The following interview with marketplace analyst Fareeha Ali takes us through her nearly five years of covering online marketplaces.

Fareeha Ali headshot

Fareeha Ali, Digital Commerce 360 research and editorial director, and senior analyst of online marketplaces

Fareeha Ali, research and editorial director at Digital Commerce 360, started covering marketplaces in 2016. She was assigned a story as a research analyst to write about eBay, Etsy and Amazon. As she drilled into the topic, she discovered its depth and that there were way more marketplaces than she anticipated. Ultimately, that effort turned into a 50-page report and her beat began in earnest. The following marketplace questions take us along for the ride.

Q: What are the most interesting things you remember along that journey?

Ali: In the spring of 2016, Walmart relaunched its marketplace and announced plans to expand it in a big way. Prior to that, it only had a handful of retailers selling on the marketplace. I remember being at a ChannelAdvisor event in Vegas when Walmart made the announcement and knew many sellers would sign on eventually and that Walmart’s massive store footprint would help it compete with Amazon. I thought to myself, I think this is a big deal.”

It feels like I’ve covered marketplaces for a long time when I think about how much has changed in the last few years. Looking back at that moment, it seems like ages ago that Walmart wasn’t a top marketplace, especially because it sustains ecommerce growth through its marketplace. Its sellers helped expand its Walmart.com product assortment from 8 million SKUs before the relaunch of its marketplace to more than 75 million SKUs on Walmart.com.

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Q: Consumer interest in marketplaces continues to rise. Why do you believe that is the case? Will 2021 see a repeat performance?

Ali: Amazon. Amazon is the reason marketplaces became normalized. It wasn’t the first to have one, but it has been the most impactful to U.S. ecommerce. Here’s why:

  1. Amazon removed the stigma around buying from another person. Buying from a marketplace may have been perceived in the past as being a used item or from a single seller, but with the help of Amazon, it’s now acceptable and almost mainstream to purchase from a retailer through a marketplace.
  2. With Amazon there is so much demand and assortment. At many other sites, particularly prior to 2020, there aren’t as many choices as Amazon and orders may be slower to arrive. Like many others, I ask myself where else can I shop and ultimately find myself turning to Amazon.
  3. Other marketplaces like Etsy feed off Amazon’s success and continue to build more loyalty among consumers because now there’s more trust in the marketplace model.

Q: How do you see the marketplace landscape?

Ali: For traditional retailers that add a marketplace to their sites (see: Target, Walmart and others), it’s a model that makes sense for those companies that don’t have a large ecommerce presence or want to expand ecommerce quickly. It’s a way to expand an online business with a lower cost because the retailer doesn’t have to source, manufacture or hold inventory.

And it helps with product assortment. Recruiting marketplace sellers is an easier way to expand into new categories, for instance.

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Q: Selling on Amazon is filled with opportunity but also fraught with issues. It seems like retailers are caught between a rock and a hard place. Is it a good opportunity or are they sacrificing more than they should?

Ali: I have seen the sentiment changing over the past four years, particularly for large companies. Initially, their perspective was: Why sell on Amazon? Now many do. Let’s face it, Amazon is the No. 1 retailer. Many U.S. online shoppers go there at some point in their shopping journey and that’s hard to ignore. Even if you’re not selling on Amazon, your customer is searching for you on Amazon. If you are aren’t present, shoppers may shop at a competitor that is selling on Amazon. Brands see advertising against their own names. Sellers are realizing that they can protest Amazon, but it likely won’t help their business.  The bottom line is, don’t put all your eggs in one basket. It’s all about balance. And don’t give up your ecommerce site.

Q: Can Amazon growth rates be sustained?

Ali: Yes, eventually it will hit a ceiling, but not soon. Amazon is smart. It’s able to scale because of its business model and with the way it has been growing its first-party business. Plus, the millions of merchants that now sell on Amazon get their income from Amazon. Take eBay, for example, which has now hung around for 25 years. The company may not have been growing at the pace of the rest of the market, but they manage to hang around and get millions of sellers because the business model works.

Q: Of course sales growth is the top reason to sell on marketplaces and customer acquisition is critical. Are some companies in a better position than others to reap these rewards?

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Ali: Yes, now that more recognizable brands are selling on Amazon, growth for Amazon will continue as it’ll attract even more consumers. There’s a reason Amazon wants these brands. However, the larger brands may take sales away from smaller marketplace sellers. In many instances brands rule and Amazon knows this.

Q: How can marketplaces better accommodate retailers and their marketplace concerns?

Ali: The biggest complaint is you can’t get a hold of a person at the marketplace to help with any issues. That’s a problem. And I’m not talking general customer service. For retailers selling on Amazon, it’s their business, their life blood. Even if they do get in touch with someone, there are long delay times. The onus is on the seller to fix issues. For example, it’s the seller’s responsibility to identify other listings that are fraudulently selling their products, to purchase those products so they can prove to Amazon that products are fake—all before the listings are actually taken down. Meanwhile, some sellers can lose thousands of dollars in the process. This can and should be better.

Q: What’s on tap for the future of marketplace?

Ali: More retailers launching more marketplaces. Think of Macy’s and other retail chains struggling and leveraging marketplaces to drive their business. Particularly seeing the shift in retail to online during the pandemic, the marketplace model makes sense for retailers that didn’t invest enough in ecommerce before 2020. Allowing other merchants to sell on your site helps many retailers scale their online business faster—and it works, if done right. It may be a while before consumers are fully comfortable to shop in stores like they did pre-pandemic, so the marketplace model is one solution for retailers.

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Ali will discuss her projection of marketplace growth in 2020, in addition to other key data points such as U.S. online retail sales growth and growth by category, during a keynote presentation Nov. 12 at the IMPACT Ecommerce virtual conference.


 

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