Of the $5 trillion global digital commerce market, $3 trillion comes from marketplaces alone. As a niche of the e-commerce industry, that’s quite an achievement, considering how many more individual online stores there are in comparison to marketplaces. Some of the most well-known online marketplaces are Amazon, eBay, Alibaba, Etsy and Walmart.
In Europe, these are all available, however, online marketplaces specific to the EU are Cdiscount, Real.de, Otto, Bol.com, Zalando, Beslist.nl and many more. Although Amazon is an American company, they are still the number one online marketplace in Europe, with approximately 1.6 billion visits per month. Another American company, eBay, stands as the EU’s second largest marketplace, however, with only 37% of Amazon’s European traffic. Nonetheless, what does this all mean for the future of retail and e-commerce? How will the landscape of marketplaces change over the coming years? Which sectors and departments of retail are leading the way in the marketplace space? As we look to the future of marketplaces.
As of writing 2022-08-01
When search platforms like Bing, Yahoo and Google first came onto the scene in the late 1990’s and early 2000’s, the wonder and awe of having the world’s knowledge at your fingertips was life-changing, and this is before the addition of advertising and shopping features that followed later on. Users of the internet would never have guessed that a search engine like Google would become, in essence, a marketplace on its own. The same can be said for social media platforms like Facebook, TikTok and Instagram which started out as spaces to share photos, videos and to connect with friends and family. Looking back at their original states, it is astounding to see the growth and evolution of social media platforms and search engines.
In 2016, Facebook created Marketplace, a section of the platform that provided locals in a city to buy from and sell things to one another. Instagram tested out shopping features through Instagram Stories in 2018, but by 2021, the feature was so successful that the platform created an entire tab dedicated to shopping. From clothing to swimwear, jewellery to furniture, the tab curates posts and ads from brands and retailers selling their products. The feature has become so advanced, users don’t even have to leave the Instagram app to complete a purchase. In 2022, 44% of Instagram users shopped weekly on the app and 50% of Instagrammers use the app to find new brands. According to Facebook’s own data, 1 in 3 users in the US will use Marketplace to purchase something, keeping in mind it is the 5th most popular marketplace in the country. Social commerce, as it has come to be known, is only going to get larger, with sales expected to reach $600 billion by 2027. It is safe to say that social platforms have moved from content sharing to content marketing to multi-brand, retail-driven platforms.
Search engines have had a similar meteoric evolution. Google offers a “Shopping” tab, similar to their other offerings like Maps, Images, News, Calendar and more. Bing and South Korea’s Naver also offer a Shop-like section. Google’s search technology allows it to be the leading search engine marketplace as they incorporate shopping options into organic searches, including voice search. For example, if someone Googled “red triangle bikini” or “dairy-free baby food”, search results would be an intricate and deliberate blend of content and digital commerce including products from brands and retailers. The marketplace business model has come a long way since the Bazaar of Tabriz in the 16th century.
Shopping for vintage clothing and buying from second hand clothing stores is not new, but it is, in itself, revolutionising. Covid-19 had an impact on resale marketplaces, as families and individuals looked for ways to make money or ways to scale down on consumption and expenses during lockdowns, job losses and furloughs. By selling and monetizing fashion, instead of adding to global waste, consumers were able to maximise the circle of fashion - and ultimately drive the growth of resale marketplaces around the world. Buying clothes previously owned by others is not only becoming a multi-million Euro industry, but it is firmly finding its place on its own as an online marketplace. Also known as a resale platform, the second hand apparel market is expected to be valued at $218 billion by 2026, doubling in size from 2021 to 2025. The likes of Vinted, a resale platform in Europe, the UK and the US founded by Thomas Plantenga, allows users to buy and sell used clothing and other items through its app and desktop option. Over 65 million people around the world use the service without having to pay selling fees - a feature quite unique to most marketplaces and resale platforms. On the other end of the resale platform market is Dubai’s The Luxury Closet (TLC), which acts as an exclusive, premium resale platform in the Middle East. You can buy second hand luxury items from Louis Vuitton, Hermes, Dior, Rolex and more. TLC’s success and popularity has grown so large, it has opened up in the UK market in July. Later on in 2022, it plans to extend to Europe. Resale platforms like TLC have tapped into a new arena of the second hand market, offering consumers the chance to own designer items at lower prices than what one would pay if it were new.
What makes a resale marketplace unique to shopping at a second hand store is, firstly, the experience and, secondly, the fact that major resale platforms include the products from smaller second hand apparel businesses, making it a marketplace and a retailer simultaneously. Resale platforms have a business-to-business (B2B), a business-to-consumer (B2C) and a consumer-to-consumer (C2C) business model all running concurrently. The UK’s resale platforms market already includes Mr Porter Resell, Reflaunt and Lampoo which are also available in France, Germany and the Netherlands. Vestiaire Collective is Europe’s largest resale platform, of which The Luxury Closet will have to contend with. Vestiaire Collective’s CEO Maximilian Bittner believes that the growing focus on sustainability will further drive the success of resale marketplaces. “Fashion fuels some of the world’s biggest problems: Overconsumption, overproduction, climate change, and work ethics,” he said in an interview with McKinsey & Company. He admitted that he was surprised at how much of the sustainability aspect pushed the success of Vestiaire Collective specifically:
“The investors who reached out to me at the time looked at this very much as a second hand, luxury fashion business. I don’t think people were yet seeing how big the sustainable opportunity could be. And I really have to admit, I didn’t see it either. But the speed at which it came now absolutely surprised me.”
Another resale marketplace that’s focused on sustainability is Depop, which encourages engagement between sellers and buyers as a part of the second hand and thrifting community. The sellers are new-age brands and the buyers are consumers mostly from the Gen Z population - approximately 90%. Depop has had $1.6 billion in purchases to date; showing just how steadfast resale marketplaces are becoming as they disrupt Google Shopping and traditional wholesale retailers like Walmart.
Despite experiencing store closures amid lockdowns in China 2020 and again in 2022, with a third of their stores in the country remaining closed, luxury brand Chanel is doing well globally with a double-digit improvement in sales. Global sales increased by $15.6 billion in 2021 - a 49% increase from the previous year. However, the company’s CFO Philippe Blondiaux shared in June that despite the boom in sales, Chanel has new plans to further increase profits, with some of those plans seeing major changes in how the consumer will experience shopping at Chanel. For one, the brand may begin limiting availability of certain products to instigate soaring demand, which is something they have already started doing with their Classic Flap bag. Blondiaux shares that one customer can only buy two of these bags per year, which cost $10,000 each. This will increase exclusivity of owning a Chanel item and will also curb the bulk buying that often takes place within the resale and grey market.
Chanel has already seen how effective this strategy is in South Korea, where customers have lined up outside a Chanel store in the capital of Seoul to take part in what’s called an “open run” - a sprint to get one’s hands on high-demand items.
Another strategy used by Chanel will be a greater move to direct-to-consumer (D2C) within the next few years, which is something we’ve seen retailers and brands do on a heightened scale since 2020. Blondiaux shares that their magnificence and perfume enterprise, which is their department for makeup, perfume and other beauty products, will mostly exist online as they prioritise e-commerce. This department has largely always relied on wholesale or brick-and-mortar stores to succeed, however, since e-commerce sales jumped 32% for the magnificence and perfume department, it will soon become the channel of priority for Chanel.
Other wholesalers, like makeup retailer Sephora and high-end perfume and cosmetics retailer Marionnaud, have both seen their wholesale orders drop drastically in the US market, which can be attributed to the growth of e-commerce and a decline in American malls.
Successful online marketplaces focus heavily on the actual experience of shopping online, using beautiful imagery, video content, seamless payment processes, intuitive “you may also like” suggestions, dedicated brand pages and more. When a consumer shops on an online marketplace that focuses on the entire shopping journey, they can feel the difference from walking into a department store that’s wall-to-floor merchandise. Nowadays, we are seeing international brands take a hard look at their stores to see how they can evolve and remain interesting and relevant. The idea of the “concept store” takes the very senses and experiences you would want in a marketplace and brings it to life in physical form. Walking into an Adidas or Nike store to buy a pair of sneakers or visiting Yves Saint Laurent to purchase a coat is no longer just about the product - it’s about the lifestyle of the brand. In fact, concept stores have very little product in them, as a way to maximise exclusivity whilst providing a visual experience.
Nike has created a “House of Innovation” that combines sports luxe, technology and sustainability as an experience. Each store is solar powered and made from sustainable materials, while digital technologies are used to show off the athletic capabilities of each product.
Inspired by fragrance bottles, Hedi Slimane, the creative director for Celine turned their Parisian store into a luxury fashion experience. “Fragrance precedes the fashion I create,” says Slimane. The store combines Celine’s 11 new fragrances, high-end leather goods and haute couture items.
Although the store-in-store concept is not new to retail, it has seen an increase in popularity as retailers consolidate smaller brands and businesses, and brick-and-mortar retail contends with e-commerce. Some brands have also merged, combining their products, employees, logistics and resources to stay in business. An example we all may be familiar with is a branded coffee shop like Starbucks within a clothing or food store like Macy’s; or a beauty retailer such as Sephora having an in-store kiosk for JCPenney. According to a Mastercard study, “to increase offerings to customers” came in as the top reason for stores joining forces at 33%. To consolidate resources and to increase foot traffic came in second at 25%.
Department stores used to be the original playground for consumers to search for new brands; to compare products and to enjoy the endless amounts of choice. However, an online marketplace could be compared to an entire mall with all the options of various stores and categories.
Although department stores and wholesale retailers still hold a significant place in retail, the changing face of marketplaces is evolving rapidly. In 2020, 63% of all global online spending occurred via online marketplaces; a figure that increased by 29% from the previous year. With a growth rate like that, it is easy to predict that online marketplaces will be the new go-to choice for consumers around the globe. Going forward, retail leaders will need to reconsider their approach if they are yet to enter the online marketplace arena in order to further monetise their current commercial strategies, increase their relevance, as well as their global or domestic footprint.