Shoppers crown online marketplace as king, now representing over 60% of global e-commerce spend
Online marketplaces are increasingly the dominant method that consumers use to purchase products, representing c.60% of all e-commerce spend globally and transacting c.$4.1 trillion in annual gross merchandise value (GMV) in 2022, growing by $1.7 trillion since 2019.
New analysis by OC&C Strategy Consultants on digital spending found that specialist models (including vertical focused, secondhand and hyper-local models) have been a major driver of this growth, capturing business by targeting specific customer needs that generalist marketplaces have been unable to meet.
The findings were based on analysis of the top 250 digital marketplaces around the world by gross merchandise value (GMV) to understand the nature of these marketplaces and their evolution.
These specialist model marketplaces have overtaken generalists in growth; growing faster by a factor of 1.6x (36%pa vs 23%pa between 2019-22) and taking market share from the historically dominant generalists like Amazon and eBay.
This has resulted in the rise of mid-sized specialist marketplaces in the last few years.
Since 2019, eight marketplaces have grown larger than $10 billion in third party GMV and a further 34 marketplaces have grown beyond $1 billion in GMV – including the likes of Trendyol, Poshmark, Backmarket, Rue du Commerce, Drizly and Privalia.
This growth has been particularly prevalent in Europe, where specialists are most developed, taking 15% share of marketplace spend vs <5% in China.
The prevalence of direct retail e-commerce models means vertical-focused and curated shopping experiences are far more common in Europe, meaning consumers are more comfortable shopping with these models.
The growth of these specialist models (and generalists too) has been heavily influenced by differences in growth across categories.
For categories that have sustained growth in marketplace penetration – including apparel, consumer electronics, grocery and personal care – this presents a significant opportunity for specialist models to continue to grow scale as the overall “pie” expands.
Despite this, generalist marketplaces remain significant and still capture c.70% share of all third party GMV in 2022. These generalists are increasingly looking to grow revenue through take rate growth, which have grown substantially between 30-50% for the major generalist marketplaces such as Amazon, Flipkart and Mercado Libre.
These increases are being justified by the introduction of a broader set of value-add services, such as marketing fulfilment and analytics tools, but are undoubtedly squeezing margins for sellers.
Ankul Wangoo, Associate Partner at OC&C Strategy Consultants, comments: “The story around online spending in recent years has focused on the growth of the likes of Amazon, but now we are seeing the growing importance of vertical-focused and secondhand marketplaces which can offer more curated and tailored experiences, as well as building greater trust with shoppers.”
“This presents challenges for brands and retailers, who will need to think carefully about their distribution strategy across a growing set of marketplaces, but also opportunities by ultimately opening new avenues to reach new customers.”
“This also poses a challenge for generalist marketplaces who will have to improve their proposition to ensure they remain competitive in their key verticals.”
Vertical focused marketplaces
Vertical focused marketplaces succeed on the basis of a more tailored experience for buyers adapted to specific vertical (e.g. fashion), better curated inventory, and a more appealing ‘store front’ for sellers.
The scale of vertical specialists (five players with >$10 billion 3P GMV) is now substantial enough for them to be able to compete with generalists in terms of international coverage and value-add services. They include the likes of Zalando (a clothing specific marketplace), Rue du Commerce (electronic specific), and houzz (home design specific).
Secondhand and refurbished marketplaces
These marketplaces have transformed how buyers and sellers can trade secondhand and refurbished products.
They have simplified the user experience for both buyers and sellers and build consumer trust through transparency and guarantees to encourage transactions. This model has been supported by strong market tailwinds in the secondhand market, with sustainability top-of-mind for both buyers and sellers.
Hyper-local marketplaces
These marketplaces have grown significantly where fast delivery is required, particularly in grocery and takeaway.
A recent surge in value-add services, like transaction support, enables these marketplaces to run smoothly and grow rapidly. Grocery marketplaces in top 250 have grown particularly quickly from a small base - by almost 4x between 2019 and 2022.
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