Marketplace models have powered and scaled commerce for millennia, but the digital shift combined with the online marketplace options now available to buyers and sellers are reenergizing marketplace dynamics for Main Street, where small and medium businesses (SMBs) are reinventing themselves with new digital storefronts and strategies.
Marketplaces as Retail’s Front Door: What Sellers Need to Thrive in This New Digital World, a PYMNTS and Visa collaboration, surveyed nearly 1,100 individual and business marketplace sellers from across the U.S. to understand how marketplaces are being used, what the popular products are and how payouts are sent and received.
What we found is a diverse ecosystem of players, small to large, connecting and transacting thanks to online marketplace efficiencies. Payments, however, remain a challenge, as different types play catch-up and attempt to catch on with marketplace users.
“Digital marketplaces are a beneficial yet underutilized tool for Main Street businesses and for individuals using web sales to supplement their personal incomes,” the new report states.
Noting that only 3.5 percent of all Main Street businesses and 16 percent of all adult U.S. and microbusinesses report using digital marketplaces, the report states that “digital marketplaces, which enable [sellers] to list products and accept payments with little expenditure, can … provide a cost-effective alternative to building payment operations from the ground up. The only question is how marketplaces can draw these sellers to their platforms.”
Faster Payments Making Fans
It seems the best way to attract sellers now revolves around payments speed.
Classifying respondents in five categories of sellers — individuals, microbusinesses, small businesses, mid-sized businesses and large businesses — the Marketplaces as Retail’s New Front Door study found that “businesses in our survey that sell via online marketplaces wait an average of 3.3 days before they receive sales proceeds in their bank accounts, and 27 percent of those businesses report waits of between three to five days.”
That’s why so much attention is focusing on the marketplace payments experience — and for good reason. The study notes that 60 percent of surveyed businesses are “somewhat” to “extremely” interested in switching to marketplaces that offer real-time settlement options.
“The SMBs we have studied have few credit options available to bridge their cash flow crunches, however, and they now regard getting paid more quickly after sales are made as an essential service from virtual storefronts. One-third of all surveyed businesses and individuals selling on marketplaces would consider switching marketplaces for access to real-time settlement options that can help them get the funds they need,” per the new study.
Many Uses for Marketplaces
Observing that online marketplaces are “the new malls,” Marketplaces as Retail’s New Front Door states that “62 percent of the businesses in our study that use marketplaces do so to reach more customers, and that 78 percent of surveyed individuals and microbusinesses in our study use marketplaces for the same reason.
Businesses also listed ease of marketplace use (21 percent) and relative ease of marketplace payouts (12 percent), which increases among individuals and microbusinesses (16 percent).
Even so, there’s a lot of variation in how marketplaces are now being used.
“Not all businesses in our study rely on marketplaces to the same extent, however,” the report states.
“Our research indicates that 65 percent of surveyed businesses use marketplaces to complement their physical storefronts, while 27 percent use marketplaces as their only storefronts. All marketplace sellers stand to benefit from expedient payouts, but quick and easy funds access is even more crucial for the 27 percent of surveyed sellers that use digital marketplaces as their only storefront.”