How marketplaces are evolving

Indicating the continued growth in e-commerce, U.S. online retail sales are forecast to rise 9.8% to $1.2 trillion this year, according to a new report from FTI Consulting.

U.S. e-commerce sales will make up 22.7% of the overall retail market share this year, up from 21.6% last year.  Online sales growth accounted for 57% of total U.S. retail sales in Q1, its highest rate since 2017 excluding the pandemic period. 

Total U.S. e-commerce sales this year will reach “high- to mid-single-digit sales growth for several more years,” a shift from the mid-teen annual growth rate it experienced in the decade before the COVID-19 pandemic, according to the report. 

FTI Consulting research has charted the continued e-commerce growth in the years following the beginning of the COVID-19 pandemic. In 2022, the firm predicted that e-commerce sales would exceed $1.07 trillion, a milestone it had previously projected would occur in 2025. The following year, its research estimated that online retail sales would reach $1.14 trillion, a 10% jump from 2022. 

E-commerce market share of total retail sales are expected to plateau to around 35% in the next decade, according to the report. However, several product categories have already reached that plateau including toy and hobby, office supply, consumer electronics, music and videos, books and magazines, computer hardware and software, home furnishings and sporting goods. 

“E-commerce in the U.S. is in a maturing phase as it returns to pre-pandemic normalcy, but it continues to capture market share, primarily from store-based retailers,” J.D. Wichser, senior managing director and leader of the retail and consumer products practice at FTI Consulting, said in a statement. “As the retail landscape evolves, it is critical for businesses to turn their strategies toward omnichannel integration and technological innovation while adapting to shifting consumer demands to maintain a competitive edge in a crowded field.”

The U.S. retail industry is already responding to some market changes by shifting stores to fulfillment centers, closing underperforming locations, using AI, reducing labor and blending an online and offline customer experience, per the report. 

Other research suggests that e-commerce sales will rise in the coming years. A June Forrester report projects that U.S. online retail sales will reach $1.6 trillion by 2028 and will comprise 28% of total U.S. retail sales. 

Fulfilling its promise to enhance its e-commerce business, Nordstrom is introducing a new digital marketplace on its website, the department store announced Monday. 

The retailer is showcasing a broader selection of products, sizes and brands through the marketplace. Among its marketplace partners are Mulberry, Adore Me, Cynthia Rowley and DXL, according to the announcement. 

Shoppers using the Nordstrom marketplace can still earn loyalty incentives and access perks such as styling and alterations.

Nordstrom’s marketplace launch comes after the retailer last month said it planned to lean into its e-commerce business. CEO Erik Nordstrom said during a Q4 earnings call that the retailer is enhancing its online personalization features. 

In recent years, other major retailers, including Macy’s, Walmart and Michaels, have created third-party marketplaces. However, instead of opening its site to a wide swath of sellers, the company carefully selected its marketplace brand partners “to ensure that our marketplace experience drives the relevance and inspiration that Nordstrom customers expect from us,” according to Miguel Almeida, Nordstrom’s president of digital and customer experience.

“Nordstrom.com is our largest flagship store and gives us the opportunity to offer new and existing customers more choices for more occasions,” Almeida said in a statement. “Our goal isn’t to be the everything store, but to offer customers more breadth, depth and newness in the categories that they come to us for, from some of the most coveted brands in the market.”

Meanwhile, as the retailer tries to draw new customers, Nordstrom’s net sales have fluctuated in recent quarters. In its third quarter 2023 earnings report, net sales dipped by 6.8% to $3.2 billion, but its Q4 net sales increased 2.2% year over year to $4.3 billion. The company’s full-year fiscal 2023 revenue fell 5.4%. 

Beyond its e-commerce push, Nordstrom also plans to concentrate more on its off-price business. Erik Nordstrom told analysts that the company opened 19 new Nordstrom Rack locations last year and plans to open an additional 22 Rack stores this year.

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By Ekata

Marketplaces face many challenges when it comes to platform growth and risk mitigation. First, they must ensure that there is an easy way to transact while simultaneously reducing the number of fraudulent transactions. And even when fraudsters gain access to a marketplace, they must be detected before the payment authorization. Ekata's Product Buyers Guide for Marketplaces explains how marketplace account opening, transactional risk, and platform integrity are crucial to the vendors and product solutions you choose.

Account Opening

When thinking about user experience and fraud prevention, a marketplace must use a holistic approach. After all, platform integrity is intertwined throughout every stage of a marketplace; from account opening and buyer/seller transactions to checkout, payment authorization, and shipment. For example, if a marketplace validates identities at account opening, the transactional risk can be decreased by weeding out bad users such as bots and spammers.

Account opening is a crucial piece of a marketplace — there is no marketplace without sellers and buyers joining the platform. Most marketplaces have a unique onboarding experience for buyers versus sellers. And the onboarding experience varies depending on the size of the marketplace. The Product Buyers Guide for Marketplaces explains the solutions available to your business to help ensure account opening best practices.

Transactional Risk

Transactional risk is a significant point of contention for marketplaces because transactions are the height of user engagement- transactions are where real dollars and goods are exchanged. Most marketplaces support multiple payment options to allow flexibility and ease of use for their customers. Marketplaces that enable payments must deal with fraud attempts before the payment authorization takes place. The types of fraud marketplaces must catch before payment authorization include credit card fraud, card testing, and cross-border fraud. 

Marketplaces should implement an effective solution to mitigate transactional risk and prevent payment fraud. The Product Buyers Guide for Marketplaces explores the vendors available as your business creates its strategy.

Platform Integrity

A variety of solutions are available today that help marketplaces prevent fraud and ensure the overall integrity of the platform. From Data Validation and Identity Verification, to User and Behavioral Analytics, you need insights and deep dives for manual investigation to best understand your users. The Product Buyers Guide for Marketplaces also explores vendors that are best in platform integrity.

Bottom Line

As the global sharing economy grows online, it's more difficult to quickly and accurately confirm identities. Historically useful authenticators like Social Security Numbers are no longer enough, and National IDs don't address the worldwide marketplace with much of this data being compromised in breaches. The demands of global commerce and risk management have given rise to a more sophisticated multi-layered approach to verifying identities—one that looks to correlate common key customer identity data such as emails, phones and physical addresses, with behavioral analytics, device identification, and existing user profile information. Taking a holistic approach to identity verification, utilizing multiple fraud protection and risk mitigation tools to increase customer transactions while decreasing the amount of fraud, helps keep the platform trusted and safe. This multilayered approach is critical to grow a marketplace, with a strategy more sophisticated than the fraudsters who attempt to break in. Read the Product Buyers Guide for Marketplaces to learn more.

Michaels launched a campaign, “Respect the Handmade,” in support of the recent debut of MakerPlace by Michaels, its new online marketplace that features handmade items, classes and how-tos, according to a press release.

Central to the effort is a 30-second spot showcasing a slew of handmade goods coming to life, set to a playful cover of the classic song “Respect.” The campaign spans social media, the MakerPlace website, Michaels-owned channels, streaming video and programmatic paid media. 

Michaels is also supporting MakerPlace, which launched in November, via an in-store pilot program, inviting makers to sell directly to their community at their local Michaels store. The retailer’s latest marketing move signals how it is attempting to stay competitive against platforms like Etsy. 

Michaels is putting marketing muscle behind its recently launched MakerPlace through the online shop’s first-ever campaign. “Respect the Handmade” could help the brand gain share against digital competitors like Etsy and loyalty from the growing number of consumers who prefer shopping from small or local businesses.

Messaging behind “Respect the Handmade” is meant to celebrate Michaels’ ongoing support of independent artists and the customers who buy their products. At the center of the campaign is a 30-second spot, which features items like a bag, earrings and flower pots coming to life to take part in a playful cover of “Respect,” the hit song originally by Otis Redding. 

Michaels additionally is using its brick-and-mortar presence to test another way for handmade artists to sell their items at their local Michaels store via an in-store pilot program. The brick-and-mortar element is part of the brand’s “test and learn” strategy, a data-driven approach to launching small-scale, in-market experiments that inform future launches, per release details. The first in-store pilot began Feb. 24 in seven stores across the U.S. and the next pilot will begin March 23. 

The Michaels MakerPlace was created to support handmade artists by offering multiple membership options, lower fees and more ways to earn, whether through selling items, hosting live classes or sharing how-tos with commission-earning supplies lists. Michaels, headquartered in Irving, Texas, currently operates around 1,300 stores in 49 states and Canada.

The first campaign for MakerPlace by Michaels follows a brand refresh by the retailer last year that introduced the tagline “Everything to Create Anything,” positioning the company as a creative partner. Michaels has made additional efforts to support sellers, including through the creation of a dedicated online marketplace for third-party sellers.

The creative push from Michaels also comes as competitor Etsy steps up its own marketing, with the e-commerce company recently making its Super Bowl debut to highlight a new gifting hub. Pinterest, also regarded as an online destination for creative inspiration, has similarly ramped up marketing recently to showcase how people use its platform to discover and experience new opportunities, places and ideas.

To build out its third-party marketplace, Target is partnering with Shopify to onboard a selection of its popular merchants and products onto Target Plus and into its physical stores, the company announced Monday. 

Target will add a curated selection of brands like Caden Lane and True Classic to its marketplace and potentially to stores in the coming months, per the press release. Using the Marketplace Connect app, Shopify merchants can also apply to sell products via the Target Plus marketplace.

Target Plus features more than 2 million products from over 1,200 merchants across categories like apparel and sporting goods. The company’s in-house team chooses participating brands for the marketplace with an eye to complementing its current assortment.

Since its debut in 2019, the Target Plus marketplace has attracted brands like Crocs, Ruggable and Timberland. The expansion with Shopify gives Target a new source to pull from for future sellers. 

Target’s Chief Digital and Product Officer Prat Vemana said in a blog post that the company’s marketplace isn’t focused on high demand and moving products, but rather providing high-quality, properly-sourced products. Vemana also noted that the company has more than doubled the number of brands and products available on the marketplace in the past year. The marketplace, which lets Target offer more products to shoppers without having to store all of them, also allows shoppers to use regular Target perks like free shipping for orders above $35 and discounts for Target Circle Cardholders.

“Target Plus invites consumers to explore a curated collection of products from vendors we trust, so they can shop our assortment with confidence,” Cara Sylvester, chief guest experience officer at Target, said in a statement. “Our partnership with Shopify extends the breadth of thoughtfully designed and affordable items available to discover and enjoy as part of Target's distinctive mix of brands shoppers love.”

For Shopify merchants, the partnership allows brands the chance to reach millions of new customers and ultimately grow their businesses, Harley Finkelstein, president of Shopify, said in a statement. 

Marketplaces have been a popular tactic in recent years with other major retailers, including Macy’s, Nordstrom and Michaels, launching their own as a way to expand their assortment.

Target is vying for online shoppers as its top-line sales stall, but its e-commerce arm is recovering. In the company’s Q1 earnings report, the mass-market retailer reported that its sales dipped 3.2% year over year to $24.1 billion. However, Target CEO Brian Cornell told analysts that the retailer’s online sales increased for the first time in more than a year, which he attributed to the company's drive-up, in-store pickup and same-day delivery services.

As it competes against e-commerce rivals, Etsy announced its first buyer membership program, dubbed Etsy Insider, on Wednesday. Etsy will launch a closed-beta version of the program in mid-September to select customers in the U.S., who will have the option to purchase a seasonal or annual membership. 

Members will receive free U.S. domestic shipping “on millions of items,” along with a birthday bonus and access to special discounts and select merchandise, among other benefits. Members also receive a limited-edition annual gift designed by an Etsy seller.

The program comes at no cost to Etsy sellers. Instead, the company will cover benefits through its membership fee, including free shipping.

Etsy announced its new buyer membership program on the same day it released its second-quarter earnings. For the period, gross merchandise sales were down 2.1% year over year to $2.9 billion, while revenue was up 3% to $647.8 million compared to the year-ago quarter. Net income in Q2 was down 14.4% to $53 million. 

The company’s Insider loyalty program is a key initiative for the year, CEO Josh Silverman said on a Wednesday call with analysts. Etsy has conducted rounds of research and “competitive audits” that will inform the program and rollout. “We’ll test, learn and iterate and are optimistic that, over time, Etsy Insider can be a needle mover, driver of buyer frequency and Etsy love,” Silverman said. 

Etsy positions itself as a marketplace where shoppers can find unique, handmade items. Last month, the company announced a series of updates across its policies and shopping experience. The refresh included a revamped home page and the implementation of standards that clarify that products must be made, designed, sourced or handpicked by sellers. The company also debuted an ad campaign that addressed concerns regarding the rise of automation and mass-produced goods.

With the launch of its new membership program, Etsy said it wants to focus on preserving creativity and the human touch on its marketplace.

“We believe Etsy Insider can become an important lever in turning our strong brand affinity into deeper customer loyalty,” Simona Shakin, vice president of product and retention marketing, said in a statement. “We’re confident Etsy Insider will make it easier and more joyful than ever for buyers to seamlessly discover pieces they will love from real people they’re proud to support.”

While Etsy is emphasizing the artisans on its platform, the company has faced fierce competition from other e-commerce giants. At the start of the year, Silverman said that Amazon, Shein, Temu and Walmart are taking up sizable market share. Ensuring that mass-produced items are not visible on the site is a big focus for the company. “It’s bad for the brand. And it’s not helpful for our sellers in terms of price competition,” he said at the time. 

Amazon has launched a program allowing sellers using its fulfillment services to issue product refunds without customers returning the item, according to an Aug. 13 announcement.

Fulfillment by Amazon Returnless Resolutions will help sellers avoid returns-related fees by cutting out the physical reverse logistics process and letting customers keep the items instead, the company said. Some products are ineligible for the program, including dangerous goods, heavy and bulky items, and those with an average sales price above $75.

Sellers and customers tapping into Returnless Resolutions have to be in good standing with Amazon, as defined by the company. Only customers without "a history of abuse" can be offered a returnless resolution, the company said. If the shopper making a return is deemed ineligible, the item may still be sent to an Amazon fulfillment center as normal.

Amazon aims for Returnless Resolutions to increase customer convenience while providing sellers with a more cost-efficient way of dealing with returns. The program could be particularly convenient for international sellers and businesses with low-cost items, Gopal Pillai, Amazon vice president of worldwide returns and recommerce, said in a separate post about Returnless Resolutions.

There are no program fees associated with Returnless Resolutions, and tapping into the program allows businesses to avoid returns-related charges levied by Amazon. The company is raising its fee structure as return logistics costs grow. 

For example, the company expanded its returns processing fee on June 1 for products with high return rates, excluding apparel and shoes. Amazon said the charge covers the operational costs of returns while reducing waste.

Amazon is one of many companies rolling out "keep it" returns options that cut out the often-expensive reverse logistics process entirely. This tactic is particularly common for lower-value items, according to a 2023 report from goTRG, a returns management solutions provider.

Walmart Marketplace, the retail giant's e-commerce platform, also gives sellers the ability to allow customers to keep their items and receive a full refund. Meanwhile, other retailers are charging returns fees or implementing stricter policies to cover costs.

Walmart is partnering with marketplace StockX to offer an expanded assortment of sneakers. 

The Walmart Marketplace will be StockX’s inaugural strategic marketplace sales channel, a Walmart spokesperson confirmed to Retail Dive in an email Wednesday. Walmart said StockX’s “initial assortment is scheduled to launch on Walmart.com next week with hundreds of coveted pre-verified sneakers, including Nike Jordan 1s, Jordan 4s, Jordan 1 Travis Scotts, New Balance and Asics.”

The StockX marketplace allows buyers and sellers to make anonymous offers on shoes, apparel, electronics and collectibles. Bids are made in real time at prices that reflect current demand, the company says on its website. Shoes sold on StockX are verified new and in their original box. The partnership is set to launch on Tuesday. 

“Adding a range of coveted current culture items from StockX helps Walmart Marketplace continue its rapid acceleration by offering more items that customers want and love,” StockX said in a Thursday statement to Retail Dive. “And, Walmart’s vast customer base – many of which are new to StockX – will get to experience the platform in a way that is convenient for them. StockX sellers can also reach this built-in audience of loyal Walmart customers without sacrificing their current volumes on StockX, as products will be listed across both platforms at scale, delivering massive demand to StockX sellers.”

Walmart’s Marketplace has seen 30% growth during the last four consecutive quarters, Manish Joneja, Walmart’s senior vice president of U.S. Marketplace and Walmart fulfillment services, said during a Wednesday global retailing conference hosted by Goldman Sachs.

“The play is to get that wider assortment from all the partners, with more examples like StockX, where you see more and more brands coming on board, serving our customers, which brings a wide and deep assortment,” Joneja said, according to a conference transcript. Bringing a variety of different brands on board enables buyers to discover items that resonate with them. For sellers, the partnership offers a fair, low cost and profitable platform, Joneja said.

The StockX partnership builds on news last week that Walmart Marketplace is expanding into collectibles, along with other categories including premium beauty and secondhand items.

The retailer’s preowned marketplace, Resold at Walmart, will offer 5 million items from 1,700 sellers, while the expanded beauty offering will feature over 20 new brands in its initial assortment. The retailer’s collectibles shop will offer 0% commission through Oct. 31 for dolls, action figures, trading cards, sports memorabilia, comic books, records and musical instruments, according to an announcement.