Global market places may own 40% of online retail in 2020

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Retailers consider themselves superior and are not the least worried

Global market places are on the rise and this trend will likely continue over the next few years. This is evidenced by the market places’ impressive revenue growth and Gross Merchandise Volume. Market places cannot be ignored anymore within the retail industry. Retailers seem to be very confident regarding the rise of market places and they do not expect to encounter any major problems in this regard. However, these e-commerce platforms do have their downsides for traditional retailers and brands.

Global online market places will take up a market share of around 40% in 2020

“Through our ‘Rise of the Global Market Places’ study we are striving to help companies define their strategy for successful competing, and growing, in a world where online market places are a dominant force,” says Prof. Jory Abraham, Managing Director of the Ecommerce Foundation.

Abraham conducted the Rise of the Global Market Places study in cooperation with Prof. Kitty Koelemeijer of Nyenrode Business University, and with Ecommerce Europe. “In total, our online survey containing questions regarding questions and statements about the influence of market places on retailers was completed by nearly 300 retailers and retail consultants,” says Koelemeijer. “Additionally, we conducted more than 30 in-depth interviews with C-level managers of leading companies around the world, including Staples (USA), Bugaboo (the Netherlands), COOP (Denmark), 3Suisses (Switzerland), Beate Ushe (Germany), Husqvarna (Sweden) and Vente-privee (France), as well as prominent market places such as eBay and Google. They provided us with key views regarding market places in their particular markets.”

Overly positive outlook

In total, 231 retailers and 43 retail consultants completed a questionnaire that Abraham and Koelemeijer put online. The composition of this response group was quite mixed, with respondents from both online and offline selling companies, larger and smaller organizations and national and international players.

 

The questions and statements included in the questionnaire covered several issues regarding the influence of market places on existing retailers and brands. This included the retailers’ capabilities and time to adjust, perceived barriers and appropriate strategies for dealing with market places within their industry.

“The most important conclusion that can be drawn from the results is that the respondents believe that the market share of market place will continue to grow, to around 40% of the global online retail market in 2020,” says Koelemeijer. “At this time, it is estimated that this percentage hovers between 10% and 30%, depending on the country, so this would represent a significant growth over the coming years. In this regard, it is interesting to note that retailers generally see their own company grow over this period as well.”

This leads to another interesting conclusion: retailers seem quite positive about the impact of market places. For instance, they are only slightly worried about the impact of Alibaba and Amazon, while they are more positive about companies such as Apple, Google and Facebook.

How retailers and consultants rate the impact of the major global market places on their business

In addition, retailers tend to overestimate their performance in comparison with global market places. They consider themselves to be stronger in almost every field, and especially at customer-facing processes, with IT development and big data being the only fields in which market places are believed to be slightly better.

The extent to which retailers use market place services to support their operations, according to retailers and consultants

Currently, retailers are often already using online market places to support their operations, and predominantly for marketing, domestic sales, IT and analytics & big data. “These activities fit in with what the respondents believe is the most positive aspect of market places,” according to Abraham. “Through online market places, they can reach more consumers, without a lot of additional effort. This also makes market places an ideal place to start cross-border activities, as you can test your product or service without having to set up a foreign online shop at the start.”

Negative influences of market places

Still, the impact of market places also has its negative sides. First of all, they are not cheap to work with. As mentioned before, price is an important pillar for e-commerce platforms and in order to keep their prices as low as possible, among other things, market places try to take as much margin from their suppliers as possible. Together with the fact that market places become more and more dominant in the retail industry, smaller retailers are often forced to cooperate in order to survive.

The barriers that retailers face towards dealing with market places, according to retailers and consultants

The results of the online questionnaire also showed an interesting difference between retailers and retail consultants. It turns out that consultants are not as rosy about the retailers’ future. They believe that retailers lack the skills and leadership in order to properly deal with the rise of global market places. As a result, retailers respond too slowly and cautiously to these occurring changes.

More challenges

The more than thirty in-depth interviews provided more than interesting insights from people at C-level management positions at prominent companies around the world. First of all, we have to realize that global market places are not the only concern for retailers. Increasing market transparency, more powerful consumers, the sharing economy and new technology also pose new challenges.

Therefore retail may look very differently in 10 to 20 years, whereby a scenario where market places are the dominant force is not at all unlikely. After all, market place are estimated to have a market share of nearly 40% and, according to a study among 12,000 consumers, consumers expect to buy 50% of their goods and/or services online in 2020. This would lead to a so-called “Platform Empire” scenario, in which retailers and brands will still exist, but may have lost up to 70% of their traditional market.

Advice

“We have conducted this research in order to provide retailers with a much needed wake-up call. And based on our results, we offer them three tips for dealing with online market places,” says Koelemeijer in conclusion. “First and foremost, retailers should never ignore them. Retailers can learn a lot from the market places’ successes and failures, and even though it will come at a price, they also offer a huge customer reach. Therefore, retailers should balance the accompanying costs with the benefits and decide for themselves what will work best form them.”

“Second, retailers should choose a specialism and become an expert within this area. This way, they can offer customers better and more customized service than market places. Having inventory will become much less important, as they actually may only offer services.”

“Finally, pure players are often ‘right-brained’ supply chain ‘machines’. This offers an opportunity for omnichannel brands and retailers to create a company with a heart. Build a strong relationship with both your employees and customers, so that people will definitely grow fond of you.”

For more information about the Rise of the Global Market Places study, download the online version of the Rise of the Global Market Places study here.

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