The UK marketplace sector is responsible for a significant slice of the UK ecommerce sector, with sales of £26.2bn in 2019 accounting for just over a third of the £76bn ecommerce market in 2019. And marketplace sales are forecast to grow by 50% over the next 5 years to reach £39.3bn by 2024*.
2020’s unfortunate events have seen marketplace sales on the rise – for both the giants Amazon and eBay as well as more niche players – as online shopping for home delivery has understandably rocketed in popularity.
The enforced shutdown has seen many traders expanding online out of necessity and marketplaces offer a fast and practical route to market; for example ASOS Marketplace introduced twice as many independent boutiques in April as usual.
Community-driven marketplaces as varied as Etsy, Depop and Discogs had already been experiencing substantial recent growth driven by an increasing appetite for unique and sustainable purchasing, and a desire to shop directly from independent traders and artists.
This blog explores further the size and dynamics of the UK marketplace sector, delving beyond just Amazon and eBay (who do account for a huge 90% of sales), with a particular focus on community-driven marketplaces to examine the winners and what we can learn from them.
THE UK MARKETPLACE SECTOR
Amazon and eBay dominate the UK marketplace sector of £26.2bn, with 90% of sales but the rest of the UK marketplace sector is worth a still significant £2.6bn. With total UK online retail sales for 2019 standing at £76bn, £1 in every £3 spent online is via a marketplace.
The table below shows the top 15 marketplaces in the UK, ranked by monthly visits. This is a useful starting point to assess the UK marketplace, albeit it may under-represent the reach of m-commerce first platforms such as Depop, as app traffic is not recorded.
The top 15 UK marketplaces can be split into 3 distinct sectors:
UK MARKETPLACE SIZE AND SHARE: DOMINATED BY AMAZON AND EBAY
The research in the table below looks at the top 6 marketplaces by UK visits (plus Discogs, Bandcamp and Depop) and calculates the UK sales made through each marketplace, as well as the “take” or commission generated by each marketplace.
As outlined earlier, Amazon and eBay dominate sales, with 90% of the £26.2bn UK marketplace sector. Established global players in Etsy and Wayfair are next in sales generated, with in excess of £250m each in 2019.
The % of commission taken ranges from 8% for Discogs to 25% for Not On The High Street, with a median average of 12%. Wayfair does not disclose a take or commission rate in its annual reporting and will vary greatly based on merchant and product category.
Please note that the table below is also featured on page 7 of the full "The UK marketplace sector - and the role of community" article, downloadable here.
AMAZON AND EBAY
Amazon’s UK revenue of £13.4bn soared by 23.2% in 2019. This figure includes all directly Amazon sold products (approx. 50% of its revenue) and commission paid by its third-party marketplace sellers but not the overall customer spend on these products, which is estimated at £14.5bn. See page 8 of the detailed article for more information on Amazon’s revenue breakdown.
7% of Amazon’s total revenue comes from Amazon Prime and it has now has 150m members worldwide, 15m in the UK. With Amazon’s convenience becoming ever more impressive – and many marketplace sellers piggybacking on the Fulfilled By Amazon (FBA) service to take advantage of this – Amazon is widening the gap in marketplace sales from the other giant of the sector, eBay.
eBay’s growth has slowed in recent years, with global sales of $85.5bn actually declining by 5% YOY in 2019. The UK accounts for 13.3% of eBay’s global commission*, so this equates to $11.38bn or £9.1bn in sales. eBay’s sales do remain significant of course – 35% of all marketplace sales and 12% of all UK ecommerce sales.
CATEGORY SPECIALISTS: WAYFAIR AND ASOS
Wayfair and ASOS Marketplace’s category specialisms have led to recent continued growth; Wayfair’s 2019 global sales of $9.1bn grew by 35% year on year, while ASOS doubled its usual number of new sellers in April due to the Covid19 lockdown.
Wayfair also offers logistics services to its retailers, helping smaller players with bulky furniture items in particular. It is this service specialism – and focus on “drop ship” items - that helps to differentiate Wayfair in the market and makes them a preferred partner for furniture/home product traders.
The curated nature of ASOS’ marketplace, piggybacking off its huge ecommerce specialist fashion site and brand has helped it establish its own niche. However, the fashion sector moves notoriously quickly as can be seen by the emergence and continuing growth of new concepts such as Depop.
Depop is a buzzy example of a new community-driven marketplace, with its social mobile app first approach very different to a traditional retail website. London based but with global reach, Depop has over 15m users, most under 26 and has sold over $500m of clothing on its platform since its launch.
Depop is an example of a true “m-commerce first” brand – you are strongly advised to download the app to encounter the full experience, which is very reminiscent of Instagram. You are then encouraged to follow other users and see what they’re posting via your feed; a “new” way to shop online but using very familiar methods for Gen Z digital natives.
And it is Gen Z sensibilities that are increasingly interested in the more sustainable options that Depop’s “pre-loved” marketplace offers – as Depop CEO Maria Raga states: “There are reports that show that in five years resale will be as big as fast fashion…We’re extending the life of the garment, which resonates.”
Etsy and Not On The High Street (NOTHS) are both arts/gifts focused community marketplaces, but Etsy’s recent sales growth has been much more impressive, with $5bn global sales in 2019 growing by 27%.
Etsy’s non-US sales are 36%, of which UK is estimated at 7.3% (based on website visits share), which would equate to $348m/£290m UK sales. When reporting first quarter results in early May, Etsy also stated that sales through its marketplace globally had grown by over 100% in April, with cloth face masks an understandably large seller, but all categories seeing significant uplifts.
NOTHS’s sales transacted of £139M for Y/E 31st March 2019 were down 4% YOY, but NOTHS’s active customer base did increase, with 2.57m making at least one purchase, +3% YOY. Although previously seen by some as “the British Etsy”, NOTHS has not kept pace with recent Etsy sales and has looked to concentrate more heavily on its gifting credentials recently, with new tagline “the home of thoughtful gifts”.
NOTHS’s recent lack of growth will likely not have been helped by its curated approach to introducing new sellers plus significantly higher commission compared to Etsy’s simpler on-boarding process and more advantageous rates. NOTHS will be hoping their new focus on gifts will arrest this decline.
A potent mixture of Wikipedia, IMDB, eBay and Pokemon for music fans, Discogs was originally established in 2000 by Kevin Lewandoski purely to catalogue dance records but now describes itself as “the world's foremost Database, Marketplace, and Community for music”.
Discogs Marketplace was launched in late 2005 after customer demand and has expanded since to become a key player in the used records market, selling 14.6m records in 2019, up 34% year on year.
The complementary Clear Digital research “Discogs: The Digital Success Story Of The Vinyl Revival” explores Discogs and the wider music market in much more detail – click here to find out more.
Convenience is always a key factor in any shopping decisions; “location, location, location” as the old retail adage explains. Competing with Amazon’s Prime shipping options is impractical for most, so generalist marketplace traders have used this to their advantage, which has been to eBay’s detriment with their recent declining sales. However, convenience is not purely related to fast, flexible delivery; as we have seen, other marketplaces’ success has included convenient browsing and purchasing options…
Instead, marketplaces as diverse as Etsy, Wayfair, Depop and Discogs have harnessed a sense of community and different online shopping experiences to build successful niche experiences serving a variety of dedicated, engaged customers with quirky/unique product selections, a strong sense of usefulness and fun, all underpinned by strong trust and ethical credentials, increasingly important for younger consumers in particular...
Product Selection: Specialising in product sectors that are not as suited to Amazon’s model, for example vintage merchandise (Depop, Discogs), bulky items (Wayfair) or artisan hand-crafted products (Etsy), has seen these niche marketplaces thrive in recent times – and with the warm feeling engendered by supporting smaller/local businesses.
Usefulness/Fun: Creating a sense of usefulness or fun in the online shopping experience, especially when looking to non-retail digital presences, is also proving successful – whether that’s using Discogs’ IMDB/Wikipedia type music resources, or gaining inspiration from Depop’s Instagram style User Experience and community.
Trust: When purchasing from any marketplace, the slightly faceless aspect of the ultimate seller can be disconcerting, which is again why reliability factors such as user reviews and strong trust in both the marketplace brand and overall community are highly important for both initial and repeat purchases.
Ethics/Sustainability: The trend for ethical trading and purchasing sustainable products continues to be a growing concern, especially for younger consumers – Depop have stated that “there are reports that show that in 5 years resale will be as big as fast fashion”, while the built to last wares of Etsy products and second hand records from Discogs also fit comfortably into being ethical, sustainable purchases from like-minded traders.
This blog is a summary of the accompanying deeper dive on “The UK marketplace sector – and the role of community” which is available to download here
Lead blogger and founder of Clear Digital: talking about ecommerce, digital, marketing and media.