Study: Consumers did half of their online spending on marketplaces in 2016
Marketplaces are taking an increasing share of business-to-consumer (B2C) online retail sales.
Last year, shoppers did half of their online spending through marketplaces — a level that could rise to 66% by 2022, according to “Half of B2C Online Retail Spend Came from Marketplaces in 2016,” a report from Forrester.
As marketplaces continue to offer easy-to-use online shopping websites, more consumers are using these destinations to buy merchandise. In 2016, 75% of active marketplace buyers came from Tmall, Amazon, JD.com, and eBay. Marketplaces also simplify the sales process for retailers, as they often cover the costs of driving consumers to their products.
Despite marketplaces’ popularity, their costs and commission rates can lower retailers’ profit margins. The large number of retailers on marketplaces can also make it harder for a brand to stand out online. To spur marketplaces’ future growth, companies must balance:
Free shipping versus actual shipping costs. Amazon’s net shipping costs in 2016 exceeded $16 billion, but revenues from Prime membership and consumer or retailer shipping payments covered only 55% of this. Amazon’s shipping costs grew faster than its shipping revenues in 2016, and the cost of shipping could further increase as more shoppers subscribe to its Prime service. On eBay, most transactions across the U.S, the U.K., and Germany involved free shipping in 2016.
The growth of third-party retailers versus the customer experience. Third-party retailers often subcontract their online delivery services, giving marketplace owners less control of the end-to-end customer experience. To challenge Alibaba, JD.com operates its own logistics network in China to provide a better customer experience, and 60% of its employees are involved directly with package delivery.
In-stock items versus inventory costs. When researching their purchases in stores, European shoppers said price, free shipping, and in-stock items are the three most important criteria influencing their purchase. In-stock availability, however, comes at a price: Amazon estimates that a 1% increase in inventory valuation adds $130 million to the cost of sales.
Marketplace services vs. retailer costs. The “take rate” is the amount retailers pay, as a proportion of their gross merchandise volume (GMV), to sell on a marketplace. While each marketplace uses different take rates, these rates are decreasing. In 2016, eBay’s average take rate fell to 7.7% of GMV, down from 8.0% in 2014. Just one-third of Alibaba’s retail revenues came from take rates; two-thirds came from online marketing services, where merchants pay for display ads or bid for keywords on the marketplace to promote their product or service listings.
The costs of online vs. offline influence. Retailers with a physical presence enable consumers to “click and collect” from stores and can influence their online and offline purchases while they’re in a store. As a result, Alibaba is investing in physical retail, with its offer for the Intime Retail Group and its partnership with consumer electronics retailer Suning. Similarly, Amazon is investing in its new “Amazon Go” stores to offer customers a hybrid online/offline shopping experience — one that allows them to shop and leave the store without going through a checkout — as well as online shopping and click-and-collect grocery services, the report said.
Last year, shoppers did half of their online spending through marketplaces — a level that could rise to 66% by 2022, according to “Half of B2C Online Retail Spend Came from Marketplaces in 2016,” a report from Forrester.
As marketplaces continue to offer easy-to-use online shopping websites, more consumers are using these destinations to buy merchandise. In 2016, 75% of active marketplace buyers came from Tmall, Amazon, JD.com, and eBay. Marketplaces also simplify the sales process for retailers, as they often cover the costs of driving consumers to their products.
Despite marketplaces’ popularity, their costs and commission rates can lower retailers’ profit margins. The large number of retailers on marketplaces can also make it harder for a brand to stand out online. To spur marketplaces’ future growth, companies must balance:
Free shipping versus actual shipping costs. Amazon’s net shipping costs in 2016 exceeded $16 billion, but revenues from Prime membership and consumer or retailer shipping payments covered only 55% of this. Amazon’s shipping costs grew faster than its shipping revenues in 2016, and the cost of shipping could further increase as more shoppers subscribe to its Prime service. On eBay, most transactions across the U.S, the U.K., and Germany involved free shipping in 2016.
The growth of third-party retailers versus the customer experience. Third-party retailers often subcontract their online delivery services, giving marketplace owners less control of the end-to-end customer experience. To challenge Alibaba, JD.com operates its own logistics network in China to provide a better customer experience, and 60% of its employees are involved directly with package delivery.
In-stock items versus inventory costs. When researching their purchases in stores, European shoppers said price, free shipping, and in-stock items are the three most important criteria influencing their purchase. In-stock availability, however, comes at a price: Amazon estimates that a 1% increase in inventory valuation adds $130 million to the cost of sales.
Marketplace services vs. retailer costs. The “take rate” is the amount retailers pay, as a proportion of their gross merchandise volume (GMV), to sell on a marketplace. While each marketplace uses different take rates, these rates are decreasing. In 2016, eBay’s average take rate fell to 7.7% of GMV, down from 8.0% in 2014. Just one-third of Alibaba’s retail revenues came from take rates; two-thirds came from online marketing services, where merchants pay for display ads or bid for keywords on the marketplace to promote their product or service listings.
The costs of online vs. offline influence. Retailers with a physical presence enable consumers to “click and collect” from stores and can influence their online and offline purchases while they’re in a store. As a result, Alibaba is investing in physical retail, with its offer for the Intime Retail Group and its partnership with consumer electronics retailer Suning. Similarly, Amazon is investing in its new “Amazon Go” stores to offer customers a hybrid online/offline shopping experience — one that allows them to shop and leave the store without going through a checkout — as well as online shopping and click-and-collect grocery services, the report said.