The importance of online marketplaces in a post-covid world

Last year, as lockdowns became the new normal, and consumers were forced to shop online out of necessity, businesses were forced to rapidly change their strategies to digital. Online marketplaces appear to be the biggest beneficiary of this “new normal” as consumers start to replace their regular trips to the stores with browsing shops online. The changing consumer demands subsequently disrupted supply chains, which made businesses everywhere across various industries rethink how they operate and start looking at online marketplaces as an effective and efficient response.

At its core, an online marketplace is an eCommerce platform that offers many different products and services from a range of different sellers. Online shoppers value the large variety of products that are usually available at comparably low prices on online marketplaces like Amazon, eBay or Tmall.

Approximately $2.67 trillion was spent globally on the top 100 online marketplaces in 2020. Sales on marketplaces accounted for an astonishing 62.5% of global online spending. In the same year, among the top 10 publicly traded e-commerce companies, 9 reported a double-digit year-on-year growth rate in their revenue. Amazon, Alibaba, Wayfair, Coupang, and Pinduoduo registered a YoY growth rate of over 30% in their revenue.

According to a report by UNCTAD, during the COVID-19 crisis, fully digital business models, i.e. third-party online marketplaces have performed better than e-commerce companies. About 58% of e-commerce companies selling goods and services online had experienced reductions in sales. In contrast, for the third-party online marketplaces, nearly 60% had experienced increased sales. The increases in sales experienced by online marketplaces have been accompanied by rising numbers of buyers and sellers on these marketplaces. 

The pandemic has caused a lot of changes in the e-commerce industry. Overall, businesses and consumers have become more inclined to make use of e-commerce services. As a result, new efforts have also been made to enhance the efficiency of online businesses and new market niches have also emerged.

Marketplaces are uniquely positioned to adapt quickly to such changes as they don’t have the same restrictions that some retailers do. For one, these platforms have an established e-commerce presence, and therefore, have an advantage over their retail counterparts who had to quickly shift to digital channels amid the pandemic. Marketplaces also have more flexibility. For example, Walmart’s U.S e-commerce sales grew by 74% in Q1 2020, and newly recruited sellers were one of the crucial reasons for this growth. Walmart had the flexibility to increase the number of SKUs available online more quickly by adding new marketplace sellers on the platform. 

On the other hand, Etsy impressively grew the supply as demand increased. Etsy called on its crafty sellers to make and sell face masks, which resulted in April being the highest sales month for Esty since 2015. Etsy was able to fill a clear demand by depending on its sellers to handle the product’s production and shipment. And top players grew bigger – Amazon became the default shopping engine for many shoppers – not limited to the nearly 200 million Prime members – and built a fulfilment infrastructure larger than the competition combined.

Even in a pre-pandemic world, online marketplaces were already booming, and their value noticeably growing. Online marketplaces offer an already existing loyal customer base, the latent demand for almost every product in the market, tools and technologies to help you sell, and a logistics infrastructure already in place. Online marketplaces are rapidly becoming the powerhouse behind the new norm that is transitioning towards eCommerce and should be an integral part of every retailer’s strategy.