26 May 2023
In an era marked by globalization and heightened trade activities, B2C marketplaces have emerged as a practical and inventive solution to the challenges posed by e-commerce. These marketplaces enable us to leverage a robust brand presence, draw high-quality traffic, and consolidate third-party offerings on a compelling and exclusive platform for consumers, thereby capitalizing on business expertise.
Yet, with years of existence behind them and in an environment that has become hyper-competitive, have B2C marketplaces reached their limits? And if so, how can they reinvent themselves to offer new experiences to their users?
In this article, we reveal some of the weaknesses of B2C marketplaces and the keys to reinventing this model and ensuring the growth of your online business!
B2C marketplaces have been experiencing strong growth since the Covid-19 pandemic. In 2020, although they represented only 1.5% of e-commerce sites, B2C marketplaces generated 50% of online sales worldwide (Gartner). Forrester also estimates that by 2023, two-thirds of global B2C e-commerce will come from marketplaces.
To be managed, this hyper-growth of the B2C marketplace must be based on an evolving support system, focused on key value drivers, and at the service of business success. This evolution requires reflection and action on the organization and management of the company to project this recognized model into the future.
According to a recent study by Digital Commerce 360, B2C marketplaces now account for more than half of all online sales in the United States. However, the model still shows some limitations and constraints.
The problem with a concept that works and is profitable in the long run is that everyone wants a piece of the pie. But only some people are Jeff Bezos (besides, who wants to be Jeff Bezos?).
Over the years, the value of online commerce has been captured by behemoths like Amazon, Etsy, AliExpress, and Taobao in China or, more recently, Walmart in the United States.
The top 5 B2C marketplaces concentrate today more than 70% of online sales (Statista), leaving only crumbs for the other players to share in an ultra-fragmented sub-ecosystem with highly specialized niche players.
This raises doubts about the long-term profitability of the model, given the fierce competition and tight margins.
A recent Forrester study estimates that while online sales continue to grow in the U.S. and the European Union, the pace of this growth will show signs of slowing over the next decade.
Indeed, the behavior of Internet users has changed. After the “discovery” effect caused by the marketplaces due to the depth of the catalogs offered by the major brands, Internet users are now focusing more on the price, and their main question becomes, “Where can I find this item at the best price?
One of the direct consequences of this phenomenon is a reduced attachment to the brand and a focus on price. For example, even if a company is called Decathlon and has been positioned as a specialist in sports goods for many years when it comes to making a purchase, the consumer of 2023 will have no qualms about ordering a similar product from another site.
Conclusion? E-commerce is a very competitive sector with strong pressure on prices. Due to dynamic pricing algorithms, margins will decrease. It is mathematical.
And as Boris Ziegler, Director of consulting services at Global Brand Excellence Solutions, summarizes: “As long as the overall market is growing, there is enough growth for everyone. However, once the market growth slows down, the increase in market share does not come at the expense of physical stores or customers switching to online shopping but by taking market share away from other e-commerce players. Thus, competition in the B2C marketplaces market will intensify, and only those companies that develop deeper relationships and build customer loyalty on a holistic shopping experience will remain profitable and survive in the market that has completed its globalization.”
In the world of finance, it is said that trees don’t reach the sky. In the world of e-commerce, we could transpose this metaphor by saying that even on the web, product catalogs are not infinite or should not be.
Even if the big advantage of the B2C marketplace is to give more depth to your product catalog, an Internet user has a limited time to make a purchase.
Offering 20,000 different running shoe references may mean diluting the perceived quality of your offer and not satisfying your potential customer, who is looking for technical expertise that will reward the selection work you have done upstream.
Another challenge for B2C marketplaces is the issue of shipping costs. Whether you sell in large or small quantities, shipping costs are a reality that can weigh on your business costs, especially in times of inflation.
Companies must continually find ways to reduce transportation costs while providing a satisfying delivery experience for customers.
Despite some difficulties, B2C marketplaces are fortunate to have the genes to adapt to their DNA changes. Let’s now explore the growth and innovation levers of B2C marketplaces by proposing solutions to meet new consumer demands and reinventing a model that we would be wrong to bury too quickly.
Preserving the uniqueness and authenticity of your B2C marketplace is becoming increasingly complicated as it grows: sellers are multiplying, and it is sometimes difficult to continue to differentiate yourself from consumers.
To do this, you can and should remain king in your kingdom and continue to structure how consumers perceive your marketplace. For example, it is recommended:
In a 2018 article, Kenny Smithnanic, chief marketing officer at Mobovida, showed that the worst thing that could happen to an e-commerce player was when the post-purchase experience became a “commodity,” meaning a low-value or average service.
However, according to a survey of U.S. consumers conducted by the Institute for Business Value (IBV) in 2021, on the three phases of brand perception during an online purchase (pre-purchase, during purchase, and post-purchase), respondents indicated that the post-purchase phase had the most influence on their relationship with the brand and their willingness to recommend a website or marketplace to other consumers.
Key accounts must “brand” their post-purchase process to be unique and recognizable, even for another vendor’s product. This ranges from the delivery method to a note addressed to the customer inside the package.
→ All of the steps that follow the purchase – meeting delivery deadlines, being able to track your package, personalizing the relationship, being able to talk to someone if you have a problem, choosing your delivery providers and evaluating them – are details that will make a big difference for B2C marketplaces in the coming years.
Customer experience is a crucial part of the success of any business that sells its products online, and B2C marketplaces are no exception. By personalizing the experience, B2C marketplaces can meet the demands of new e-consumers, mostly millennials looking for autonomy, immediacy, and transparency (both on products and transactions). Not only does this improve the shopping experience for the customer, but it can also increase sales and retention rates.
The environmental impact of online commerce is a growing consideration that B2C marketplaces cannot ignore. Consumers are increasingly aware of the effects of their purchases and are looking for more sustainable and responsible solutions.
If marketplaces offering eco-friendly products are multiplying, the big players can go further by providing transparent information on the items they sell, encouraging second-hand and clothing collections, or better explaining their concept to meet consumers’ expectations.
Better yet, you can counter the inflationary impact of advertising on the price of products, like the Jumpl platform, which has chosen to make the product marketing budget available to its customers. Consumers benefit from a systematic kitty, which can be used on the current purchase or donated to reforestation programs. Thus, Jumpl is part of a reasoned approach favorable to consumers and the environment!
As significant marketplaces become behemoths, they evolve into a model offering myriad options for their sellers to showcase.
For example, Alibaba and Amazon allow some vendors to use their names in exchange for a high commission and guaranteed sales. Uber Eats may charge a percentage of the restaurant’s food and a delivery fee to the end customer. Booking.com offers hotels an increased commission in exchange for better search rankings or an additional discount available only to users of their site.
Overall, and over time, the significant B2C marketplaces need to do the same and stay in tune with their community. As such, they will be forced to evolve into complex models that allow sellers to make the most of marketplace capabilities – which will be new revenue streams for the marketplaces themselves.
The conquest of new international markets is one of the possible growth drivers for a B2C marketplace. In addition to selling more, internationalization allows diversifying risks and revenues by opening up to new market segments, cultures, and economies.
Conquering new international markets cannot be done by simply localizing one’s website. Decathlon understood this when it opened its marketplace in the U.K., listing local and innovative brands such as Donda Cycling Donda Cy, a London-based start-up that creates durable and accessible clothing for the everyday cyclist; Pendle Bike Racks, with its products designed, manufactured, and tested in a Lancashire factory in England; and Corkspace, an independent family yoga brand that promotes sustainability with its cork mats.
To continue the growth of your B2C marketplace, don’t just internationalize. Focus on developing local offers adapted to each market and its specificities!
Payment methods play a key role in the success of B2C marketplaces. Simplified and secure payment solutions are a priority to attract and retain customers: the payment experience alone can ensure the sustainability of the B2C marketplace!
One payment method, Buy Now Pay Later, has recently grown significantly. According to research conducted by Adobe, this payment method has grown 215% year-over-year in the first two months of 2021. In addition, customers who use this method tend to place larger orders, up to 18% more.
At the same time, new payment methods are becoming indispensable to consumers: PayPal, Apple Pay, Google Pay…
While PayPal remains the most widely used payment service – 90% of respondents in Statista’s survey say they used it between April 2021 and March 2022 – Apple isn’t going to take it lying down (with 11% of respondents). Big Tech recently announced the launch of a BNPL feature to benefit Apple Pay users.
Offering popular and emerging payment methods such as PayPal, Apple Pay, and the inevitable BNPL could, therefore, significantly contribute to the growth of your B2C marketplace. If your payment methods are varied and the shopping experience is smooth and reassuring, you will be an innovative and trusted player!
Lemonway offers a secure, scalable, and compliant payment solution simplifying B2C marketplace transactions. Optimize your payment flows and leverage the full potential of your platform. Contact us to learn more!
