How Can Traditional Retailers Launch a Profitable B2C Specialty Marketplace?

Can Niche Marketplaces Really Compete with Amazon’s “Everything Store” Model?

Discover why 70% of consumers prefer specialized B2C marketplaces over global giants. Explore Boston Consulting Group’s insights on how retailers can leverage their physical footprint and data to build high-margin niche platforms using seven critical success factors.

Read the complete analysis below to master the seven-step framework for transitioning your retail business into a scalable, data-rich specialty marketplace.

Recommendation

While “everything stores” such as Amazon lead the pack in the B2C marketplace space, smaller retailers can still benefit from the marketplace model. Learn why specialization and finding your niche market are essential if you want to profitably embrace a marketplace model. From the intelligent curation of products to the adoption of a flexible technology stack, gain insight into the best ways to transition to a marketplace model. Discover the seven elements of success you should unlock at your company to stay competitive and adaptive in a dynamic global market.

Take-Aways

• Boost profitability and harvest valuable data insights by adopting the B2C marketplace model.
• Launch a successful marketplace by capitalizing on a niche market.
• Embrace seven critical elements of winning retailer-led marketplaces.

Summary

Boost profitability and harvest valuable data insights by adopting the B2C marketplace model.

Online B2B marketplaces are on the rise, accounting for 67% of global e-commerce sales — that’s 40% more than just 10 years ago. Shoppers are drawn to marketplaces due to their competitive pricing, product variety, and ease of use, while retailers appreciate that they can boost their product range and unlock returns on relatively minimal investments. Boston Consulting Group research finds that marketplaces outperform traditional e-commerce sites in numerous ways: attractive delivery; competitive pricing; website navigation; product variety; attractive returns; availability of products in stock; and consumer loyalty rewards.

“Marketplaces are popular because shoppers like the variety, competitive pricing, and convenience.”

Given that 87% of consumers plan to spend the same amount or more on marketplace purchases in the next year, it’s no surprise that marketplaces are “steady money makers” for operators. Marketplace operators can earn commissions as high as 25% to 30% in fashion verticals, while typically earning commissions of between 8% and 15% on purchases. Marketplaces provide fast and relatively low-effort solutions for retailers, who can let their third-party (3P) partners handle pricing, promotions, merchandising, product fulfillment, and sourcing. Marketplaces give retailers access to vast amounts of customer data, while delivering insights that can help them quickly spot trends as they emerge, detect changing consumer preferences, and improve personalization.

Launch a successful marketplace by capitalizing on a niche market.

While Amazon and Alibaba are dominating the “everything store” marketplace category, if you’re a smaller retailer, you can still leverage the potential of the marketplace model by specializing and finding your niche. A Boston Consulting Group consumer survey found that 70% of consumers actually prefer the experience of shopping in specialized marketplaces over “everything stores” with the same products at a similar price. Consumers are drawn to niche marketplaces, as they have more trust in specialist brands, enjoy the customer service experience more, and perceive the prices as being better.

“When launching a marketplace, a retailer also must be clear about how it is different from the offerings of other players.”

Best-in-class retailers that launched niche marketplaces in the past five years have succeeded in multiple ways. For example, in Germany, Douglas launched its health and beauty marketplace in 2019. It delivers an omnichannel experience connecting 850 physical stores and has doubled its e-commerce sales since 2022. The UK-based home improvement and DIY marketplace launched by Kingfisher in 2022 saw profitability on its first day. The Belgium-based sports apparel and gear marketplace launched by Decathlon in 2021 is forecast to hit equivalent to $1.1 billion in European sales by 2026. Retailers transitioning to the marketplace model have the advantage of being able to differentiate themselves from pure plays, as their physical footprint and existing customer loyalty and trust help drive sales.

Embrace seven critical elements of winning retailer-led marketplaces.

Boston Consulting Group identifies seven essential elements for successful retailer-led marketplaces:

1. Clear and aligned customer proposition — When launching a marketplace, your customer proposition should align with your current e-commerce strategy, existing offerings, brand, and customer experience. Be sure to differentiate, identifying how your offerings are distinct from others targeting your customers.
2. Competitive pricing — Retailers can host multiple third parties selling identical products and/or integrate competitive pricing tools (such as Amazon’s Buy Box) into user interfaces to drive success.
3. Smart curation — Be careful when choosing third-party sellers and products to maintain consumer trust and avoid putting customers at risk.
4. Superior customer experience — Deliver a top-notch customer experience by ensuring easy navigation, improving personalized recommendations, and investing in excellent customer service.
5. Positive seller experience — There is a direct relationship between “sellers, SKUs, and the retailer’s gross merchandise value (GMV).” You’ll attract and retain sellers if you create a good experience for them by helping them onboard their marketplace with ease, while providing the support and the tools needed to help them grow their business.
6. Flexible, scalable technology stack — Invest in modern technology architecture, integrating it into your existing systems, while staying up-to-date on technological advancements in areas such as GenAI.
7. Advanced services — Boost your marketplace EBITDA (earnings before interest, taxes, depreciation, and amortization) by 3% to 5% and enhance your value proposition with potential sellers by adding advanced features, such as data monetization, retail media, and fulfillment services. The e-commerce marketplace is undergoing rapid changes, so harness the opportunity to stand out from the competition by operating a specialty marketplace that highlights your unique strengths.

About the Authors

Khaled Tawfik, Tanmay Jain, Ali Harcourt, and Ammaarah Subjally are professionals with Boston Consulting Group.