U.S. consumers’ shopping behavior changed as the coronavirus pandemic spread across the country in early 2020, leading many marketplace sellers and marketplace operators to adopt new strategies quickly.
At the outset of the pandemic, the restrictions on businesses from local governments and marketplace operators changed so quickly that many sellers had to switch business strategies daily. In an early April 2020 Digital Commerce 360 survey of 107 retailers, 36% of retailers said they adjusted their marketplace strategy as a result of COVID-19.
But those adjustments have been different for each merchant. Nearly a quarter of sellers, for instance, altered advertising, customer acquisition and marketing strategies on marketplaces since the COVID-19 crisis began, according to a Digital Commerce 360 survey of 118 retailers in May 2020.
Other merchants have made changes to their fulfillment network and last-mile delivery vendors, faced supply chain and inventory turnover challenges, or have shifted focus to their own ecommerce sites.
On the other side, consumers faced longer delivery times, limited stock, higher prices and limited customer service on marketplaces during the crisis, according to a Digital Commerce 360 and Bizrate Insights survey of 1,000 consumers in May 2020. On the plus side for sellers, online shoppers also tried new marketplaces and, more importantly, shopped directly on sellers’ websites instead.
Some marketplaces actually fared better than traditional retailers after the pandemic struck. An analysis of U.S.-based online marketplaces in the Top 100 shows total visits to the 57 sites declined 2.9% in March compared with January 2020 and declined 1.8% in March 2019. In April, traffic to the sites jumped 9.2% compared with January 2020 and 15.3% compared with April 2019. In May, traffic to the 57 marketplaces jumped 15.6% compared with January 2020 and 17.3% year over year.
Marketplaces are uniquely positioned to adapt quickly because they don’t have the same constraints as their retail counterparts. For one, they have an established ecommerce presence and, therefore, have a leg up on the many store retailers that had to quickly build a digital channel amid the crisis. Second, the marketplace model allows for more flexibility.
For example, Walmart’s U.S. ecommerce sales grew 74% in Q1 2020 ended May 1, and the retailer said its newly recruited marketplace sellers were one reason for growth. That makes sense because Walmart can increase the number of SKUs available online more quickly by adding marketplace sellers.
Etsy called on its crafty sellers to make and sell face masks. As a result, April was the highest sales month for Etsy since 2015. It was able to fill a clear demand by relying on its sellers to handle the creation, storage and shipment of the masks.
Similarly, sellers on apparel marketplace Jane sold nearly a million masks in April and May both from existing and new sellers. When the statewide lockdowns began mid-March, however, Jane’s sales and traffic declined significantly through the end of the month, senior vice president of commercial operations Mark Spencer says, without providing specific figures. In March, total visits to Jane.com were down 9.3% compared with January 2020 and down 31.6% compared with March 2019, according to an analysis of SimilarWeb traffic data.
Jane made a few adjustments to the changing consumer shopping patterns during the COVID-19 crisis. The marketplace relaxed some standards for its sellers so they wouldn’t be penalized for things such as shipping delays. It also strongly advised its sellers to consider offering free shipping and extended return windows, knowing that Amazon has conditioned many consumers, Spencer says.
“We have seen a change in category dominance. Home and toys have seen numbers akin to the holidays,” Spencer says.
Sales picked up in early April and now the marketplace is growing double and triple digits in certain categories. Sales of women’s tops (blouses and shirts) are up 51% year over year, home decor is up 149% and loungewear/sleepwear is up 210%.
On the other hand, dress sales are down 29% year over year and heeled shoe sales are down 66%, Spencer says. This is likely because formal events and most gatherings were postponed during statewide lockdowns. In April, total visits to Jane.com were up 9.8% compared with April 2019 and up 39.7% compared with January 2020, SimilarWeb data shows. In May, traffic was up 11.3% compared with May 2019 and up 40.8% compared with January 2020.
“Looking forward is a challenge. Are people going to go outside? Will outerwear be relevant in the fall? If puzzles are relevant now, will they be later? There are some unknowns, so it’s important for us to have the flexibility to pivot,” Spencer says.
Even with the uncertainties, the company projects 20-30% growth in gross merchandise value in 2020.
Marketplace sellers must plan around an unclear future as well. For online office supplies retailer Jam Paper & Envelope, forecasting near-term inventory needs for the “new normal” is a challenge. The merchant, which sells on a number of marketplaces including Amazon, eBay and Walmart, has seen customers switch from buying their products on Amazon to purchasing on other channels, likely because of the faster shipping times, Kelly Ennis, Jam Paper’s director of marketplace strategy says.
“Will those customers come back to Amazon when Amazon’s 2-day shipping promise is back or will they continue to shop on other channels?” Ennis asks. “Until we have that answer, it’s going to be difficult to predict how much inventory is needed at FBA if we can’t trust that historical data.”
This is an excerpt from the 2020 edition of the Digital Commerce 360 Online Marketplaces Report. Purchase the full 59-page report for $399 or learn more about Gold and Platinum memberships, which includes access to more than a dozen research reports each year.