Marketplace: Threat, trend or tale?

The number of marketplaces in the ecommerce space has exploded in the last couple of years. The trend is pushed forward mainly by the ease with which it enhances customer experience: quickly adding distribution centers and fulfillment points does not require much investment.

In spite of this reality, some retailers still see marketplaces as a fad, or at least a trend that will die down in the coming years. This pessimism might be misguided, since the most important online stores are betting for a future where marketplaces are the most important form of ecommerce.

So, what makes this form of online selling more interesting than the alternatives?

The drive to be better

The great results obtained by the biggest marketplaces in the world, such as Amazon, Mercado Libre and eBay, have boosted the market and enhanced the expectations of online buyers.

This means that customers are constantly looking for websites that offer next-day delivery, great customer service and a broad product offering in order to guarantee a good shopping journey. These elements can make - or break - a sale, and they are increasingly easier to offer in a marketplace environment.

The advantages of implementing a marketplace have been recognized by several sellers who have flocked to this model. This fast adoption has resonated with consumers, and only 8% of online sales happened in branded websites, while another 18% occurred in supermarkets. Most of the remaining sales happened in different marketplaces.

"I would say marketplace and omnichannel are currently the driving forces in ecommerce. The argument on marketplace is that you're gonna expand your assortment and reach exponentially with little risk. You'll basically be a channel where sellers can integrate you and get a rebate out of it, while omnichannel is a bit more complicated to manage."

Juliana Sales, Product Marketing Manager at VTEX Where is the threat?

Like any change in a company's business model, the introduction of a marketplace might not be welcomed internally by all. Specifically, sales people tend to be weary of this operation, and see it as a direct competitor.

"People understand you have a way to deliver products and then see the marketplace as a way to add sellers with the same products or even better ones with lower prices, which could be a threat to the first-party operation. Other companies think the integration to external marketplaces will compromise their direct-to-consumer approach."

Juliana Sales, Product Marketing Manager at VTEX

Some companies also understand the advantages of offering an innovative sales channel, but might think little of it besides the "newness" factor, especially for manufacturing operations who see it as a big change with little to show for it.

Sales says that most operations come around to understanding the value proposition of a marketplace and how it can help a company reach a broader market and grow sales. This is true both for well-known brands that offer a new sales channel for customers, as well as for small brands that wouldn't otherwise be chosen by consumers if they weren't available in a marketplace.

Marketplace is here to stay

Currently, marketplaces already occupy a big percentage of sales and an important place in consumers' top of mind. The convenience of a one-stop-shop is hard to compete with, and buyers will hardly be dissuaded from the trend.

Marketplaces are also heavily investing in customer service and logistics, so their good results are helping them consolidate themselves in the field, which makes it harder for small retailers to offer competitive options.

This is good news for both buyers and sellers, since there's an easy way of offering even more products to different consumers no matter where they are located.

"It's a growth opportunity to leverage a strategy from a business model that enables you to reach more customers, deliver more product options and a better cost because you're closer to the buyer. You also enable other use cases like click-and-collect, delivering the experience customers are hoping for."

Juliana Sales, Product Marketing Manager at VTEX

So, is marketplace a tale? Definitely not: it's already the most popular online sales channel.

Is it a threat? No: it's an opportunity for companies in expansion, that allows them to increase sales and offer a better shopping experience in an easier way.

Should you adopt it? That's up for you to decide, but it already seems to have a strong seal of approval from both sellers and buyers.

DISCLAIMER: It is important to note that historical financial information or operational KPIs may not be comparable with publicly-filed information at SEC, since VTEX did not report its financials in accordance with International Financial Reporting Standards (IFRS) prior to 2019 and certain KPI definitions may differ from publicly-filed information. You are cautioned not to place undue reliance on figures published before July 21st, 2021 as they may not be comparable to the metrics disclosed from the IPO onwards.

Written byLalo Aguilar

Lalo is a journalist with more than 5 years of experience, who now is focusing his story-telling abilities on the world of ecommerce and the quick revolution happening around it.