In Western Europe, marketplace e-commerce as a share of retail e-commerce consistently increased between 2014 and 2022, from 35% to 42%. The share of third party (3P) merchant sales in total marketplace sales also consistently increased, from 23% in 2014 to 30% in 2022. Marketplaces are expected to continue expanding their online dominance. Such growth is being widely driven by the evolving preferences of online shoppers who increasingly favour the convenience, variety, and competitive pricing offered by digital marketplaces—online retail platforms for which the bulk of sales follow a marketplace model. Marketplaces sell inventory from multiple third party merchants, with the marketplace platform processing the third party transaction (even though it is not the merchant/seller of record). Simultaneously, pandemic-induced (or accelerated) digitalisation has seen merchants onboarding platforms as a convenient way of establishing their online presence and continuing to sell to consumers.
Furthermore, in the face of the current challenging economic environment marked by subdued demand, heightened operational costs, and limited investment capabilities, marketplace growth is poised to persist as a cost-effective means to boost revenue and expansion for brands and retailers alike. The following case studies illustrate the diverse success stories of recent marketplace pivots: from Douglas’s transformation into a digital beauty platform to B&Q's rapidly scaling home and garden marketplace.
Douglas’s strategic step from omnichannel retailer to digital beauty platform
In 2019, as a key part of its strategy to transform from being a bricks-and-mortar business with 2,400 stores into an omnichannel player with a digital presence, Douglas, one of Europe’s leading beauty retailers, launched its European beauty marketplace. The platform was initially launched in Germany, its home market.
Douglas introduced more than 55,000 SKUs, doubling its total product range to surpass 100,000 products within the first 12 months
Source: Euromonitor International
Fast forward to September 2022, the marketplace was extended to France, Austria, Poland, Italy, and the Netherlands via 207 partners and offering 316,000 SKUs.
Due also to its marketplace pivot, Douglas was able to broaden its assortment, quickly addressing rising trends and categories, without inventory risk, a key driver for traffic as post-pandemic digital consumers increasingly look for variety and newer products. For example, in December 2021, as the company focused on the growing pharmacy cosmetics market, brands such as Orthomol Beauty and Phyto were quickly included in its product range, while in February 2022, Douglas acquired Disapo, an online pharmacy retailer, which was also integrated into its marketplace.
Following Douglas's success, which also saw the group’s online revenue share grow from 17% in 2019 to 32% in Q3 2023, numerous companies have launched their own marketplaces within the beauty industry. Notably, Superdrug in the UK and Perfume’s Club in Spain have recently joined the trend. However, not all attempts have been successful, as evident from the closure of Farfetch Beauty marketplace in August 2022, and TheRealReal Beauty, which ceased operations in March 2023.
These instances highlight that successful marketplaces in the beauty space are more likely to emerge from beauty specialists such as Douglas. This is attributed to their established distribution agreements and positive consumer perceptions towards companies with expertise in beauty.
B&Q's success and the rise of retail media in home and garden retailing
Home and garden retailers face various challenges in adapting to dynamic consumer trends, particularly in categories such as furniture, given their substantial production and logistical time and capital commitments. The need to clear old stock and introduce fresh offerings clashes with financial constraints. Marketplaces again emerge as a compelling opportunity, with the potential to eliminate upfront costs on new inventory and related warehouse management expenses. Under this scope, it is unsurprising that one of the leading home products specialists, B&Q, launched its own marketplace, DIY.com, in March 2022. The platform proved to be an instant success, with the number of SKUs growing from 6,000 at the launch to 700,000 across 23 categories as of July 2023, while the number of merchants grew from 20 to 750 in the same period.
Due to its wider and more compelling array of products, DIY.com quickly grew its sales to reach GBP43 million in Q3 2023, accounting for 35% of B&Q’s online sales in the quarter
Source: Kingfisher’s financial reports
Furthermore, apart from driving higher retail website traffic, marketplaces place greater pressure on their sellers to boost their presence, in turn fuelling retail media revenues. For example, Kingfisher Retail Media was launched in July 2023 in France, then introduced in the UK with B&Q in December, alongside planned rollouts across five further European countries.
Kingfisher envisions retail media revenues eventually accounting for around 3% of the group's e-commerce sales, translating to approximately GBP63 million, based on the FY22/23 e-commerce revenue of GBP2.1 billion
Source: Kingfisher’s financial reports
Marketplaces an integral part of retail e-commerce strategy
As the retail landscape continues to evolve, the rise of marketplaces is poised to be a strategic imperative for established retailers. These platforms offer a dynamic and relatively inexpensive way to drive revenue (especially at a time when rising interest rates increase the difficulty of raising fresh capital to fund new investments), while also mitigating supply chain risks and enhancing profitability. Furthermore, established retailers, such as B&Q, can leverage their extensive consumer traffic and distribution networks, including physical stores, to scale and fulfil orders efficiently. Moreover, as European privacy laws increasingly limit online audience targeting, leading retailers possess a valuable asset: a nurtured and known audience in the middle of a live shopping journey, in the moment. This in turn allows them to drive incremental revenue through the rise of retail media, charging brands for targeting their shopper traffic.
With investors and companies increasingly prioritising profitability, seeking ways to disconnect revenue from proportional cost, even as consumers champion convenience and broad assortments, marketplaces are emerging as a natural destination from a winning e-commerce strategy.
Read our report on Retailer Corporate Strategies in Marketplaces for an in-depth analysis on the drivers that are guiding successful marketplace strategies today.
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