Over the last year, foot traffic in physical retail stores plummeted due to the pandemic. This caused flocks of people to make the transition to online shopping, creating a major boom in marketplace adoption. With the increase in traffic to online marketplaces, the entire concept deserves a closer look. So let’s break down the current state of marketplaces.

What Exactly is a Marketplace?

In the simplest terms, an online marketplace is an eCommerce site that connects sellers with buyers, and all transactions are managed by the website owner. Companies use online marketplaces to reach consumers in a way that they can’t physically. Think Amazon, eBay, and Craigslist.

Online marketplaces were born in roughly 1995, when eBay and Craigslist were founded. eBay launched and became a place that brought sellers and buyers together in an auction setup. Craig Newmark started Craigslist as an email distribution list to friends, featuring local events in the San Francisco Bay Area. Nowadays, there are countless online marketplaces like Amazon, Etsy, Alibaba, and bol.com.

Companies that leverage the marketplace model have been rising steadily. Etsy’s stock tripled at the height of the pandemic since millions of creators raced to the platform to sell custom masks. Airbnb also managed to go public this year, even after major losses at the beginning of the virus outbreak. Now, more and more mainstream retailers are finding ways to incorporate the marketplace model into their own operations. According to Forbes, marketplaces already account for more than 50% of global online sales, and that number is growing rapidly.

Amazon’s Impact

Adobe's Digital Economy Index report released in March indicated that shoppers spent $183 billion more online from the prior year, bringing total eCommerce spend to $844 billion. Of course, this surge in eCommerce can be credited in particular to Amazon

Amazon reported that it had 150 million members enrolled in Prime last year, which is an astounding 45% of the U.S. population. According to Digital Commerce 360, 36% of consumers admitted that they bought from Amazon, eBay, or Walmart’s marketplaces in the past year. But many companies are competing with the eCom giant, and 43% of consumers said they purchased something this year from other US marketplaces. Other marketplaces are starting to catch up.

Opportunity Ahead

There is a ton of opportunity for specifically DTC brands to utilize online marketplaces. As the number of online marketplaces rises, DTC brands need to evaluate which ones make sense for their brand based on the overall objective of the marketplace. For example, a brand that mass produces products obviously would not sell their inventory on a marketplace that specializes in small, handmade crafts. Once a respective DTC brand finds the marketplace niche that fits them, they’re golden. 

Getting as much juicy consumer data as possible also allows brands to understand the marketplace's core customer base along with what compels a consumer to shop at a certain place. 

Trends and the Future of Marketplaces

Marketplaces are growing rapidly. Analysts predicted that worldwide marketplaces would account for 40% of the global online retail market in 2020. These same analysts clearly did not anticipate an unprecedented global pandemic.

It’s not too late to test out a marketplace model, even after the pandemic slowly fades away. Buyers are getting accustomed to shopping for groceries, housewares, and even B2B products only online, and these habits show no signs of slowing. Now more than ever, platform businesses are disrupting and displacing legacy eCommerce, retail and distribution businesses that depend on a labor-intensive pipeline model.

However, an issue that is plaguing most popular online marketplaces, particularly eBay and Amazon, is the huge market for counterfeit items sold on their platforms. In response to this, these marketplaces have no choice but to innovate and create new initiatives to combat counterfeiting. eBay has launched authentication programs to verify items, such as shoes, high-end watches and sports memorabilia. Meanwhile, Amazon has teamed up with brands, including Valentino and Salvatore Ferragamo, to sue counterfeiters. They’ve also launched a counterfeit crimes unit, and introduced third-party seller verification.

Once marketplaces combat the roadblocks that prevent it from furthering its reach, we might see an even bigger boom in marketplace adoption.