When shoppers think about making a purchase online, over half of them consider searching for that product on Amazon, according to Digital Commerce 360. “With each year that passes, it’s becoming harder and harder to ignore the sheer volume of traffic to marketplaces and the revenue opportunity there,” says Director of Research Data at Digital Commerce 360 Jessica Young.
In this episode of Retail Uncharted, Jessica analyzes the findings from Digital Commerce 360’s annual Online Marketplaces Report. The report ranks the top 100 online marketplaces in the world by sales and analyzes emerging trends in the industry
Not only are shoppers becoming more marketplace-savvy, but retailers too are embracing the platform with some, like Target and Walmart, launching their own marketplaces. These are known as hybrid marketplaces. They are one of the fastest growing categories of marketplaces, which led Digital Commerce 360 to dedicate an entire section to hybrids in this year’s report.
Whether through traditional or hybrid, marketplaces offer retailers several profitable opportunities, says Jessica. In this podcast she shares top retail success stories and outlines practical advice for retailers looking to expand their footprint on these platforms.
During the podcast, Sidecar’s Mike Perekupka asked Jessica:
- How have marketplaces changed in terms of consumer and retailer behavior in the last three years?
- How can retailers retain their brand value while selling on marketplaces?
- Is Walmart’s marketplace poised to compete directly with Amazon?
- How has COVID-19 impacted the growth trajectory of online marketplaces?
- Why are more retailers embracing the hybrid marketplace model?
- Which online marketplaces are climbing the ranks in terms of sales?
- What is your biggest piece of advice for retailers looking to expand sales on marketplaces?
Top Sound Bites
On brand loyalty and marketplace shopping:
Jessica: One of the data points that’s really crucial for retailers to track is the share of consumers that have purchased from a seller’s own website after finding a product first on a marketplace.
That’s kind of a boiled down version of sellers’ probably biggest fear: who owns the customer? Do they even know that they’re buying from me, and what are the chances that they’re going to make a repeat purchase through my site?
In 2016, when we first started asking consumers about this, about a third of shoppers had followed through to the retailer’s site after discovering an item on Amazon, specifically.
In 2020 we generalized the question and asked whether shoppers had ever ordered something from the retailer site after seeing a product on any marketplace and 52% said yes.
This year that rose again to 57%. That’s really good news. This means consumer awareness has sharply increased in the last handful of years, and that marketplaces are becoming a more effective acquisition tool for third-party merchants.
On the importance of a dedicated marketplace strategy:
Jessica: CakeSafe is a brand of baking accessories and tools, and they sell this signature box that protects cakes while they’re in transit. The company’s been selling online since 2009 but it started a dedicated Amazon division in February 2020 after getting some feedback that loyal customers kept requesting Amazon Prime shipping.
We spoke to Rachel Moreschi, CakeSafe CMO, and she was telling us that during an earlier stint testing out Amazon listings, the brand ran into issues after using the same product descriptions and photos from its own site.
Content from a specialty website is geared toward a niche audience. Customers on CakeSafe are devoted and advanced bakers. They had more proficiency and baking expertise to use the tools.
On Amazon, especially during the pandemic with quarantine baking, these were generally customers who were new to baking. To reduce confusion and increase the potential for return, CakeSafe started creating more in-depth and detailed descriptions. They added instructional photos to make sure that customers are buying the correct items for their needs.
Now, through Amazon, the brand has become more accessible to this new market during the pandemic. At a time when the brand’s own e-commerce site started taking a hit, CakeSafe was really able to capitalize on that influx of shoppers turning to Amazon. In just a matter of months Amazon sales started accounting for 20 to 30% of the company’s business.
That’s really due to having a person or a team devoted to marketplace strategy. It’s no longer an afterthought, but really integral to growth, brand recognition, and overall success.
On Walmart’s ability to compete with Amazon:
Jessica: Let’s put things in perspective. Walmart’s e-commerce sales, which is what we’d consider first-party sales that Walmart owns itself, grew about 64% year over year in 2020. Its marketplace sales, which capture products that are sold by third-party merchants, grew by triple digits. Walmart executives didn’t disclose more specifics, but we’re estimating it was about 110%.
Even into this year Walmart is saying marketplaces are a driver of the strong performance in the U.S. This third-party platform segment is doing very well, but we’re still talking $25 billion versus Amazon’s $284 billion.
Walmart is closing the ranks, and they’re climbing up the list of top 100 marketplaces, but that is a significant gap. We also tend to forget that eBay is another marketplace that Walmart would have to leapfrog to get in Amazon’s ballpark.
Walmart has been making deals with e-commerce platform providers like Shopify and BigCommerce in the past year, so that they could widen their reach and recruit potential marketplace sellers. Walmart also just lifted requirements that third-party merchants be registered in the U.S. earlier this year. That’s opening up the marketplace to foreign sellers so that’s going to dramatically accelerate the growth in sellers.