Why the majority of consumers prefer digital marketplaces to traditional e-commerce
What it means: As the lines continue to blur between what is a first-party online retailer and a marketplace, consumers can’t tell the difference and often prefer that marketplaces on sites offer expanded search and product options. Driving up the value proposition of e-commerce through limitless aisles, more transparent pricing and efficient supply chain and delivery is crucial to distinguish the channel.
What’s the point: E-commerce’s explosive and accelerated growth during the pandemic came out of necessity for most consumers. Now, as consumers return to normal, pre-pandemic, behaviors, the e-commerce channel needs to define its value proposition for consumers beyond efficiency and providing the ability for browsing during the day. For those in essential retail, this comes down to the ease of delivery, curbside options and optimizing the market basket selection instead of browsing in-store aisles to build a shopping list or menu.
More than three-quarters (77%) of consumers globally continue to believe marketplaces are the most convenient way to shop online, a 10% increase year-over-year, according to new research from Mirakl. The new report also found marketplaces at the center of U.S. consumers shift toward online shopping. U.S. consumers reported using marketplaces for 46% of their overall online shopping, and 39% reported shopping on marketplaces once a week or more — compared to 28% of overall global respondents.
Marketplaces prove to be a differentiating factor for American shoppers. Three in five (60%) respondents say they prefer e-commerce sites that include an online marketplace to those that do not, Mirakl found. When asked why, more than half (55%) of respondents cited the better prices, selection and convenience offered by marketplaces. Driven by value, a majority (51%) of U.S. consumers say they wish more retailers had online marketplaces.
“During the pandemic, U.S. consumers became accustomed to online shopping, with everything at their fingertips, delivered fast and at a great value,” Adrien Nussenbaum, Mirakl’s CEO and co-founder, told Retail Leader Pro. “While we’ve since seen the return to in-store shopping, this expectation remains in 2023, and it’s the driver behind the growth of marketplaces.”
Younger generations in particular are shifting their spending to marketplaces, with Gen Z and millennials conducting nearly 50% of their online spending on marketplaces, Mirakl reported. Baby Boomers are catching up to their younger counterparts, though, with older survey respondents stating they conducted 40% of their online shopping through marketplaces — a 16% increase year-over-year from 2021.
As consumers seek out convenience and value, retailers with marketplaces have the advantage over conventional retailers. They can partner with their sellers to offer everything from expanded assortments and more affordable price points to better shipping options – without compromising on a strong brand experience.
“The result is that marketplaces are far outpacing overall e-commerce growth,” Nussenbaum said. “We saw this play out in real time during Cyber Week 2022, when marketplace sales grew at more than 7 times the overall rate of e-commerce in the U.S.”
Consumers also are seeking new features in the marketplaces of the future. Features Mirakl’s global survey respondents cited as ones they’d most like to see in future online marketplaces include:
- Loyalty and membership programs (41%).
- In-store pop-ups that show marketplace products in person (28%).
- Purchasing integration with the latest social media apps (20%).
- A handpicked selection from influencers they follow (19%).
Additionally, more than half (56%) of consumers say they’re more likely to shop on marketplaces or websites that can offer personalized recommendations
Prioritizing Value
While consumers continue to shop in-store, a clear majority (86%) of U.S. consumers say inflation has made them look for better value when shopping, and Mirakl’s research shows consumers are finding that value online. Key takeaways from the research regarding inflation include:
- More than half (53%) of U.S. consumers say that shopping online has delivered better value during times of high inflation.
- 71% expect to increase their spending online during the next 12 months to find better value.
While direct delivery to homes is still driving many online purchases, Statista reports that 47% of consumers consider cheaper prices as a reason to shop online along with 35% of consumers who say more possibilities to compare exist online.
The Mirakl data reveals the urgent need for consumer-facing businesses to focus on providing more products at competitive price points to maintain customer loyalty. New economic pressures are causing brands’ most loyal customers to reconsider their alliances in favor of better prices. Four in 10 (40%) respondents say they focus on which brand offers the best deal, and only 22% say they continue to shop with the brands they trust, regardless of price. Three in 10 (29%) U.S. consumers say they only seek generic/lower-cost brands, further demonstrating how brand loyalty is eroding as a result of reduced purchasing power.
“While it’s not a surprise to hear that American shoppers are feeling the sting of rising prices, the research showed us the extent to which value has really become the primary focus for consumers,” Nussenbaum said. “We’re seeing that the pull of brand loyalty is diminishing as a result of reduced purchasing power. …Retailers can’t rely on brand loyalty alone. They need to focus on appealing to consumers whose top priority is getting what they need at the best price — while also meeting expectations for quality, selection and convenience — if they want to protect their business.”
When looking at higher-ticket items, such as electronics, research from Acosta found that the path to purchase was omnichannel for shoppers across all demographics. Both online and in-store shopping play critical roles for shoppers, with price, brand and sales named as top considerations in the purchasing process. Only in the case of smartphones and gaming systems was brand the number one consideration.
This shopping pattern was further confirmed with 80-90% of shoppers surveyed stating that they had not purchased some items across categories due to price, with the greatest impact seen in camera/security systems, stereo/surround sound systems, virtual assistant devices, computer accessories and headphones, Acosta reports.
For retailers and brands, this data means value and brand messages must take center stage for digital content as well as in-store experiences.
Comparative product research is done online before or during visits to brick-and-mortar stores to seek reviews and best prices, Acosta found. The leading resources for online research are retailer websites, with Amazon moving into position as a frequent product research solution. Shoppers typically visit up to two stores or websites before making their purchases.
Consumers are purchasing consumer electronics from both brick-and-mortar and online retailers, led by mass merchandise, electronics specialty and online exclusive retailers.
Topping the list:
- Amazon.com 88%
- Walmart 68%
- Best Buy 61%
- Costco Wholesale 57%
- Apple Store* 48%
- Office Depot 39%
- Apple.com* 37%
- Target 35%
- Sam’s Warehouse Club* 30%
*Gen Z more likely to shop
Large or expensive items like televisions, personal computers and gaming systems tended to be purchased at brick-and-mortar, Acosta found. In-store demos were noted as extremely or somewhat important for all demographics for televisions, personal computers and smartphones, reflecting the importance of in-stock positions and customer experience. For online purchases, consumers continue to want more access to product manuals, service reps and tutorials.
Availability
Both globally and in the U.S., consumers are also finding e-commerce channels to be more reliable in terms of product availability. More than half (53%) of U.S. consumers agree that the products they need have been out of stock more frequently in stores in the last six months, according to Mirakl’s research. These short-term out-of-stock challenges are yet another contributor to long-term behavioral shifts in favor of e-commerce. When a product they normally purchase in-store is out of stock, half (52%) of shoppers try to find it online often or very often. If they find what they’re looking for, nearly three-quarters (71%) shop for it online the next time they need it.
“When a retailer or manufacturer has an item out of stock, they risk the customer leaving their brand or store,” Kathy Risch, Acosta’s senior vice president, consumer Insights and trends, told Retail Leader Pro. “Both retailers and manufacturers suffer in different ways: when brick-and-mortar stores have something out of stock, it’s typical for customers to leave the store and find it at another competitor, whether they purchase it in-store or online. Manufacturers, however, risk customers shifting to a different brand entirely. Either way, when items are out of stock, everyone suffers.”
Brand loyalty is a significant consideration when items are unavailable, especially in the consumer electronics space.
“We see that the No. 1 most likely next step for consumers is ‘to wait for the specific item(s) I want to be available,’” Risch said. “However, brand loyalty does not mean store loyalty. Retailers are at risk when an item is out of stock because consumers will check different physical stores for the item or check online.”
Delivery
For those who shop retailers online, Acosta’s research shows that 29% of consumer electronics online buyers requested store pick-up, while the other 71% had it delivered to their home.
“Retailers need to provide both options to meet needs,” Risch said. “Those ordering for home delivery want free shipping — our research shows that 59% of consumer electronics shoppers specifically bought products on Amazon for the free delivery, and 48% cited the convenience of Amazon.”
Many consumer electronics in-store shoppers prefer buying in-store (32%) because they can pick an item and leave with it that same day, Acosta found. “Yet even many in-store buyers prefer the item be picked up curbside on their way out or delivered to their home, so retailers need to have all options readily available, Risch added.
Consumers are expecting to receive their items quicker as well. Quick delivery has become so important to consumers that it continues to be one of the most significant online shopping barriers. It comes with a lot of added pressure for retailers to compete.
“They have increasingly higher expectations as retailers continue to offer faster delivery solutions, such as 1-hour grocery delivery or Amazon Prime members who receive their orders within 48 hours,” Risch said.
However, these expectations have a cap.
“Many shoppers do not need items delivered the same day or certainly not within an hour,” Risch said. “And some consumers are unwilling to pay for faster delivery, especially in an inflationary market. People will choose how they spend their money based on high inflation rates. Inflation rates have even caused backlash on quicker delivery. In this unwavering market, retailers must find a balance between fast and reasonable depending on what the consumer must pay.”
Retailers consistently strive for accuracy when fulfilling their customer orders, and shoppers expect it. Given today’s inflationary environment and fierce competition, retailers can’t afford for their consumers to receive an inaccurate order.
“The quality of service — including order accuracy — becomes the point of differentiation among retailers,” Risch said.
What’s next: E-commerce still hasn’t been able to find its true point of view in driving impulse purchasing. That behavior simply can’t be replicated as easily online as it can in-store. For those in grocery, leaning into retail media and product placement to drive those impulse products to the top could help to solve this challenge as well as messaging to consumers along the path to purchase.