Online marketplaces could be worth as much as $7 trillion in sales by 2024 should organisations capitalise on the full potential of the marketplace trend, according to analysis by iBe.
Currently, marketplaces contribute $1.7 trillion to the economy each year and in retail e-commerce accounts for as much as half (50%) of sales annually. However, iBe predicts that sales driven from marketplaces are likely to exceed $7 trillion in the next five years, hailing a new era in e-commerce.
This rise is driven by more and more companies embracing marketplaces as the best platform to facilitate online sales, expedite cross border expansion, increase product range and improve logistics, costs and operations. This, complemented by an estimated annual growth of 8% in global online sales, will fuel the uptake of the marketplace model by a broad range of businesses.
Generally, marketplaces fall into three broad categories:
- Business to Business (B2B)
- Business to Consumer (B2C) and
- Peer to Peer (P2P)
Currently, over half (56%) of European marketplaces are global companies like eBay, Amazon and Alibaba, but there is also significant local marketplace choice in Europe, and the local platforms’ market share is continuing to grow as they get established and build loyal following amongst domestic and international consumers.
Business to business (B2B) marketplaces, like Alibaba in China or Conrad in Germany, present the biggest growth opportunity. Currently, only $600 billion, a mere 7.5% of the annual $7.9 trillion worth of online B2B sales, are made via marketplaces. However, as businesses begin to realise the benefits of trading with partners via marketplace platforms and as more companies trade online, B2B sales will continue to grow. In fact, iBe expects this to reach $12 trillion by 2024, with B2B marketplaces’ share of online sales growing significantly to 30%. As a result, B2B marketplace sales can grow to $3.6 trillion by 2024.
Similarly, forecasts show that business to consumer (B2C) marketplaces, which form the most developed sector led by Amazon, Rakuten, Deliveroo and many others and is currently responsible for $1.1 trillion of marketplace sales, could be worth an estimated $3.5 trillion by 2024, accounting for over 70% of all online B2C sales.
Peer to peer (P2P) marketplaces such as eBay or Airbnb are the best known to consumers but are significantly lower in sales volumes than the other two categories, due to the nature of their business. Current P2P marketplace sales represent 60% of that category’s overall online sales and are presently at $30 billion. Estimations show these types of marketplaces are expected to generate over $240 billion by 2024, accounting for 90% of overall online P2P sales.
From the B2B sector, presently, SME businesses are exploiting B2B marketplaces most actively, whilst the large businesses are, not surprisingly, utilising these marketplace platforms least. Furthermore, all these verticals can grow exponentially by 2024.
As a part of the most developed B2C sector, the retail vertical is the clear leader of the marketplace evolution whilst manufacturers selling directly to consumers have the largest opportunity to grow. Other strong potential for growth can be found in digital, travel and subscription services in the business to consumer marketplace industry.
“Marketplaces represent a staggering opportunity for businesses across a variety of sectors. For example, retailers can build global sales via an existing marketplace platform and they can broaden their range of products very quickly by allowing third parties to sell via their website, rather than scaling up in-house,” explains Masha Cilliers, Specialist Payments Partner at iBe.
“On the other hand, manufacturers can cut out ‘middlemen’ by selling directly to consumers and thus drastically increasing their revenue. As for businesses selling to businesses, they can improve their operations by replacing legacy paper reconciliation processes with state of the art marketplace platforms, consequently increasing liquidity, improving speed to market and saving costs. It will also help businesses to find the best suppliers and buyers.
But before companies can fully embrace the marketplace evolution, there are still challenges that need to be overcome. Regulation and payment processing, for example, can often be the biggest barriers to entry. More needs to be done by the financial service players to ensure that businesses better appreciate the myriad of benefits and understand the specific restrictions and can find the most fitting technological solution. However, those financial institutions who understand the marketplace potential sooner will be those who will realise most of its potential.”
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