By Adrien Nussenbaum, Co-founder and CEO of Mirakl
Consumer shopping habits have shifted irreversibly towards eCommerce in the past two years. For many, every day has become a holiday as new packages arrive from their favorite online retailers. One surprising aspect of this shift is how retailers have adapted their businesses in response. According to Mirakl’s Enterprise Marketplace Index (“the Index”), while traditional eCommerce sites have experienced sharp growth, online marketplaces have grown at double the eCommerce rate: more than 80% year over year in the fourth quarter of 2020. So what’s driving this growth imbalance? The answer lies in how successfully marketplaces have enlisted the assortments of complementary third-party sellers to respond to customer expectations.
The needs of shoppers swung wildly in 2020 and continued to evolve through 2021. They pursued high-demand products with unforeseen urgency — first in critical categories like personal protective equipment, groceries, and sporting goods, and followed more recently by apparel and beauty products. In the face of this product scarcity, the retailers that could fulfill consumer needs quickly were immediately rewarded. Through marketplaces, retailers were able to respond to this changing demand by increasing product assortments, expanding offers by an average of 32% year over year, according to the Index. As a result, these marketplace operators benefited from an even larger gain of 81% in overall gross merchandise value (GMV).
In addition to attracting new customers with expanded assortments, in the long run, marketplaces also enable retailers to develop longer-term, more satisfying relationships with their existing customers — offering a curated assortment of products and brands at scale, without sacrificing brand DNA. After launching its marketplace, a leading furniture and home decor brand actually saw its eCommerce conversion rate increase. Additionally, the Net Promoter Score (NPS) for marketplace products was equivalent to online orders for its owned assortment — even as overall assortment grew by 32%.
These carefully designed marketplaces take the guesswork out of online shopping, providing customers with a one-stop destination for the right product in every circumstance. According to the Index, retailers with marketplaces saw a 34% year-over-year increase in traffic to their core eCommerce sites in Q4, bolstering their status as shopping destinations, and outpacing even the elevated traffic levels seen across eCommerce.
It is this flexibility and agility that empowers retailers to meet customers where they are — filling the gap created by traditional eCommerce and growing GMV in the process.
Success Through Assortment
Behind the growing assortments lie powerful networks of high-quality, third-party marketplace sellers. Retail leaders nurtured these relationships as a competitive advantage, through intense vetting, seamless catalog integration — presenting a single, unified face to customers — and satisfaction monitoring. As a result, while retailers with marketplace businesses expanded their network of sellers by an average of 46% in the past year, GMV per seller increased by 24%. This concurrent rise in seller count and GMV per seller shows that sellers do not cannibalize each other’s growth. In fact, the Index found that the addition of new high-quality sellers leads to incremental growth for every seller — and including retailers’ owned product offerings.
While legacy retailers struggled to keep core items on their virtual shelves, marketplace pioneers leveraged growing networks of third-party sellers to expand their businesses to new frontiers — and were rewarded for their boldness. For example, one marketplace operator, a leading American apparel retailer, chose to make its platform a destination for discovery, curating new sellers through a marketplace dubbed “Labels we Love.” The rotating assortment of products introduces new brands to the operator’s customers, building out variety in a way that drives traffic and leveraging customer trust to curate a high-value selection.
The distributed networks and wide assortments characteristic of marketplaces also offer invaluable resilience during periods of complex change. Marketplaces diversify the supply chain, distributing unexpected pressures across a network of third-party suppliers. While one node may not be able to meet shifting market trends, the network itself is far more likely to survive by compensating for any weaknesses.
Why Marketplace Momentum Will Only Continue
While this summer has already seen an increase in in-person shopping and entertainment, there is no turning back in terms of permanent consumer expectations: they have been conditioned to expect the availability of any product, anytime and anywhere. As a result, the bar has risen for companies to deliver on their brand promise against accelerated timelines regardless of other behavior shifts in the world around them.
As brands build on the omnichannel strategies they honed over the past 18 months, marketplaces will be essential in boosting customer acquisition and retention across all channels. Beyond the black-and-white sales numbers associated with the introduction of third-party products, attention is a form of currency in today’s digital world, and marketplaces can deliver a halo effect to retailers in the form of increased traffic and customer satisfaction.
The past year in retail provided the most significant proof point to date that consumers vote with their wallets in pursuit of convenience and reliability. And as retailers come to understand and appreciate the need to demonstrate resilience, we can expect more legacy brands to rely on enterprise marketplaces to maintain a sizable, agile and future-proof assortment that will drive consistent revenue growth in the face of change.
Adrien Nussenbaum is co-founder and U.S. CEO of Mirakl, the global leader in online marketplace solutions. Since graduating from HEC Paris in 2001, Adrien’s career has been focused on innovation, entrepreneurship and disruption. His background in corporate finance and management consulting has allowed him to support top Fortune 1000 companies in their strategic growth and transformation initiatives, including creating and leading FNAC’s marketplace from 2008 to 2011. A serial digital entrepreneur, Adrien has always been driven by the desire to invent tomorrow’s economy: All Instant, a NY-based Instant Messaging platform sold in 2003, and SplitGames an online video games marketplace sold to FNAC in 2008. Along with co-founder Philippe Corrot, Adrien has built and led winning teams across the globe, created hundreds of jobs, and generated billions in sales for customers. Outside of the office, Adrien enjoys spending time with his wife and two daughters exploring their new hometown of Cambridge, MA. But don’t think you’ll catch him trading bouillabaisse for New England clam chowder any time soon.