Reports Trends

Key Takeaways from The State of Marketplaces in 2021 report [Battery Ventures]

To say that the marketplace has grown last year is like saying nothing. Companies want their products to be available in as many places as possible. Hence, we see further sales development. In addition, the pandemic caused those who had not previously bought online to move to the Internet. As a result, users are increasingly demanding, and it is the role of store owners to understand what barriers and difficulties new buyers have faced.

The pandemic is also the appearance of thousands of new stores. Those who have not been present on the Internet so far have noticed that it is an absolute must have. Quick implementations triumphed, because every day without a sale for business owners was a loss. Everything related to e-commerce was on the rise this year. It was driven by the natural increase in online shopping popularity, but also by restrictions.

Big regulations

Leading online marketplaces have recently been regulated in China. Due to this, Chinese marketplaces lowered returns of the BV Marketplace Index by 25 percentage points (pps) over the past 12 months. In this way, China may serve as an “early warning sign” of future regulations for marketplaces around the world.

source: The State of Marketplaces – 2021, Battery’s report

In addition, marketplace IPOs have been booming the last twelve months. Below are the eleven businesses that qualified for the BV Marketplace Index.

source: The State of Marketplaces – 2021, Battery’s report

Pandemic Effects

A Pandemic Has Divided The Marketplace Into Two: “Stay-At-Home” vs. “Recovery” Businesses. 

source: The State of Marketplaces – 2021, Battery’s report

It’s important to know that Recovery-Marketplaarewere is leaning toward post-pandemic growth and are optimistic with stocks. After hitting record lows last year, equities are soaring. They bounced back with the rise of stringent blockades and an increase in the number of vaccines, etc., while “Stay-at-home” companies are reopening. 

source: The State of Marketplaces – 2021, Battery’s report

In a new reality, what should you do?

source: The State of Marketplaces – 2021, Battery’s report

To navigate a new reality, you should focus your business on growth. To achieve this, try to solve the company’s problems, gradually expand to a broader set of markets, and leverage established supply/demand networks and tech capabilities to enter adjacent categories. 

Then, scale efficient growth and create defensibility. Reduce dependence on the paid acquisition by incorporating product-led and network effects. Prioritize tasks when your company invests in development and product. Next, show a path to achieving positive unit economics. How profitable are your most mature cohorts and markets? If so, you can be assured that every investment will pay off.

In the end, create optionality and demonstrate long-term viability. To do so, improve your supply chain, improve the product experience and competitive defensibility,  allow customers to “buy now, pay later”, lower your customer acquisition cost and make their lifetime value. 

Carvana Case Study

Financing options are vertically integrated at Carvana. Provides securitized loans to 70% of the platform’s customers, then sold to investors. In addition, provides insurance coverage through third-party partnerships, earning commission from product sales.

Among Carvana’s strategic benefits is margin expansion (the company earns roughly half of its Gross Profits solely from its fin-tech products) and seamless customer experience – through the platform’s embedded fintech offerings, customers can buy or sell vehicles in just a few minutes.

source: The State of Marketplaces – 2021, Battery’s report

Over to you

In 2021, marketplaces may be considered successful. Despite the objective challenges of timely deliveries and the global supply chain, e-commerce has seen historical sales and customer numbers. The industry was driven by the natural increase in the popularity of online shopping, resulting, among others, from returning market restrictions and lockdowns.

Sellers will more and more turn to platforms that provide coverage and already have optimized purchasing processes and a recognizable brand. The year 2022 will undoubtedly show the growth tendencies of marketplaces – both prominent international players and local platforms. This is good news for consumers – more choice and opportunities for cheaper shopping. At the same time, it will be a challenge for manufacturers, retailers and brands. This will mean one thing on the market – a further increase in the importance of marketplaces.

For more insights, check out Battery: The State of Marketplaces – 2021 Report.