Marketplaces and other platforms as a key to global expansion strategy

As ecommerce continues with strong global growth, consumers are getting more and more used to buying products from outside of their own countries. According to Forrester, cross-border shopping will make up 17% of ecommerce in 2023, achieving global sales of USD 735 billion – and according to an even more recent study by Statista, it can be as high as 20% of total ecommerce by 2022.

Why are we seeing such strong growth? First of all, with the expansion of ecommerce, consumers have become more comfortable with generally buying online. Additionally, they have become more ‘adventurous’ when it comes to searching for the products they want, and, crucially, there is an ever-growing supply of products available for purchase and delivery across borders. There are some other factors such as better price and good delivery options – see the table below where IPC summarised the factors which may encourage consumers to buy products from outside of their own country.

Ecommerce growth in many established markets, such as Europe, the US, and some parts of Asia, is also somewhat slowing down as the markets achieve saturation of online sales and internet and ecommerce penetration. This drives domestic retailers in these markets to start to look elsewhere for expansion and growth.

According to the Kaleido Intelligence report, whilst global combined ecommerce growth has been around 10%, cross-border ecommerce is above 15% GAGR, so clearly there are some extra opportunities still up for grabs, and as it varies from country to country and region to region, there are even bigger benefits to reap in selling to certain markets.

According to ChannelAdvisor, 80% of retailers worldwide agree that cross-border ecommerce has been profitable, and 70% of online shoppers have recently made purchases from foreign sites. Similarly, FIS (Worldpay) quotes that 55% of their surveyed customers have purchased from another country in the last 12 months.

So, it seems clear that online retailers should seriously consider expanding their sales to other countries in addition to their domestic sales. But establishing successful operations in multiple markets is not easy, especially for mid-size retailers. Here is a list of some key points to consider when starting international sales:

• localising website and payment pages;

• accepting payments local to the consumers in other markets;

• easy and cost-effective delivery options;

• good localised support;

• straightforward returns process;

• local regulatory and tax compliance;

• ensuring local currency payments and no extra FX charges to consumers.

Some retailers look to find local partners to help tick these boxes. Some go for establishing local presence. But many are looking to platforms, such as marketplaces, to help them reach new consumers. These may vary from international, well-established marketplaces such as Amazon, Rakuten, Etsy, and others, but in some cases, retailers collaborate with domestic, often smaller but more locally established marketplaces. In fact, this is also a strong incentive for larger local retailers to become marketplaces themselves and to expand their product lines by adding a broader range and often unique products by these foreign retailers. 

In a newly published European Marketplaces Report, RetailX terms marketplaces that sell their own products in addition to third-party products as ‘Mixed’ versus those who only act as a platform and do not have their own products as ‘Pure’. It also provides comparisons between European countries as regards the marketplace sales penetration. So, according to the report, in the UK, over 62% of online sales are via marketplaces, in the Netherlands that number is at 40%, but in Denmark only 7%. So, there is a significant difference, country to country, on how the marketplaces have become a way of life for the consumers. See the map below where darker coloured countries are those with the least marketplace sales and lighter ones are those with the highest.

So, what strategies should retailers deploy in order to leverage marketplaces and other platforms as their sales channels in the markets outside of their country? There are different ways of looking at this. Some retailers are very happy to ‘push’ their products to all the key marketplaces available in a particular market. Some may choose just one partner. And some might go to a lesser-known, local marketplace instead of a global one. Below is a little summary of the pros and cons of such strategies, for illustration.

And, then, some retailers might actually build their own marketplace either to become a ‘Mixed’ marketplace, where they add others’ products to their own product lines, or to offer a ‘Pure’ marketplace platform to retailers, often with a unique vertical or niche focus. That former category normally would be relevant for a company that already has an established and well-known brand and the latter for a technology focused company. Recently, we have seen examples of ‘Mixed’ marketplaces coming from department stores (Carrefour, La Redoute, Allegro, Manor), brands (MediaMarkt, LCDC, Darty, OTTO), and manufacturers (Siemens, Mercedes). And, of course, there is a large and growing selection of ‘Pure’ player marketplace platforms, both locally and internationally (Zalando, Cdiscount, Wish, Pigu, CDON, Wildberries, StubHub). 

There are many cross-border sales strategies for retailers to choose from and leveraging global or local marketplaces and platforms definitely offers viable options to get to the non-domestic consumers fast and efficiently. But the retailers should be clear about the costs and the implications of any of these strategies before deciding what is right for their particular circumstances.

This editorial was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally. 

About Masha Cilliers 

With over 25 years of experience in the payments industry, Masha is currently Principal Consultant at Payment Options Ltd, Advisor at Thunes Collections, NED at PaySME and at Trust Payments, as well as a recognised speaker and writer on the subject of payments, marketplaces, and new economies. Masha previously held senior posts at Visa, Microsoft, Mastercard, Cybersource, and Ingenico.

About Payment Options

Payment Options is an independent consultancy run and managed by Masha Cilliers. Its key focus is helping merchants and payment providers to understand the payments industry and each other, to build successful partnerships, and to implement innovative strategies. Payment Options has been working with marketplaces for over ten years and has a deep and practical knowledge base of this emerging vertical.