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The end of the eCommerce boom for online retailers?

The German eCommerce market continues to grow steadily – yet fewer and fewer providers are actually benefiting from it. According to a study by the EHI Retail Institute and Statista, the 1,000 largest online shops achieved 42.8 billion euros of eCommerce sales in 2017. Compared to the previous year, this corresponds to a growth of 8.1 percent. The ten largest shops, however, generated more than 40 percent of this figure. By contrast, the smaller online retailers – ranked 501 to 1,000 in the survey according to their sales figures – have a market share of around nine percent. When we compare figures with previous years, the heavy market concentration of the larger webshops becomes noticeable. According to these figures, small online shops have now been posting lower average sales for the third year in a row, compared to the previous year. In 2017 this was 3.7 billion euros, in 2016 3.8 billion euros and in 2014 as high as 4.3 billion euros.

How the platform economy is turning the online retail business upside down

The reason for this unbalanced composition of the eCommerce market can be found in the growing importance of the platform economy. This term describes the sub-sector of eCommerce that is organised via digital marketplaces such as Amazon, Zalando and Otto. As so-called intermediaries, these enable the direct interaction of two or more parties. Platforms only acquire their strengths through so-called network effects. The higher concentration of a network of providers and consumers enables stronger user interaction on both sides and makes the marketplace more attractive. This is why the platform economy strengthens the position of only a few larger players.

More and more online retailers are using digital marketplaces as additional sales channels

The results of the study by the EHI Retail Institute and Statista clearly show the increased use of platforms by online shops. This increase is most noticeable on Amazon. There, some 43 percent of online retailers already use the Marketplace platform as a sales channel – an increase of seven percentage points over the previous year.

We are witnessing […] that marketplace activities are increasing overall. More and more large online retailers operate their own marketplaces, which in turn are increasingly used by others to benefit from their extended reach”, says Christoph Langenberg, Data Analyst & Project Manager for eCommerce Research at the EHI Retail Institute.

As a retailer, should you now follow the same path as the platform giants of Zalando and others? Even if the temptation to have your own platform is great, there are severs risks involved, because a functioning marketplace does require huge networks. According to retail expert Gerrit Heinemann, a platform should achieve at least 500 million annual visitors to appear among the first results on Google. And a good Google ranking is necessary because of the purchasing behaviour of customers. But what options are available to you, the retailer, in order to survive in the market?

These growth opportunities remain open to the online retailer

Over the past year, multichannel retailers who sell their products across multiple channels were particularly successful. According to the German E-commerce and Mail Order Association, they achieved the highest sales growth in 2017. In the course of multichannel strategies, small stationary retailers in particular have grown most of all via the Amazon Marketplace. As an online retailer, you should consciously decide whether you also want to sell your products via existing marketplaces. A disadvantage of such platforms is the loss of direct customer contact, which the respective platform will take over for you. But the sales opportunities on the large marketplaces increase, since you can now penetrate into otherwise inaccessible or unreached markets cost-effectively.

We recommend that online retailers actively decide for or against selling on digital marketplaces.

We recommend that online retailers actively decide for or against selling on digital marketplaces.

As an online retailer, design your prices so that you remain successful

The increasing market concentration in eCommerce is presenting online retailers with fresh challenges. To maintain their own profitability, it has become essential to establish active price management. Large platforms rely on extremely dynamic and effective price setting. Many online shops already use price management tools to pursue clear pricing strategies that offer them decisive advantages on the market.

With our price management software blackbee you can perfect your pricing strategy in eCommerce. Our pricing tool shows you how your prices hold up to the competition. You will also discover which prices you should lower to which level in order to increase your market share.

Link tip #1:

If you decide your online shop needs to increase turnover further on sales platforms, our article, “Online marketplaces: How you, the retailer, can find the right platform for your business”, offers more information on the various marketplace models.

Link tip #2:

If, on the other hand, you want to increase the profitability of your online shop, our article, “Success factors in eCommerce – Some tips towards a profitable online shop”, provides you with the most important factors for a successful web shop.

 

Would you like to learn more about the price management solutions blackbee can offer you? Talk to our experts, they will be happy to assist you further!