Walmart Bets on Explosive Global Growth of Online Marketplaces (and Why You Should Care)
A consumer-driven rise in marketplace popularity, amplified by the digital transformation during the pandemic, calls out to retailers and brands to develop their brand position and drive growth.
Brands and retailers that are embracing marketplace opportunities have high growth expectations in the coming years. Our recent ecommerce forecasts project online marketplaces to expand to 22% of total retail by 2026 in the US market, 17% globally.
Driving this growth, are global marketplace brands themselves, Amazon and Alibaba, but also many other general merchandise (for example Walmart, or Otto in Germany) and specialty marketplaces: Etsy, Newegg, Zalando or traditional retailers like Best Buy and J Crew.
Brand and price control within marketplace channels will prove to be key to realize the growth rates underlying our market sizing forecasts. If brands continue to embrace aggressive growth strategies via marketplaces, more will follow, further fueling selection in the marketplace flywheel. The proliferation of marketplaces provides greater choice for brands and retailers to broaden their marketplace coverage, reducing their reliance on Amazon’s vast marketplace. Currently, marketplace sales for all retail are estimated at 14% of US Retail Sales, but they are projected to account for more than 1 in 5 US retail dollars by 2026 – a clear indicator to get involved in this channel now. Will you take advantage of the opportunity to grow your brand domestically and globally and become a marketplace seller?
Why Sell on a Marketplace?
In our recent webinar, Ricardo Escalante of Walmart International’s marketplace division pointed to important strategic advantages afforded to brand partners through marketplaces.
With the third-party business model, brands control:
- Retail Pricing
- Customer Care
Compared to a traditional wholesale model, where retailers control all those aspects of the consumer experience, marketplaces clearly provide brands with more freedom and control. As digital retail capabilities continue to evolve, marketplaces will need to vie for consumers’ attention. Retailers like Walmart that have brick and mortar stores can use their ecosystems to their advantage over Amazon. This has the added lure for marketplace sellers that if they do well on the marketplace that there is future potential to drive revenue from selling in stores.
What Categories are Selling Well on Marketplaces?
While marketplace category performance follows trends in the general market, there are key categories that are outperforming specific to this channel. Escalante pointed out that Walmart is looking to grow assortment in all General Merchandise categories, but he emphasized an increase in demand for merchandise that help consumers work, study, exercise and entertain themselves at home. He also said that Walmart.com in the US is gradually opening its Marketplace to the grocery category, involving yet another sector of retail that will benefit from the expansion.
Getting Started on Marketplaces
Building a plan for selling on a marketplace should start with basic questions including the following:
- Who are our target shoppers who frequent the marketplace?
- What products are right for this channel?
- What is our strategic positioning?
- What business model is right for this positioning?
- Which marketplaces are the right fit?
- What skillsets are required?
- What marketing resources must be dedicated to the channel?
The pandemic has been a catalyst for growth for marketplaces, and vendor counts are rising sharply. At McMillanDoolittle, we help brands and retailers navigate the dynamic global ecommerce environment and develop new strategies aligned with customers’ evolving digital preferences and behaviors.
To learn more about our digital transformation and global ecommerce services or about our consumer and market research, simply contact us.
And if you liked this blog post, please check out our other content focused on global marketplaces, including our recent webinar, Learn How to Apply Winning Digital Retail Growth Strategies from Walmart and Crate & Barrel, and related blog post recapping the event.