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Retail is undergoing a transformation amid a surge in online sales and the popularity of marketplaces. We understand how experienced sellers adapt to changes and why even large network players go to marketplaces
How online overtook everyone
At the end of 2020, analysts recorded a faster growth rate of online commerce compared to the usual sales channels. Global retail sales in 2020 sank by almost 3% to $23,6 trillion, calculated in eMarketer. Meanwhile, global e-commerce grew by 25,7% to reach $4,2 trillion.
Marketplaces have become one of the main engines of online commerce. Back in 2015, the Ecommerce Foundation and the Dutch University of Ninrode predicted that by 2020, marketplaces would account for 39% of the global e-commerce market. Experts underestimated the role of large online platforms, and the forecast turned out to be overfulfilled: last year, the share of marketplaces was 62,5%.
In our country, e-commerce grew by 58% at once – up to ₽2,7 trillion. Almost half of the orders (405 million out of 830 million) were made by users through marketplaces.
They were the fastest growing sales channel in 2020, according to a study by Data Insight. For 90% of sellers on marketplaces, sales increased, and for 58% – significantly. For 55% of Russian sellers, they have become the only or main sales channel.
How relationships with offline are changing
The transformation of trade has formed three multidirectional trends in the relationship between traditional retail and marketplaces.
- Retailers are turning into marketplaces
We are talking, for example, about the oldest British chain of department stores Debenhams. She curtailed activities at the end of 2020, having worked for 242 years.
At first, Debenhams sold clothes, hats and accessories for women in mourning. In the 20th century, the store sold clothing collections under its own brand. According to the Financial Times, the chain has been slowly dying for the last 4 years due to high rents, ballooning debt and lack of flexibility. The coronavirus pandemic has finished off Debenhams, which occupied XNUMX% of the British clothing and footwear market.
Nevertheless, the brand will continue to live, but already as a marketplace. In January 2021, Boohoo, an online fashion retailer for young people, acquired Debenhams along with its customer base for £55m. Boohoo plans to use Debenhams as a digital marketplace for third-party sellers.
- Marketplaces become retailers
In August 2021, The Wall Street Journal, citing sources, reported on Amazon’s plans to open several large department stores in California and Ohio. Amazon is expected to sell clothing and electronics in such stores. The marketplace is set to experiment with offline retail after Amazon has taken a dominant position in the e-commerce market.
- Retailers go to marketplaces
A trend that is very typical for our country. Traditional retail is looking for alternative sales channels, new growth points and develops cooperation with marketplaces.
For example, in June 2020, on AliExpress, our country (the site is the leader in terms of monthly mobile audience in Russian e-commerce with 11 million users) launched its own store, Smiles of the Rainbow, which sells cosmetics and household goods. In April–May 2021, VkusVill joined the site, in June — Metro, in July — Podruzhka, and in October — Lenta.
“VkusVill” and “Lenta” work with the marketplace through a special section “Yes!” AliExpress apps are our country. It is designed to sell groceries, essentials, baby food and pet products with same day delivery. “Rainbow Smile” works through the main directory.
How sellers enter the market
- “Rainbow Smile”: audience expansion
Our country came up with the idea of cooperation with AliExpress even before the pandemic. Raduga Smile wanted to expand its customer base and increase brand awareness, says Aleksey Baulin, General Director of the network, — the marketplace allows you to promote not only products, but also the store brand. The partnership brought results: the top 5 regions for orders through the marketplace included the South of our country, part of the Urals, Siberia – those places where there are no retailer offline stores.
The store operates in the drogerie format, that is, it sells non-food items of daily demand. The specificity of the offer is the low cost of a unit of goods. With online orders, Baulin says, the average check can be 2-3 times higher than in an offline store.
The number of active subscribers of Rainbow Smile on AliExpress, our country has exceeded 200 thousand. Compared to February 2021, the retailer’s sales have doubled. The company expects monthly growth of 15% going forward.
As of October 2021, AliExpress ranks first in terms of store sales on marketplaces. The site is handled by a dedicated group, Smiles of the Rainbow, responsible for sales, customer service, and data updates.
“For work on AliExpress to be effective, it is necessary to participate in the promotion program on the platform, offer customers promotional codes and discounts to guarantee the best price. It is also necessary to constantly improve operations and services – ordering, processing chats and reviews, working with the assortment, correcting errors, and so on, ”recommends Baulin.
- VkusVill: multiple turnover growth
VkusVill says that by March 2020, the company’s own express delivery was receiving 800-1000 orders a day. One day in March 2020, 3 orders came in a day – this was a turning point in the development of the service. First, delivery was integrated into the main mobile application and website, then scaling began in all cities where the network is present.
At first, VkusVill stores worked in a hybrid format – they collected online orders and served customers who came to buy groceries themselves. But the number of orders increased, and at the end of 2020 the company opened the first darkstores. In the summer of 2021, darkkitchens appeared on and at their base.
Today VkusVill works with marketplaces and other delivery services. The share of online sales is more than 28% of the company’s turnover.
The partnership with AliExpress was discussed in 2020: “It was clear that this was an interesting project. It shows very good results, especially in the regions. At the first moment, our customers were a little surprised that we entered this marketplace. And for us it was a new experience – the first partner for whom we carry out not only assembly, but also delivery to the buyer on our own. We started at test stores in Moscow on April 28, 2021, by mid-May our other stores were also connected, ”retailer representatives said.
- Lenta: online channel development
The Lenta retail chain began developing the e-grocery business five years ago, says Evgenia Fanta, head of the strategic partnerships department. The retailer began to cooperate with companies that deliver products, and at the same time create its own Lentochka service (now Lenta Online). To date, Lenta Online operates in more than 100 cities: this is the widest federal delivery coverage among food retailers.
The network studied the possibility of integration with marketplaces during 2020, however, given the pandemic, it was decided to focus on the development of its own service. “By 2021, the interest was not lost, and it was necessary to choose a partner,” says Fanta.
According to her, Lenta and AliExpress, our country, quickly found an attractive format for cooperation for both sides. “The marketplace began to develop the direction “Yes!” and was interested in fast and dynamic growth with strong players. And Lenta was looking at ways to attract new audiences, including from channels that had not previously offered a range of food products,” continues the Head of Strategic Partnerships.
She notes that the buyer profiles on the AliExpress platform are different from those the network already works with in other channels: “It means that we are expanding the audience.”
The share of e-commerce in the retailer’s total revenue has roughly doubled since 2020. Now it accounts for more than 4%. The chain’s strategy provides for a doubling of revenue by 2025, including through the development of e-commerce.
Why you can’t do without a new channel
Sellers look to the future with cautious optimism. Of these, 56% predict that by the end of 2021 the figures will exceed the results of 2020, and 33% predict comparable results, according to a study by “AliExpress Our Country” and the MPGO business community.
Next year, 16% of respondents expect rapid business growth, 42% – a gradual increase. And 31% of respondents fear that the situation will worsen if nothing is done. In order to maintain growth, 90% of sellers plan to work more actively with marketplaces.
Experts note that now cooperation with large sites is an almost indispensable element of successful work in a highly competitive market. “The e-commerce boom has turned the tide and forced brands to go to customers, and not vice versa. This strategy provides new opportunities for self-presentation to customers and encourages us to look for new ways to overcome competition,” says Saagar Mehta, Director of Business Development at Vendo. He advises sellers who want to increase sales on marketplaces.
According to him, today the only reason to visit the site of a brand or retailer is to get more information about the company or to find discounts.
“The era of d2c (Direct-to-Consumer) stores has come to an end. The channel diversification that marketplaces can provide is the key to sales growth and customer retention,” concludes Mehta.