According to that European Marketplaces 2022 Report from the digital platform RetailX and Jitterbit, third-party digital marketplaces such as Amazon or Asos are showing strong growth. Sales in the market have doubled to €200 billion since 2020 and will “continue to grow in the coming years,” the report said.
The report also shows that third-party marketplace growth has increased by more than 500 percent since 2007.
Within the next five years, these online retailers could become the largest and fastest growing retail channel, with two-thirds of all online sales being made through these marketplaces. Looking at China, where this share is already 80 percent, this seems all the more likely.
Much of this global development will come from the growth of five leading companies, according to the report: Amazon, Alibaba, Pinduoduo, JD and Walmart. RetailX estimates that these companies will collectively generate $4.3 trillion in revenue by 2027 — that’s 59 percent of all e-commerce.
Although the companies are based in the US and China, their reach is much wider and their platforms are already playing a major role in transforming the market in all regions, including Europe.
The extent to which third-party providers are used in Europe is far from balanced. In the UK, marketplace sales account for around 64 percent of e-commerce sales. In Spain, Italy and Poland, the share is around 50 percent, while in Greece it accounts for less than one percent of online trade.
Nevertheless, the use of these marketplaces is increasing across Europe. According to RetailX, this is due to the cost and convenience benefits of the marketplace model. By offering multiple sellers per product or category, digital marketplaces are inherently competitive. For consumers, this results in both competitive prices and other conveniences such as free and fast delivery.
Fashion brands see opportunities
In the report, RetailX also examined how retailers and brands use the top 15 third-party providers such as Zalando, Ebay and Etsy. The self-compiled list of the “Top 500” retailers and brands includes H&M and Marks and Spencer. Of the 500 companies surveyed, 477 are present on at least one of the 15 most important European marketplaces, with their products being available at least in the form of brand shops or being resold by retailers and third parties. 421 brands also have their own profile on at least one of the marketplaces, only five percent have no presence on the sites examined.
The report states that “Brands and retailers are proactively addressing concerns that the use of marketplaces is eroding their brand identity and giving away hard-won and valuable customers to the marketplace.” Instead, companies would use the platforms to expand their reach, RetailX said.
The data also shows that the vast majority use the digital marketplaces with their own online presence. Around 84 percent of the 500 surveyed brands in Europe have a profile on at least one marketplace, showing that many not only sell their products through third parties, but also use the platforms to create their own spaces and storefronts. It’s also becoming clear that leading brands, usually very image-conscious, are collaborating with marketplaces to reach a wider audience.
At 53 percent, fashion brands account for more than half of activity on third-party platforms. According to RetailX, this trend is due to the fact that fashion is one of the biggest growth sectors in e-commerce. To the Fashion Sector Report According to RetailX, the global online fashion retail trade will be worth around US$970 billion by 2022, with a compound annual growth of 10% since 2020 and this growth is forecast to continue into 2026.
The report therefore argues that digital marketplaces have changed the way fashion brands sell. For example, the competitive nature of third-party providers would lead to lower prices for consumers worldwide. Platforms like Asos and Zalando are major competitors for leading marketplaces like Amazon and have transformed the fashion industry, opening a new distribution channel for many brands and creating unbridled competition. The marketplaces often try to suppress the prices of the established providers.
Luxury brands are also increasingly entering the digital marketplace segment. Platforms like Lyst, Farfetch and Secret Sales are trying to carve out niches to expand the reach of luxury labels. “Secret Sales specializes in providing well-known brands with a platform to sell their latest seasonal items, capturing a growing market for affordable luxury fashion. Farfetch, on the other hand, specializes in providing an online platform for both big brands and smaller boutiques to expand their reach into new markets.”
Drivers of upcoming growth
The report also identifies growth drivers: convenience, competitiveness, choice, and delivery options were the top reasons shoppers choose marketplaces. But there are other pillars that both the operators of the marketplaces and the retailers have to take into account in order to be successful in the future.
RetailX also noted that live streaming, which has long been popular in Asian markets, “will become a key differentiator for many marketplaces in Europe in the years to come.”
A number of emerging technologies are also cited as important drivers for the future growth of virtual marketplaces: According to RetailX, the importance of algorithms will remain, evolve and improve. But SEO, augmented reality and virtual reality as well as the metaverse will also be important factors for growth.
“Placing products being considered for purchase in the environment in which they are intended to be used is a powerful and much-needed tool for any form of digital selling. Consumers can see how the clothes look when they are worn. Marketplaces can establish these often complicated and expensive technologies. Unlike a label or a retailer, platforms can afford to invest in such technology Augmented reality report.
According to RetailX, the importance of virtual reality and the metaverse lies above all with the younger target group, which is already growing up in virtual worlds. “As they become consumers who can spend real money, they will expect similar experiences with the internet and e-commerce. As such, Virtual Reality and Metaverse will play a key role in shopping in marketplaces for years to come.”
This translated and edited post previously appeared on FashionUnited.nl.