Increasing share of platforms in online trading

Marketplace as a winning business model

In commerce, the rapid growth of sales in the digital channel has become evident over the past two years. Forced isolation, and limited opportunity to shop in physical outlets have often left online shopping as the only way to meet consumer demand. Among digital channels, shopping platforms (marketplaces) are by far the most popular, accounting for over 40% of all spending in the digital channel globally in 2021.

Marketplaces in many high-developed countries were also the leading source of inspiration for consumers. In the US, 57% of consumers cited Amazon as their main source of inspiration, compared to 56% in Germany and 52% in the UK respectively. In contrast, leading marketplaces in countries such as Thailand and Indonesia were the primary source of inspiration for 70% and 76% of consumers respectively.

Despite already having a significant share of digital commerce, the popularity of marketplaces continues to grow. In 2020 and 2021, sales through marketplaces worldwide more than doubled (cumulative annual growth rate 2019-2021 of nearly 50% ). ). The growth rate of marketplaces was more than double that of e-commerce shops, which grew at an average annual rate of 22% over the same period.

The rapid growth of marketplaces was driven both by an increase in the number of sellers (doubling the number of sellers in 2021 compared to 2019) and in the range of products, which increased by 62% over the last two years. These increases have translated into a significant growth in consumers buying virtually exclusively on shopping platforms (42% of consumers said they shopped exclusively or predominantly on shopping platforms in 2019 compared to 57% of similar declarations in 2021).

The rapid growth of marketplaces is not just the result of a pandemic, which bodes well for the future growth of this sales channel. Based on the market shares achieved in their categories by the leading players operating in the 3P model (platform model), hybrid model (3P + 1P) and 1P (own assortment only in the digital channel), platform companies gained on average 4.5 times more market share than pure e-commerce shops in the first 10 years after launching in a given market. Also companies operating in the hybrid model grew much faster and on average reached a size close to three times that of their competitors operating in the 1P shop only model.

The above data show a clear advantage of marketplaces over companies focused on own assortment (1P model). The ability to scale and the flexibility of supply obtained through an ecosystem of third-party sellers allows to offer a much broader assortment to end customers, and several offers of the same product give the feeling of making a price comparison and thus being convinced to choose the best possible offer for themselves.

Marketplaces on the Polish market

In Poland, as in the west, the share of marketplaces is estimated at over 40% of the market, with 36 percentage points for our domestic platform Allegro, 3 percentage points for Aliexpress and 2 percentage points for other platforms such as Empik, Zalando, Amazon or eBuy. In Poland, 2/3 of respondents who buy online declare that they shop on marketplaces, and nearly 1/3 of consumers indicate this channel as their favourite one for making purchases in the digital form. In such services Poles value above all a wide and diversified offer available in one place, as well as cheap or free delivery and speed of order completion.

Allegro, our homegrown marketplace, saw GMV growth of 21.3% year-on-year in 2021, with much of this increase coming in the first two quarters when covid tightening was heaviest. In the first quarter, Allegro's GMV growth was 46.1% year-on-year. Much of this growth was due to a number of facilities and consumer support during the pandemic. Support programmes included free access to the Allegro SMART! providing free deliveries, which translated into a 71.5% increase in users of this service. Other facilities included extended payment terms for small businesses, no commission for new sellers for the first 3 months, easier access to a seller loan and a freeze on fee increases.

Due to the significant share of e-commerce in Poland, which in terms of penetration in selected categories often exceeds the values for Western European countries, Poland has become an attractive market for numerous foreign marketplaces. In 2021, Amazon decided to enter Poland by opening its shop in the .pl domain. The decision to enter Poland is certainly supported by good forecasts for the further development of the digital channel in Poland as well as the high recognition of Amazon by Poles (more than one million active consumers on the Polish-language Amazon.de website). It is also worth mentioning that Amazon, even before its entry, was the biggest American employer in Poland, with more than 19,000 employees and 10 logistics centres, Amazon Web Services office and Amazon Technology Development Centre in Gdańsk.

eBay has also announced its return to the Polish market. The marketplace made its first attempt to enter the Polish market in 2005. From that year the platform existed on the Polish market until 2011, when it decided to withdraw from Poland leaving only the international version available. Now eBay is trying to find a new place for itself on the already much more mature e-commerce market in our country. This time the marketplace believes in its success, the source of which is to be the development of sales of global products and the possibility to sell products of Polish producers abroad.

Increasing popularity of the hybrid model

Due to the search for new growth drivers, many retailers are choosing to add third-party offers to their online sales channel, thus starting to operate under a hybrid model. Examples of successful global brands include Best Buy Canada, Carrefour, GoSport or Conrad. And while each of these examples is different, the main objective remains revenue growth. This in turn is achieved through: a significant expansion of the available product range, increased sales due to lower prices offered by constantly competing retailers and higher customer retention due to the ability to find all products in one place. However, successfully adding a 3P offer to an existing sales channel is not a simple task. Companies wishing to undertake it must bear in mind that there are many differences between selling in their own channel and as a marketplace. One fundamental distinction is the target group to which own services are offered. For the operator of a 1P shop, the customer is always the consumer, i.e. the last point in the chain, whereas for the operator of a 3P platform, the customer is also the retailer, as it is the one that the operator needs to attract to its platform in order to secure more revenue. It is therefore crucial in the process of building a purchasing platform to create a solid value proposition for sellers that includes a wide range of functionalities (BI tools, order management, shop personalisation, etc.), a clear and transparent remuneration policy and access to promotions depending on sales performance.

Expanding sales channels by adding a 3P offer to an already existing online shop is quite a complicated operation also from a technological point of view. This is because expanding a 1P shop with an additional 3P module requires building new functionalities for all 3 parties involved in the transaction.

For an online shop to become a marketplace, the operator must enable third parties to start selling. In order to do so, it is crucial to include the most important functionalities for the seller, such as the ability to introduce a customised product catalogue, the ability to manage the order list and its dispatch, and convenient communication channels with the customer. The implementation of these functionalities can be divided into 4 main ways, the choice of which will depend on the technology already in use, the budget and the ambitions of the marketplace operator.

The easiest way is to buy a plug-in dedicated to 3P sales. However, this move is available only to shops which operate on the basis of SaaS solutions, the so-called E-commerce Platform. Moreover, choosing such a solution is connected with a rather limited number of additional functionalities and low control over platform customisation, and it requires external support, so it is rather recommended for smaller providers.
The second way is an open-source solution, which in turn is dedicated to players who have sufficient financial and competence resources, and their marketplaces are already built on the basis of this solution (e.g. PrestaShop or WooComerce). This solution gives a lot of customisation possibilities, however, it is fully dependent on resources and requires quite a long construction time.
The solution that requires the most investment, but also potentially offers a very large range of functionality, is to build your own multi merchant management functionality from scratch. However, the effectiveness of this solution depends on the chosen vendor and will require a long building time.

The last solution, chosen by many large players, is the so-called Marketplace Development Platform (e.g. Mirakl), i.e. a ready-made solution delivered by external companies focusing only on building the functionality of managing multiple merchants. Solutions of this type are characterised by coverage of most functionalities related to the 3P segment and relatively short implementation time, as well as a fairly simple integration process.