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Will Amazon meet its match?

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From small specialists to global players, marketplaces are a winning formula, says Penelope Ody

 

If an online marketplace is defined as a site where products are provided by multiple third-parties but transactions are processed by the marketplace operator, it can become quite difficult to separate out the pure etailers. Asos and Game, for example, both have a marketplace for third-party products, while some analysts even list Tesco as a marketplace. In the US, Sears – which boldly declares “Now shipping to Great Britain” – also has a ‘marketplace’. So where do retailers end and marketplaces begin? Department stores, such as Sears, with their assortments of concessions could, after all, be just as easily described as ‘offline marketplaces’.


Definitions and differentiation aside, online marketplaces have become a favourite and convenient one-stop shop for many – as Amazon demonstrates only too well. In the UK, it is already Britain’s fifth-largest retail business, taking 4% of total retail spend, according to Verdict, while a study by Survata suggested that 49% of online shoppers start their product searches on Amazon. While Amazon dominates western marketplaces, China’s Alibaba already handles even more business, with Morgan Stanley estimating its gross merchandise volume at more than $700bn across its numerous marketplaces. That’s compared with Amazon’s estimated gross merchandise value (GMV) of $225bn.


One to watch will also be JD.com, China’s largest retailer and second-largest ecommerce website (GMV £195bn), which now has 292million active users of its marketplaces. Google has invested $550m in JD with the aim, according to the official announcement of the deal, to offer “helpful, personalised and frictionless shopping experiences”. Like Amazon, JD has built its own logistics platform – complete with drones and robotic delivery vehicles – and last year launched Toplife as a platform for high-end brands to compete with Alibaba’s TMail Luxury Pavilion. It has also invested in Farfetch to add 700 fashion brands to its offer, while earlier this year, it announced plans to launch its marketplaces in France, Germany and the UK. Its Joybuy marketplace is already established in the US. For Google, the new link provides an entrée into the world of physical goods, while for JD it helps drive its ambition to compete with Alibaba. This combination may ultimately prove to be a significant challenge to Amazon as well.

 

 

JD has built its own logistics platform, complete with drones and robotic delivery vehicles


Away from the world of mega-marketplaces, smaller specialists such as Etsy and Da Wanda, or national players like Allegro and bol.com, attract a loyal following generally built on a focused product assortment, high service levels and, of course, convenience. Just as in a very different retail world, small specialists always competed successfully with the department stores. Such minnows will no doubt survive any future clash of the titans.

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