Marketplace: the age of reason?

Antoine de Sainte Marie is a Manager at Converteo. His areas of expertise revolve around strategic framing in e-commerce and innovation. He shares his insights on the key success factors specific to the marketplace model.

Key Takeaways

• Marketplaces represent over 62% of global e-commerce sales in 2023, with their revenue quadrupling in France between 2012 and 2020.
• In some saturated markets, marketplaces face challenges as they do not meet certain key success factors to attract and retain sellers and buyers.
• It is necessary to question the relevance of assortments, the traffic acquisition strategy, the value proposition for buyers, and the services provided to sellers.

Now dominating over 62% of global e-commerce sales in 2023, marketplaces are reshaping the e-commerce landscape. In France, this dynamic is equally pronounced, with the revenue of marketplaces quadrupling between 2012 and 2020. However, despite these remarkable successes, some marketplaces are struggling, failing to master the key factors inherent to this model.

In B2C, the meteoric rise of marketplaces is driven by the growing demands of buyers: a vast and varied product assortment, competitive prices despite inflation, and increasingly convenient and faster delivery options.

In B2B, the marketplace model proves relevant for digitizing the entire value chain, including service providers, subcontractors, and external stakeholders, especially in a context of scarcity.

In both cases, the “platform” effect allows the marketplace to enhance its traffic and even monetize it through a retail media offering: the model is thus virtuous for the operator, buyers, and sellers. Marketplaces are now overshadowing the dynamism displayed in the 2010s by multi-brand sites, which are now burdened by rising acquisition costs, astronomical logistics fees, and a limited offering.

This does not prevent certain players from facing difficulties.

Basing a marketplace on an existing e-commerce platform does not guarantee success. For example, while Mango adopted this approach in 2021 to develop cross-selling of products not available in its initial assortment, the Spanish brand announced the closure of its marketplace in 2023 due to a lack of real value creation.

Some markets are saturated with a growing number of generalist or specialized marketplaces trying to capture market share without any real differentiating factors.

26% of the top 100 marketplaces experienced a negative average annual growth rate between 2020 and 2022.

Rakuten, for instance, was forced to close its European marketplaces one by one in 2020 (UK, Austria, Spain, and Germany), with the exception of France.

This increased competition drives prices down, jeopardizing the profitability of marketplaces, which is linked to sales volumes (subscriptions and commissions). Despite a significant acceleration in performance during the COVID-19 pandemic, CDiscount is feeling the full force of competition from Amazon in the French market.

As for local marketplaces, which gained popularity after COVID-19 to promote local commerce, their development, supported by the Banque des Territoires, “has proven to be a failure, failing to meet the expectations of both consumers and merchants.”

A recent example is the Business France marketplace, which lists 22,500 Made in France products available for export to B2B buyers, yet does not allow for transactions.

Finally, Chinese players (led by Shein and Temu) are also capturing market share with low-priced products shipped from China.

Beyond the environmental and ethical issues surrounding these practices, buyers are drawn to these platforms. Similarly, the emergence of second-hand platforms, social commerce, and drop-shipping is competing with traditional marketplaces.

Defining Key Success Factors Related to Expectations

The mere act of linking a marketplace to an existing e-commerce platform is not a guarantee of success, as it is crucial to address certain key success factors to ensure the virtuous cycle between the operator, sellers, and buyers is sustained.

• Relevance of the Assortment

To enhance their attractiveness, marketplaces differentiate themselves through their assortment. On one hand, this is reflected in a meticulous selection of products in the catalog: 53% of buyers consider the relevance of the offering to be decisive in their choice. Curation ensures the breadth and depth of the offering by securing the presence of strategic categories while also eliminating the gray market, thus ensuring the reliability of the products sold.

On the other hand, price competitiveness is essential: 62% of consumers are attracted by favorable prices. Marketplaces encourage their sellers to be competitive compared to prices offered by competitors while maintaining sufficient margins for their profitability.

These strategies require a commercial approach and targeted recruitment of sellers to ensure an offering that aligns with buyer expectations. 

• Traffic Acquisition

In light of the general rise in acquisition costs, optimizing the natural search engine optimization (SEO) of marketplaces is essential: the readability of the site structure, the quality of textual content, and various redirect links serve as the backbone of this optimization.

Marketplaces must also be able to activate other targeted acquisition levers (SEA, Social, CRM, affiliation) by developing synergies with their promotional activity calendar.

To achieve this, building brand awareness on social media plays a crucial role, as does defining precise target audiences and activating them.

The development of a marketplace can also present an opportunity to enhance and monetize existing natural traffic. However, additional visits represent an increment for increasing conversion rates.

• The Experience, Aligned with Buyer Expectations

In a highly competitive landscape, the ability of marketplaces to develop a strong value proposition for buyers is a competitive advantage that fosters loyalty in both B2B and B2C sectors.

• In B2B, buyers expect features that enhance relationships with sellers and promote long-term collaboration: quotation requests, customization of orders, mechanisms for identifying technical products, and volume-based pricing.
• In B2C, buyers favor marketplaces that offer an advanced shopping experience: diverse and rapid delivery options, a variety of payment methods, and high-quality after-sales service.

• The Right Level of Services for Sellers

By monetizing their audience through retail media, marketplace operators offer sellers the opportunity to target potential buyers and gain visibility. This explains the dynamism of the third wave of digital marketing: it is rare for a month to pass without a leading marketplace announcing the expansion of its retail media offerings.

At the same time, platforms must provide a robust technical back-office for sellers. This includes accessible and detailed reporting, the ability to export data for deeper analysis, and the capacity to create feeds with existing systems for efficient inventory and sales management.

Regarding logistics delegation, operators can adapt to the maturity of sellers by offering flexible logistics solutions. Some sellers may prefer to entrust the storage, shipping, and returns of products to the marketplace, a service popularized by “Fulfillment by Amazon.”

Ultimately, effective seller onboarding contributes to creating an attractive catalog. With a content management system (CMS), seamless integration and an optimal experience are ensured for both sellers and buyers.

Brands, aiming to streamline the online distribution of their products, consider the economic potential of marketplaces and base their decision to activate one over another on complementary criteria: alignment with target audience, operational complexity, level of technical integration, available services, and more.

Developing a marketplace requires considerable human, technical, and financial investments. In a context of heightened competition, mastering the key success factors and differentiation strategies is essential to convincing both buyers and sellers.

To find its economic model, the marketplace must reach a critical mass that allows it to create a virtuous circle for all its stakeholders (operators, sellers, and buyers).

The standards of this e-commerce model continue to evolve; what were once considered guarantees of success have now become norms.

For a brand, failing to consider the marketplace in its distribution strategy can be seen as an oversight, while for a distributor, attempting to build a marketplace at all costs is a mistake. 

Sources

• LSA, Marketplaces : le modèle gagnant de l’e-commerce ? , 2022
• Mirakl, Report The State of Online Adoption, 2023
• Statista, TOP100 Companies: Marketplaces, 2023
• Cour des Comptes, La politique de l’État en faveur du commerce de proximité, 2023
• Journal du Net, Business France lance sa marketplace, 2023

Contributors:

Mathilde Lassalle, Data & Business Consulting Consultant,
Clément Delille, Data & Business Consulting Manager,
Mehdi Fenjiro, Senior Manager Data & Business Consulting,
Victor Fulconis, Partner Data & Business Consulting.