Published June 2023
Retailers are challenged daily to address the shifting demands of post-pandemic consumers. As consumers spent more time at home and less in stores, the migration to online shopping and preference for the one-click convenience of a digital marketplace only accelerated during the pandemic.This digital shift in retailing shows little sign of slowing down. Sixty-one percent of customers are planning to spend more time online after the pandemic than they did before, and these increasingly digital customers expect the businesses they buy from to keep up.1
As a result of consumers’ evolving behaviors and expectations, traditional retailer-to-consumer models are evolving to provide customers access to an endless aisle of products and services across multiple touchpoints. A marketplace model helps enable retailers that might not have the bandwidth to own and manage an endless aisle of inventory. If properly executed, marketplace models can drive financial upside. Nontraditional players, such as Google Shopping and Facebook Marketplace, are toppling the barriers around digital retail innovation by offering digital marketplaces that pressure incumbent retailers to expand their ecosystem of offerings to remain competitive.
These digital marketplaces, which match buyers seeking a service or product with sellers while allowing retailers to expand assortment without holding inventory, are a critical step forward in the digital shift in retailing.2 Already, several retailers enjoy success, including:
Amazon: Amazon’s Marketplace (e.g., third-party sellers) represent about 60% of Amazon’s overall gross merchandise value3, equating to roughly a 25% market share of the total US e-commerce spending for its marketplace alone.4Etsy: Etsy’s fourth quarter of FY2023 saw sales climb 16.5% year over year to $4.2 billion, a 72% increase in active sellers to 7.5 million, and a spike in active buyers of 17.6% to 96.3 million.5Kroger: The grocery giant had $11.3 billion in digital sales in 20236 and this is expected to double by 2025. Kroger attributes the growth to the expansion of its online marketplace.7As consumer demand for seamless digital retail experiences continues to grow, retailers are seeking ways to provide convenience, variety, and value. But even as digital marketplaces become an important business model consideration, not every retailer that launches one will find success. To create a satisfying digital marketplace—one that produces true value for customers, sellers, and the retailer—companies must make a series of strategic choices.