Some of the most successful businesses globally, including Alibaba, Amazon and Zalando, owe their success in large part to their marketplace business.
Connecting supply and demand with an accessible platform is a win-win for both brands and retailers, with consumers also benefitting from a wider choice. But where does this model originate, and what’s the evidence that it’s a worthwhile investment for retailers? We’ve taken a closer look at the numbers behind the marketplace model. Check it out!
What is a marketplace?
The main difference between retail models such as wholesale and marketplace is that as a marketplace, the retailer doesn’t buy stock to sell. Instead, marketplace retailers provide space for brands on their online platform, without taking on the risk of buying the goods. This way the retailer can offer a far wider variety of products, while brands enjoy the platform’s existing traffic and access to new customers without having to compete with them. The fashion and lifestyle sectors are becoming ever more competitive, especially in digital sales, and marketplaces and platform businesses are booming. So how did this model evolve?
The history of online marketplaces
Marketplaces in e-commerce are intrinsically tied to online shopping, which has been around for just 25 years. In 1994, on the US-platform Netmarket, a CD was bought using a credit card: the first purchase completed online in history.
Since then, the retail industry has seen an ongoing shift from offline to online sales, with increasing numbers of marketplaces and changes in consumer behaviour. The ongoing pandemic has pushed this trend faster and further. Today, analysts expect B2C marketplace sales to increase to $3.5 trillion by 2024. When thinking of using marketplaces as a new sales channel, brands should consider which of the various marketplace models best suits their goals.
Today's customers expect all of their needs to be catered for when shopping in a trusted online environment, and they are warming to platform businesses, one of the reasons for annual digital growth predictions of 20% in 2021 over 2020 according to McKinsey. In fact, according to Forbes, platform businesses account for more than half of all online sales, also driven by the pandemic, and are also said to generate double the profit and are at double the market value of their competitors.
Fashion & lifestyle products are the top-selling online category. Currently, even the luxury market is catching on to this trend, as it has doubled its online market penetration from 12% since the pandemic. Overall, it’s clear that this shift towards platform structures is spreading across fashion and lifestyle sectors, and is here to stay.
To read more about the benefits of becoming a marketplace click here.
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