Will Marketplaces Devour Ecommerce?

question-425At Channel Advisor’s Catalyst 2014 event last week, Channel Advisor’s CEO Scot Wingo asked, intriguingly, “Will marketplaces eat ecommerce?”

Wingo was referring to the growing dominance of marketplaces, notably Amazon’s and eBay’s, and the fact that marketplaces are outpacing the growth in general ecommerce websites. Wingo made a strong case as he walked through the four customer drivers (selection, value, convenience and confidence) that marketplaces provide a better experience than free-standing ecommerce websites.

Wingo has the numbers to back him up, noting that over the past 10 years Amazon has had an average annual growth rate of 32%. But he is also taking the long view, emphasizing that mobile will add to the power and growth of marketplaces, especially since mobile apps from marketplaces like Amazon and eBay make buying from a phone an easy and convenient experience.

The marketplace mobile app experience not only delivers the selection, value, convenience and confidence that Wingo spoke about, but these apps overcome the complaint about buying on mobile phones – there’s no need to have to pump your payment or address information into your phone for each purchase.

To be clear, it’s no longer just Amazon and eBay. Companies like Best Buy, Staples, Sears, Rakuten and Newegg are among the largest and fastest growing ecommerce marketplaces. Many merchants at the Catalyst event pointed to the very quick and dramatic growth of Newegg, and there were discussions about the strong loyalty of eBay users.

Amazon and other marketplaces’ global growth is fueling the rise of marketplace growth in general. And marketplaces based in other countries such as Tmall in China, Mercado Libre in Latin America, Trade Me in New Zealand support Wingo’s “eating” theory by being a primary ecommerce engine in their respective countries.

While marketplaces in the U.S. account for only one-third of online sales, in China it’s upwards of 80%. It was pointed out that many of these countries don’t use credit cards to the extent consumers do in the U.S., so many of the marketplaces have PayPal-type payment services, further binding customers to those marketplaces. Lynn Dong, Director of Global Development for Tmall, the largest marketplace in China, pointed out that only 5% of Chinese customers pay with a credit card – most use debit cards.

While marketplaces are expected to grow dramatically, no one is suggested that brand Web sites are dead – far from it. But many attendees at Catalyst are wondering if brick-and-mortar is apt to be on the menu next.

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