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Welcome to Data File. At The Current, we comb industry, analyst and economic sources for the data that matters to ecommerce professionals. This weekly feature is one of the ways we’re sharing what we find.
Third-party marketplaces are expected to become the largest retail channel globally by 2027.
That’s one of the big takeaways from a new report by ecommerce provider Edge by Ascential that forecasts the growth of the marketplace model over the next five years.
Let’s dig in:
First, some terminology:
- Marketplaces are retail websites that facilitate display and purchase of products, and serve as a single point for shoppers to access many different kinds of products from multiple brands. In short, these connect a big audience of shoppers with a multitude of brands. Under this model, brands provide products, while the marketplace owner controls the overall shopping experience, including certain policies and costs. This is distinct from an ecommerce store, where a website houses a single brand’s goods, and the brand retains control over different facets of the store.
- 1P vs. 3P: Under a first-party (1P) marketplace model, the marketplace owner acquires goods and sells them on the platform, controlling placement, pricing and assuming responsibility for fulfillment and delivery. With a third-party (3P) model, the brand or seller of the goods acts as the retailer, selling to consumers through the platform.
- It's not an either/or: Marketplaces can have both 1P and 3P. Amazon, for instance, as both.
A growing model: In all, the third-party marketplace model has grown 500% since 2007, Edge by Ascential’s Future of Marketplaces Report states. Amazon launched its marketplace in 2000, and it has been an important engine of the company’s growth since then. In the recently-completed Prime Day, Amazon said third-party sales growth outpaced that of Amazon’s own retail business. Walmart launched its third-party marketplace in 2009, and has recently made moves to step up activity. In China, 3P is even more of a bedrock of online shopping, accounting for 80% of ecommerce sales.
Third-party will be first: According to Edge by Ascential, third-party sales are set to take up a growing share of ecommerce. But it’s not just making an impact in online sales. The report, which was created using Edge by Ascential’s Retail Market Monitor, suggests it will be the fastest-growing channel of retail globally. More projections include:
- Third-party sales are set to account for 59% of all global ecommerce sales by 2027, up from 56% today. In all, third-party sales through online marketplaces will add $1.3 trillion in sales over the next five years, the report forecasts. The fastest growing categories are expected to be grocery and pet products.
- In global retail as a whole, third-party marketplaces will account for 38% of all sales growth.
- First-party sales will decrease share from 44% today to 41% in 2027, even as this channel adds $778 billion in sales over the next 5 years.
Key quote: “The most successful retailers, both now and in the future, will operate third-party marketplaces,” said Deren Baker, CEO of Edge by Ascential, in a statement. “...The consumer brands that will be most successful in this new retail environment will align with the right marketplace partners, optimize their unique capabilities to use all elements of the marketplace flywheel and leverage real-time data and insights to respond effectively to competitive intelligence, performance blockers and changing market conditions.”
Who will the leaders be?: Globally, third-party marketplaces are driving forces behind the top retailers, according to the report. Projections are as follows:
- When considering first and third-party sales, the four largest marketplaces – Amazon, Alibaba, Pinduoduo and JD.com – will account for about two-thirds of all ecommerce.
- Alibaba will be the overall leader in global retail sales in 2027, the report projects, with Amazon in second.
- A prediction: The top five retailers, which includes the group listed above and Walmart, will have third-party marketplaces by 2027, the report states.
Trending in Retail Channels
Applications are open for startups interested in the 12-week Store Nº8 dCommerce Base Camp.
Walmart incubation arm Store Nº8 and Web3 accelerator Outlier Ventures are teaming up to support retail startups.
The organizations opened applications this week for the Store Nº8 dCommerce Base Camp accelerator. The virtual program will offer education, funding and mentorship to startups building solutions in Web3 that are designed for the retail and commerce experience.
Focus areas for selected startups will include decentralized infrastructure, data and growth solutions, immersive experiences and the metaverse and the intersection of AI and blockchain technology.
“We think dCommerce represents a huge opportunity to unbundle ecommerce into its constituent parts, and into a more decentralized and composable stack of protocols to create a more efficient, equitable and improved experience for retailers and consumers from CRM to last-mile delivery," said Outlier Ventures CEO Jamie Burke, in a statement. "There is clearly no better partner than Store Nº8, as Walmart's incubation arm, so we are thrilled to launch this accelerator program together.”
Beginning in mid-August, founders will take part in a 12-week program. The cohort members will receive funding and access to subject matter experts from Store Nº8 and Outlier Ventures. They will also receive support from industry mentors in areas such as product roadmap development, the token economy and fundraising.
“Decentralized commerce has the potential to unlock new value in the global commerce ecosystem, so we are excited to partner with Outlier Ventures to support and engage with entrepreneurs building at the forefront of this technology on their path to scale," said Store Nº8 VP Thomas Kang, in a statement.
The new program arrives in the year after Web3 and the metaverse saw a spike in interest from brands and retailers, as the arrival of immersive platforms opened up new digital environments where consumers gathered. Walmart entered the metaverse through an activation on Roblox, and also introduced a platform for digital collectibles. But it remains a nascent space, so there’s room for startups bringing fresh ideas to help larger enterprises develop capabilities. Alongside connections that help startups move forward, such learning is one potential outcome of the accelerator could last beyond the 12 weeks.
Applications for the accelerator are available here.