on these more concentrated platforms also helps sellers understand where there's demand for new products. Online marketplaces allow users to easily see what other competitors are selling, what customers are buying, and how they're reviewing those products. This increased transparency around competitor performance and market trends can provide tremendous value to sellers starting their own businesses.
With the majority of small business activity happening on marketplaces, more and more digital sellers will look for tools to help them run their businesses more efficiently, keep up with inventory demands and meet growth goals.
More Large Retailers Will Get in on the Action
In 2016, consumers did 50 percent of their online shopping on marketplaces like Amazon.com, eBay and Etsy, according to a Forrester Research study, and that figure could rise to as high as two-thirds in the next five years. There's no denying marketplaces are here to stay, and large retailers must confront that reality head on if they want a piece of the $1.6 trillion pie.
Tapping the power of marketplaces can result in new sales channels, which many retailers need in order to survive as more high profile brick-and-mortar closings continue to dominate headlines. But with such stiff competition in today’s retail market, traditional retail businesses need to think long and hard about how they either compete with or participate in online marketplaces.
To create the right marketplace strategy, retailers must first recognize that not all products are right for marketplace sale. From there, learning to manage their brand on marketplaces and being responsive to customer questions and feedback is critically important as that's where many customers will first interact with the brand. But ultimately, to be the most successful in today’s shifting retail landscape, you must realize that marketplaces, while a huge growth opportunity, are just one part of the whole customer experience. Retailers will have other touchpoints to develop customer loyalty.
The Future is Bright
Marketplace platforms offer more purchase convenience, access to a larger number of buyers and sellers, and the ability to comparison shop, all of which have contributed to incredible global e-commerce growth in the last several years.
However, as the next few years will bring much change to the retail industry overall, the continued evolution of the marketplace economy will play a huge role in its future, impacting everyone from small businesses to traditional brands like Nordstrom. And all businesses, from the smallest of retailers to the biggest of behemoths, will need to find their place in the marketplace economy in order to reach the increasing number of consumers who prefer to shop on these platforms.
Keith Smith is the CEO of Payability, a financing service for marketplace sellers.
