Online marketplaces offer a lower-cost route to market for many sellers and a more convenient way for buyers to find, compare, and purchase products and services. Sure, there can be risks for sellers when they give over some control to a third party. And a few brands, such as Nike, have moved their focus to direct-to-consumer and away from Amazon. But this hasn’t stopped the gold rush in terms of funding of new platforms and adoption of marketplaces by both buyers and sellers.
In fact, with Amazon and Alibaba branching out and high-growth marketplaces like Etsy, Pinduoduo, and Walmart (all growing revenues more than 70% in 2020) carving out their turf, two-thirds of global B2C e-commerce sales is now captured by marketplaces. On the business front, we are tracking the growing options for B2B sellers, with the emergence of over 200 funded marketplace operators across multiple sectors, from aircraft parts (ePlane) to life sciences staffing (Science Exchange) to general business services (Upwork).
As we have expanded our coverage, we’ve focused on how to understand buyer preferences and how to succeed as a seller or operator. We’ve created a framework for evaluating the marketplace fit of various product categories, examined where IT purchasing will need to evolve to favor this model (if ever), and studied and ranked the top software-as-a-service marketplaces from Alibaba, AWS, Google, Microsoft, Salesforce, and others.
Later this year, we’ll dig into the selling strategies brands are using to excel on third-party channels — as well as the brewing showdown between sites like Amazon (and other retailers) and some of the mega brands that are going it alone.
In The Marketplace Gold Rush, There Are Claims For Tech And Services Providers
We recently shined a spotlight on capabilities within the top commerce services firms that help brands sell on marketplaces and/or build their own and have been tracking the platform providers, such as Marketplacer, Mirakl, and VTEX, that power them, as well as the add-on services from firms like Coveo, PayPal, and TreviPay that streamline how buyers find, compare, ship, and pay for their purchases.
The market for these tech providers has been rapidly expanding along with the growth of the marketplaces themselves. Annual venture investments in marketplace tech have nearly tripled since 2018 and have already approached nearly $1 billion in 2021. And among the 14 largest commerce service providers we studied in our recent Forrester Wave™, the total number of new client installations of marketplace platforms topped new installs of both Shopify Plus and Oracle Commerce Cloud.
So where is the opportunity for providers? For services firms, there is a need to help clients not only with their Amazon and “owned” marketplace strategy but also with social commerce and related skills like analytics and merchandising (all still emerging and high-demand capabilities).
Meanwhile, for software firms, there are distinct opportunities, whether you are a marketplace development platform or a vendor selling add-ons to facilitate understanding of trends and targeted promotions, additional credit and payment options, or even shipping and logistics:
- Platform opportunity. Since facilitating transactions is the central goal, these providers need to shorten time-to-value (taking a page out of Shopify’s playbook) and help operators maximize gross merchandise value. But value can’t end at launch. Platform providers need to also help operators scale up and boost their take (direct revenue) from each transaction and lower the cost of acquiring new sellers — especially as there is more competition for sellers among the top marketplaces and even within them.
- Tools and add-on opportunity. These providers have the advantage of selling services to both new platform customers as well as operators and sellers on traditional platforms. The goal here is helping operators maximize loyalty among all participants and boost their take of indirect revenues like digital advertising (Amazon’s fastest revenue growth) or add-on services.
Reach out if you’d like to learn more about this research, which spans my team, the B2B marketing team, the retail team, and beyond.
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