Marketplaces as an industry have grown substantially since the global outbreak of Covid-19 in early 2020. In the UK, online sales rose to a record high of 33.9% as a share of all retail spending, climbing from 20% pre-lockdown in February 2020.
Of that growth, marketplace sales made up 55% of the global ecommerce market in 2020.
The shift to online shopping has caused massive growth in sellers on marketplaces – both on newly launched marketplaces and those already leading the industry.
Let’s look at Amazon, the world’s largest marketplace. Amazon has 6.2m sellers worldwide, at a moment in time where the global population is 7.9bn. This equates to an Amazon seller for approximately every 1,270 people across the world. Of those, 1.6m are actively selling on the marketplace, which means there is an active seller for approximately every 5,000 people.
Seller growth in the marketplace is on the rise. So far this year 352,000 sellers signed up to sell on Amazon. Should this pace continue, the marketplace can expect to have 785,000 new sellers this year.
Amazon’s seller statistics are starting to point towards marketplace saturation. But whilst Amazon has a market share of more than 30% of the UK’s ecommerce market, what about the other marketplaces? Do they tell the same story?
As of 2020, more than 4.3m sellers globally sold goods through the Etsy platform, up from approximately 2.7m active sellers in the previous year, marking the largest growth jump that public records show. eBay claims 25m total sellers worldwide, Wayfair more than 19m. Seller numbers, both active and total, are staggering across the board.
Selling beyond price
These colossal figures spark important questions. Are there simply too many products, too many sellers and too much choice?
Let’s return to Amazon for a moment. Seller competition on the platform is fierce. A large portion of the marketplace’s total sales is generated by a small fraction of its sellers. Less than one in ten active Amazon sellers were able to generate over $100,000 in annual sales, and just one per cent of them achieved sales of over $1 million.
So with such stiff competition, how does a seller differentiate itself from the rest? And have all consumer goods simply become commodities because they are so easy to sell?
Whilst that might be true in some cases, there is still diversification across many product categories. Leading electronics brands boast better technology, and handcrafted gifts remain uncommon. Even if you can argue that not all goods are commodities, it is ultimately the manufacturers that benefit from the differences in product quality and technology through improved margins and increased market share. That doesn’t help sellers, and especially not new sellers.
Price remains the number one reason that people buy, but for sellers that becomes a race to the bottom. For both sellers and marketplaces, finding the other levers that facilitate or hinder a sale, and acting on them, is key. So what are they?
In recent research, when people were asked what the most important factors are in their decision to buy from a new brand on a marketplace, trust (22%) was cited as second only to price (61%), followed by delivery and returns (17%).
The delivery and returns experience commands massive investment. But trust is still an untapped, underinvested differentiating factor for most sellers.
Of the consumers surveyed, almost 40% said that their trust in brands had declined over the past three years. This compared to less than 10% who said it had improved, with the remaining 54% unchanged since 2018.
It is logical, therefore, that consumers are increasingly focused on trust in their buying decisions. When asked: “Do you research sellers on a marketplace to check their credibility before making a purchase?”, 84% said always, 10% sometimes and 6% rarely.
Investing in trust is an absolute next step for both sellers and marketplaces to regain and maintain confidence in buyers. Transparency will distinguish reputable sellers from those with dodgy business practices and poor trading histories.
The great news is that this shift to place trust central to the buying process will naturally raise the standards of sellers on marketplaces and diminish the effects of product oversaturation. For many marketplaces, it leads to an organic cleansing and reorganisation of sellers.
Good news for consumers, great news for most sellers and even greater news for marketplaces.