03/03/19

The Economic Impact of Marketplace Sales on Small Business

The top 75 online marketplaces were responsible for more than $1.55 trillion in annual sales, according to Internet Retailer’s recent study. Those numbers account for nearly 90% of total online marketplace sales. These staggering numbers should turn the head of any small business owner looking for a sales boost.

Online marketplaces are essential because they “offer real convenience to consumers,” says Richard Kestenbaum, co-founder and partner at Triangle Capital LLC. “Over the last several years the number of marketplaces has exploded. If you were creating a department store in 2017, it would be an online marketplace. I call them Department Stores 2.0.”

The explosion of the online marketplace has led many small business owners to consider the value of starting online-based businesses or of converting aspects of their current business model to move product online.

Accompanying the ever-increasing needs of small businesses are a litany of websites dedicated to putting merchandise in front of consumers.

Most popular online marketplaces in 2018

Statista recently polled online sellers to discover the most popular online marketplaces in the United States as of January 2018. The results averaged the popularity of certain sites on a scale of 10:

The older players like Amazon and eBay crest the top of the list for a reason—they offer the most diverse portfolio of products on a single site.  Younger companies, like Etsy, are also very popular for their specific kind of branding and services.

Core differences between sellers

In the past few years, for example, Etsy has made a name for itself as a marketplace where buyers can find great handcrafted items. Etsy’s online marketplace showcases 12.3 million products hosted by 875,00 merchants at any given time.

Online retailers like Newegg.com specialize in computer hardware, electronics, tech gadgets and gear. The site tends to be a first choice for many technophiles looking for very specific kinds of products.

Sites like Etsy and Newegg offer consumers the chance to shun all the noise of larger retailers and browse through a more carefully curated range of products. Even though consumers like being able to find almost anything on Amazon, the unfocused nature of the site can cause difficulty when shopping for something precise.

Also, Amazon has a stigma in some circles as a small business killer. To help combat some of the negativity surrounding it’s large-scale approach, Amazon has recently taken steps to appear more viable to small businesses.

Case study: Amazon’s Storefront portal

Amazon’s Small Business Impact Report shows that the online retailer created 900,000 jobs for small businesses in 2017. Over 20,000 of those businesses surpassed $1 million on the platform last year. About half of all sales on Amazon are small business sales.

To help celebrate all the small businesses who contribute to the site’s success, Amazon launched a new portal called Storefronts. At first, the website will only feature a select group of 20,000 merchants. Later, the plan is to expand the site to feature the other 300,000 small businesses.

As Amazon continues in its efforts to recognize and support the small businesses who host products on the site, it will become a more viable platform for small business in general.

But, there’s something Amazon still hasn’t really nailed down yet: helping their sellers feel like part of a core group.

Case study: Etsy and their sellers

For 54% of Etsy sellers, Etsy was the first place they sold their goods. Why is this? Because Etsy’s brand has a pretty clear statement to make the second you open the website. It’s a place where creative people make homespun goodness.

76.52% of Etsy sellers consider their Etsy shop a business. For the 10% of sellers that share ownership of their shop, the vast majority of shops are co-owned by either a spouse, partner, or another family member. Not only is Etsy a great place to house your business, it’s home to a great deal of family-oriented businesses.

Additionally, the median age of Etsy sellers is 39—much younger than the typical business owner in the US, which is just over 50 years old. When asked why they decided to start a business on Etsy, 69.15% of Etsy sellers said they wanted to express their creativity.

This core group of people, though smaller than Amazon’s seller base, have a significant impact on the economy.

U.S. sellers created 1.24 million jobs in the independent worker economy this year, generating $1.36 billion in income. Additionally, $2 billion in extra economic value was added by Etsy sellers this year, impacting the retail industry significantly.

Most Etsy sellers are planning on growing their businesses in the next two years by purchasing new equipment (30.93%), renting studio or retail space (12.38%), and hiring outside production assistance (5.12%), among other growth opportunities.

The current and future impact of online marketplaces

In 2016, shoppers did half of their e-commerce spending using marketplaces. It’s projected that 2/3 of ecommerce spending will be done on marketplaces in just 5 years, according to a Forrester Research study.

Global revenues for marketplace platform providers are predicted to more than double from $18.7 billion in 2017 to $40.1 billion in 2022, according to a report from Coresight Research and data by Juniper Research. The Americas will represent 57.2% of the 2022 total.

“We expect to continue to see growth and evolution in marketplace platforms across industries,” Coresight concluded. “Retail marketplaces allow a larger number of buyers and sellers to engage with each other on a common platform, while resale and rental marketplaces continue to drive growth in the sharing economy. In the U.S. in recent years, it is now as easy to buy services as it has long been to buy products.”

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About the author

Andrew Mosteller
Andrew Mosteller
Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.

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