Online marketplaces expected to grow by 15% annually and match direct eCommerce spend by 2025

Amazon platform

The unstoppable rise of the online marketplace model – operated by the likes of Amazon, Expedia and eBay – is driving the largest fundamental shift in consumer spending since the emergence of eCommerce in the 1990s.

That is the findings in a new report from OC&C Strategy Consultants. which predicts that by 2025, spending through the leading online marketplaces will overtake the vast majority of eCommerce outlets in established retail and travel categories. When considering aggregate spend, marketplaces in those categories are set to catch up with direct eCommerce ahead of 2025. In 2020 alone, marketplaces accounted for over $1tn of total western consumer spend in these categories, and 40% of total consumer spend online.

Across all of these established categories, the report estimates that marketplace growth will continue at 15% per year in the West and become as large as direct eCommerce by 2025, when it will account for c.45-50% of online spend.

The move to the marketplace model is being driven by their increasingly sophisticated offerings. For consumers, they bring convenience, choice, and value. For suppliers, they provide access to a large customer pool and a slick user interface, plus value-added services like fulfilment and payments.

Marketplaces are now very much the norm when it comes to books, food delivery, or ticketing, where they represent at least 25% of consumer spend. They are also continually increasing their share against eCommerce players in the travel, clothing, and furniture sectors. In these established retail and travel categories, it is only grocery where marketplaces, and indeed eCommerce, have yet to make an impact, with offline and online direct spending accounting for at least 97% of overall spend.

These trends have been accelerated by Covid-19. The trading conditions created by the pandemic, where consumers were largely forced to transact online, drove a significant increase in penetration across digital channels, with only one established marketplace category – DIY, Gardening and Pets – seeing a reduction in third-party/online spend during the pandemic.

Mostyn Goodwin, Partner at OC&C Strategy Consultants, comments: “The report offers a striking illustration of the fundamental change in consumer spending habits. Online marketplaces are rapidly becoming the first port of call for both customers and suppliers, and the days of these platforms being a hub for jumbled second-hand stock are well behind us. While Covid-19 has undoubtedly accelerated the shift to online, the inexorable share gain by marketplaces shows no sign of slowing”