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How Digital Marketplaces Will (Again) Redefine Commerce and Experience

30 October 2018

From readwrite:

Over the past 20-plus years, digital marketplaces have fundamentally transformed commerce and consumer expectations around the world. But although names like Amazon and Uber have become household names at this point, the evolution of and disruption caused by digital marketplaces is far from over.

In 1995, eBay launched the mainstream digital marketplace movement with its unique online auction model. In 2009, the gig economy expanded and supercharged the digital marketplace concept with hybrid marketplaces that combined specialized products and services across diverse market segments, a la Airbnb, Postmates, Lyft, TaskRabbit and the like. By 2020, marketplaces around the world will account for 40 percent of the global online retail market. But believe it or not, by that time, these dynamic entities could look quite a bit different, both technologically and economically.

. . . .

Marketplaces are bigger than we thought. Of the more than 100 marketplace executives we surveyed, the majority of participants represented high-revenue companies. One-third of those companies generated $100 million or more in revenue in the last fiscal year. Further, 38 percent earned $50 to $99 million and 25 percent claimed $1 to $49 million. The majority of marketplaces (35 percent) reported gross merchandise volume (the total value of merchandise sold to customers through a marketplace) of $500 to $999 million. Only 12 percent reported over $1 billion in GMV. In addition, 25 percent reported GMV of $250 to $499 million and 19 percent reported $50 to $249 million.

Competitive differentiation is their biggest challenge. Marketplaces cite four common customer-facing challenges in pursuing growth: competitive differentiation, buyer retention, buyer acquisition and social media engagement. Other challenges that marketplaces faced include shopping cart abandonment (26 percent) and technology resources to scale growth (23 percent). Among the top challenges, only e-commerce companies said competitive differentiation and customer experience are equally the biggest challenges. Among mixture companies, participants said competitive differentiation is the main challenge.

Marketplaces are challenged to retain sellers as well as buyers. The three main reasons for seller disengagement are insufficient competitive differentiation (46 percent), insufficient sales (33 percent) and marketplace service fees (31 percent). Additionally, sellers claim that marketing costs (28 percent) and the lack of buyers (26 percent) are critical business issues. It’s also interesting to see that 24 percent of marketplaces claim sellers leave due to network leakage, where customers leave to transact directly with sellers.

Marketplaces judge their health according to loyalty. Among the many metrics that can be employed to gauge marketplace health, 46 percent of those surveyed place emphasis on tracking customer lifetime value (CLV), which reflects larger and more frequent transactions. At 23 percent, marketplaces are also tracking buyer and seller loyalty. Tied for the third top optimal health metric at 11 percent are peak liquidity and repeat customer transactions. Peak liquidity is a crucial metric as it represents the ratio between buyers and sellers that maximizes transaction value.

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In light of current challenges related to competitive differentiation and marketplaces’ near-obsessive focus on customer loyalty and repeat business, we can expect to see a shift in marketplace approach in the coming years. Tomorrow’s most successful marketplaces won’t just be a place to exchange services and goods. They will be experiences unto themselves.

Marketplaces will soon look beyond connecting buyers, sellers and service providers to create unified platforms that deliver complete experiences as the product or service. For example: When customers set out to find a solution for dinner, they don’t set out to simply find a place or book reservations. They set out to eat dinner, whether that’s in the restaurant or through delivery.

Link to the rest at readwrite

PG wonders if technology-driven holistic experiences will dominate in the manner suggested by the OP.



One Comments to “How Digital Marketplaces Will (Again) Redefine Commerce and Experience”

  1. “Marketplaces will soon look beyond connecting buyers, sellers and service providers to create unified platforms that deliver complete experiences as the product or service.”

    Will soon? I’m guessing they’re trying very hard to ignore what Amazon has been doing yet again …

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