Marketplace growth is accelerating, meeting pent-up demand and driving new transaction behaviour globally. But in this new – somewhat crowded – era of marketplace development, scale will only come to those who focus as much on their sellers as they do on their customers.
Marketplace platforms sit at the heart of ecommerce growth. From the multi-product behemoths like Amazon and eBay to niche destinations like Chrono24 and MAMOQ, marketplaces are omnipresent and will account for up to 70% of digital commerce by 2025.
The marketplace phenomenon is like a flywheel that won't stop spinning. As more consumers leverage marketplace platforms, more brands and individuals use them to reach customers, which, in turn, brings in more customers seeking choice and good deals.
Given the vast opportunity on the table, it's no surprise to see new marketplaces appearing all the time. In fact, Checkout.com research finds that 26% of retailers with revenues of more than USD 1 billion are planning to add an online marketplace to their ecommerce offering in the next 12 months.
Is there room for all these marketplaces in the digital economy? Absolutely. But will they all scale into the next behemoth? Unlikely.
That's unless they place a laser focus on attracting and growing sellers on their platforms.
In this new era of the marketplace economy, power is shifting to sellers, who have more choice than ever over where to sell their goods. And they're using this to their advantage. Visa Direct found that 95% of marketplace sellers list on more than one platform. 44% are evaluating which to join next. The puzzle these dynamics are forcing marketplace platforms to solve isn't restricting sellers from using other platforms. It's how to position their marketplace as a destination sellers can grow.
For a marketplace to become the online platform of choice, it needs to provide sellers with access to customers. It's table stakes, but it does require marketplace operators to carefully consider how they build their checkout experience, convert customers, and ensure that transactions are authorised successfully.
What's less considered by most marketplace operators is the experience sellers have when engaging with their platform. Sellers want to join a platform, upload their products or services, and start making money quickly. They don’t want to deal with lengthy forms, needless document requests, and manual intervention.
Sellers also want fast access to cash and visibility into their cash flows. It's a point marketplace operators shouldn't downplay; 80% of sellers say that they urgently need access to cash to run their business. And 55% say they would switch to marketplaces with faster payout mechanisms, according to Visa Direct research.
Better, faster funds management has become a critical differentiating factor for marketplaces. It's what will attract sellers to the platform, win their loyalty, and power their growth.
The question for marketplace operators is how to do this efficiently and effectively. Splitting payments, adding commissions, transferring balances, and reconciling funding events are complex processes. Generally speaking, these require manual, repetitive work by a team of back-office staff – or require the adoption of another complex tool to the technology stack. And, in both cases, few are delivering sellers with the insights and access to cash sellers' demand.
Solving the problem is complicated but not insurmountable. Now, there are tools available, like Checkout.com's Integrated Platforms solution. With this, marketplaces can control how money moves into seller accounts and between its platform account and seller accounts at scale. Integrated Platform allows marketplace operators to:
Automate funding flows: In a single payment request, marketplace platforms can programmatically apply commissions and allocate the split of funds between one or many sellers – whether at the authorisation, incremental authorisation, capture, or partial capture stage of a payment. This means that platforms can automate away everyday operational and reconciliation tasks and ultimately give sellers instant access to their account balance.
Test commission models: Whether a fixed fee (EUR 1), a variable fee (5%), or a compound fee (EUR 1 + 3%), platforms can collect commissions from every seller however they want. And with reporting on every payment, they can set, test, and update commission models for faster revenue growth.
Control funds movement at scale: Every platform is unique, testing new promotions and commercial models while holding funds on their sellers’ behalf, which means manual funds transfers and delayed visibility into account balances simply won’t work. In these situations, it’s essential to have the ability to instantly shift funds between accounts, along with reporting and reconciling every funding event.
The next wave of the platform economy is here, and sellers know their level of choice and power in driving marketplace growth. As a result, any marketplace or payment provider that is not ready to recognise this change will risk losing their top sellers, and the resulting revenues, to competitors.
Now is the time to evaluate solutions to empower the delivery of the best payment experiences at every step of the seller's journey – plus allow the customisation and flexibility needed to support growth at scale.
This editorial piece was first published in The Paypers' Cross-Border Payments and Ecommerce Report 2022–2023, 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.
Wilco Slabbekoorn is the VP of Revenue Growth and Head of Commercial Europe for Checkout.com. Wilco has spent the past 20 years operating at the forefront of financial services, serving in international leadership roles for the likes of Nexi, Arvato Financial Solutions, WorldPay, and Experian. He is based in Amsterdam, Netherlands, and he currently serves as an Advisory Board Member for the Merchant Payment Ecosystem.
Checkout.com is a global payments solution provider that helps businesses and their communities thrive in the digital economy. It offers innovative solutions that flex to your needs, valuable insights that help you get smart about your payments’ performance, and expertise you can count on as you navigate the complexities of an ever-shifting world.
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