Evolution of Online Marketplaces: Influences and Challenges

eCommerce is transforming at an unprecedented pace. With digital innovation being on the rise, the marketplace business model as we once knew it is no longer the same.

If you’re a merchant trying to navigate the ever-evolving sales ecosystem, this overview is for you. Read on to find out what exactly has changed for online marketplaces since the COVID-19 pandemic hit and how to remain competitive in this new environment.

The Pandemic Causing Shifts in Consumer Behavior

The world is seeing a radically increasing demand for online shopping. For instance, in March 2020 approximately 40% of UK shoppers admitted that they began to shop online more than before the pandemic. By the beginning of 2021, the share had hit a 75% mark. Similar dynamics are evident globally, which means that the retailers had no choice but to adapt to the changing consumer habits.

Undoubtedly, online marketplaces have played a critical role in generating such a high demand for eCommerce.

New Online Marketplace Landscape: What’s It Like?

Online marketplaces nowadays incorporate a variety of goods equivalent to a department store or even a whole shopping street, with the distinction of it being available in a matter of clicks. Such convenience combined with the lockdowns caused by the global pandemic together create the perfect recipe for growth-fuelled innovation.

The marketplaces have also evolved to accommodate the needs of nearly every shopper, bringing the consumers what they want exactly when they want it. This is largely due to mobile shopping, as an average modern consumer typically has a smartphone at hand most of the time. In fact, the share of mobile eCommerce transactions in total sales has increased to a whopping 72.9% as of February 2022.

Challenges Faced by Merchants in the Evolved Marketplace Business Model

Marketplaces are extremely appealing for retailers, as they give them the opportunity to start selling without the hassle of building their own web store. However, as attractive as this prospect may seem at first glance, there are certain challenges associated with this business model, namely:

• The marketplaces play the role of retailers. It’s typical nowadays for the marketplaces, that are traditionally supposed to only host the retailers’ stores, to offer their own goods and promote them. This sometimes creates a monopoly by destroying any existing competition on the given platform.
• The increasing instances of counterfeits and fraud. The cases of fraud and counterfeits are rising alongside the trend for online marketplaces, to the point that the eCommerce platforms have to launch tools to combat them. One such example is the Amazon Brand Registry. For merchants, this means being continuously alert and focusing on brand protection, which isn’t always effective.

These issues are clearly having a significant negative impact on the new marketplace business model. But is there something that can be done to counter them?

Possible Solutions for the Arising Online Marketplace Threats

The challenges that are listed above are boosted by the development of digital technologies, as they facilitate the rise of challenger brands. One way to tackle this is to revert to a marketplace model that doesn’t offer proprietary goods, facilitates healthy competition, and performs the role of a link between the shoppers and retailers.

What may sound like taking a step back can actually be a run-up toward better alternatives for online marketplaces’ evolution.