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Perspectives

Digital marketplaces: The new frontier for retail innovation

Creating a seamless path to purchase anything, anytime

As companies scramble to meet evolving postpandemic consumer needs and expectations, digital marketplaces offer a promising avenue for responding to this shift in retailing and capturing new value segments. This article offers strategies and considerations for retail organizations to consider when launching or optimizing new digital marketplaces.

Retailers are challenged daily to address the shifting demands of post-pandemic consumers. As consumers spent more time at home and less in stores, the migration to online shopping and preference for the one-click convenience of a digital marketplace only accelerated during the pandemic.
This digital shift in retailing shows little sign of slowing down. Sixty-one percent of customers are planning to spend more time online after the pandemic than they did before, and these increasingly digital customers expect the businesses they buy from to keep up.1

As a result of consumers’ evolving behaviors and expectations, traditional retailer-to-consumer models are evolving to provide customers access to an endless aisle of products and services across multiple touchpoints. A marketplace model helps enable retailers that might not have the bandwidth to own and manage an endless aisle of inventory. If properly executed, marketplace models can drive financial upside. Nontraditional players, such as Google Shopping and Facebook Marketplace, are toppling the barriers around digital retail innovation by offering digital marketplaces that pressure incumbent retailers to expand their ecosystem of offerings to remain competitive.

These digital marketplaces, which match buyers seeking a service or product with sellers while allowing retailers to expand assortment without holding inventory, are a critical step forward in the digital shift in retailing.2 Already, several retailers enjoy success, including:

  • Amazon: Amazon’s Marketplace (e.g., third-party sellers) represent about 60% of Amazon’s overall gross merchandise value3, equating to roughly a 25% market share of the total US e-commerce spending for its marketplace alone.4
  • Etsy: Etsy’s fourth quarter of FY2021 saw sales climb 16.5% year over year to $4.2 billion, a 72% increase in active sellers to 7.5 million, and a spike in active buyers of 17.6% to 96.3 million.5
  • Kroger: The grocery giant had $11.3 billion in digital sales in 20206 and this is expected to double by 2025. Kroger attributes the growth to the expansion of its online marketplace.7

As consumer demand for seamless digital retail experiences continues to grow, retailers are seeking ways to provide convenience, variety, and value. But even as digital marketplaces become an important business model consideration, not every retailer that launches one will find success. To create a satisfying digital marketplace—one that produces true value for customers, sellers, and the retailer—companies must make a series of strategic choices.

Steps to digital marketplace success

Gross merchandise value (GMV) is the gold standard for measuring digital marketplace success. GMV captures the total value of merchandise sold over a given period through a retailer’s platform. Maximizing GMV requires the right products and services at the right price, fulfilled the way customers desire. Based on our experience, companies that are successful in launching or optimizing a marketplace as part of the digital shift in retailing begin by answering the following questions:

Ready to unlock digital retail innovation and growth?

Digital marketplaces enable retailers to unlock growth with expanded offerings as customers concurrently seek a wide variety of goods and services with a frictionless digital marketplace.

Successful retailers make deliberate efforts to understand customer, seller, and competitor dynamics. These organizations carefully craft strategies that meet the needs of the market, while also driving profitability for the business. If your organization finds itself at the crossroads of a digital marketplace decision, consider the steps you can take to create a differentiated, seamless, and convenient path to purchase anything, anytime.

Endnotes

1 Salesforce State of Marketing, Seventh Edition; Salesforce State of the Connected Customer Report, October 2020.
2 The Future of Customer Engagement and Experience; Digital Marketplaces Examples and Strategies.
3 Forbes. “Amazon’s Third-Party Marketplace Is Its Cash Cow, not AWS,” Forbes.com, February 2021.
4 Marketplace Pulse “Amazon’s Marketplace is 25% of US E-Commerce?” Marketplace Pulse, February 2022.
5 PYMNTS “Etsy Active Buyers Reach 7.5M, Active Buyers Hit 96.3M,” PYMNTS.com, February 2022.
6 Supermarket News, “Kroger breaks into top 10 U.S. e-commerce companies,” Supermarket News, December 2020.
7 Statista, Share of net sales value of Kroger in 2020 with a forecast for 2025, by channel; Statista.

Special thanks to Rachel Simoff and Brigitte Fox for their authorship, support, and research throughout the development of this article.

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