Tim Dare, Commercial Director at Luzern, discusses the evolution of the marketplace, why starting out on Amazon is key but importantly why and where to expand beyond Amazon:
The evolution of the marketplace
Amazon single-handedly created the online marketplace sector and remains the dominant force in many regions today. But with the creation of a new area of demand – and new outlets for the consumer spend – comes competition.
With the global ecommerce market predicted to be worth $9.3 trillion by 2027, there is now huge potential for more players to enter the marketplace arena – and they are.
The bar has been set very high by Amazon, which has built a hugely successful business by offering consumers the best possible choice, price and buying journey, as well as swift resolution of issues and a straightforward returns process. Always two steps ahead in terms of developing the marketplace and enhancing advertising tools, it’s fair to say that Amazon will have 60-90 per cent of the marketplace pie, depending on the region.
Pie is big enough to share
And that pie is now big enough that challengers can justify the investment required to build competing marketplaces, either from scratch, or by giving existing customers a wider choice than simply their own offerings by adding third party propositions.
Most consumers today start their buying journey on marketplaces – to discover new products, new features, and new product types. Amazon has created that consumer behaviour, and the sector is now so large in both scope and size that there is space for other players to try and offer something new to consumers and capture a share of the marketplace spend.
Differing approaches
There are significantly different approaches coming from the new marketplaces, and differing levels of success. Retailers with long established brick and mortar presence are using their reputation and loyal customer base to introduce their online marketplace presence. B&Q, with their excellent url DIY.com, launched their offering in 2022 as a specialist home improvement marketplace, describing the company as ‘one of the UK’s most recognisable and credible home improvement retail brands, with a history dating back over 50 years’. They have more than a million products and more than a thousand verified sellers, plus, like others, a wide network of stores that can be used by customers to ‘click and collect’ or return items bought online. As of January this year, its Marketplace accounted for 38% of B&Q’s total ecommerce sales.
Tesco launched its marketplace in June this year and more than doubled the number of SKUs from third party sellers in less than two months, with a choice of more than 20,000 across a wide range of categories from beauty to toys. With a huge existing loyal customer base, this marketplace too is set for success. On the other hand, Boots announced their move into the marketplace in Spring 2023, terming themselves ‘the UK’s leading health and beauty retailer’, and stating ‘New and emerging brands will benefit from Boots’ reputation as one of the most trusted and respected brands in the UK.’ However, In September, it was reported that the company had shelved its marketplace plans.
Trust vs cost
The online-only ‘newcomers’ such as TikTok Shop, launched in September 2023, and Temu, launched a year earlier, are attracting users largely based on price alone. Whereas the retailers with established high street presence tend to attract older customers to their marketplace, who place importance on trust, quality and service, the online-only appeal to millennials and Gen Z, where cost is the deciding factor.
TikTok in particular is targeting specifically the new area of demand where young people are spending more of their disposable income on health and beauty, even if returning products, gaining a refund, or contacting customer services prove difficult. Those brands have not yet built the level of trust enjoyed by the brick-and-mortar brands, and certainly not that enjoyed by Amazon where shoppers head for convenience and range, not necessarily the lowest price.
Value the data
Fulfilment too is a key issue. We can view the TikTok model as a ‘flash in the pan’, with new products continually coming on board, and the most successful migrating to a more traditional marketplace. This means that as they mature, they can grow their customer base with a more sustainable cost model and a solid support infrastructure. From brand engagement viewpoint, the TikTok model allows sellers to quickly see how consumers respond and for disrupter brands can offer a rapid initial route to market. Executing the TikTok model well will get good traction in a short space of time.
At Luzern, we would still advise our customers to launch on Amazon first because the customer insights and enriched datasets are invaluable, at a depth and granularity not provided by other marketplaces. But we would also advise to not then keep all your eggs in the Amazon basket, as the options are now broader. If you are armed with Amazon information on how your customers shop, and how they perform in categories in the ecommerce world, then launching on new relevant marketplaces can be successful relative to the visitor numbers these new channels can attract.
2 Responses
Great article and whole heartedly agree, if you can sell and dispatch to customers on Amazon then you can do it on other channels.
I would also look at your product profile, something that everyone can do because they know their product. Why & when do they purchase the product i.e. is it an accessory purchase to a main purchase such as wrapping paper for a present? Convenience is a significant part of such a purchase and plays a part in where and how you list it. I suppose a “Product profile v Marketplace” would be interesting to look at?
This article really resonates with what we’ve been observing at Luzern eCommerce. The shift beyond Amazon is becoming more apparent, and it’s fascinating to see how new marketplaces are carving out their own space. From our experience, managing multiple channels effectively is becoming increasingly critical. I’m curious about how others are approaching this diversification—particularly in terms of maintaining a consistent brand and customer experience across these emerging platforms. Would love to hear thoughts from the community on strategies that have worked well! Always here to support Brands with multi-marketplace strategies.