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How Marketplaces are Radically Transforming the Australian Retail Landscape

The Australian eCommerce landscape according to Australia Post is estimated to be worth $63.8 bn in 2022, and it is anticipated to grow over the next decade, as millennials and Gen Z make up the vast majority of the workforce. By 2032, eCommerce is anticipated to equate to one in every $3 spent in retail, making it one of the key underlying drivers of retail and CPG business growth over the next decade. 


Globally, marketplaces like Amazon, eBay and Tmall account for approximately 62% of all global online retail sales. Locally, whilst marketplaces like Amazon do not wield the power they do in markets like the US and the UK, many Australian brands (both retailers and CPG brands alike) underappreciate the shift and rise of marketplaces in the Australian market. In the first quarter of FY24, online sales via marketplaces in Australia grew by 30%, according to the Australia Post online quarterly trends report, which is significant given variety stores saw average growth of 17%. 


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Australian consumer embracing marketplaces in record numbers


Australia digital statistics

A swag of recent reports and industry insights suggest that Australian consumers are now turning to marketplaces in greater numbers than ever before and sees marketplaces as a key part of the consideration set when shopping online.


  • According to the global report recently released by Rithum, 61% of Australian consumers visit 2 – 3 marketplaces regularly.

  • 33% of Australians now begin their search via marketplaces and retailer sites – with 1 in 10 defaulting to Amazon as their starting point to research products down under.


Australia digital statistics - search

Whilst according to the findings of Pattern's 'Marketplace Consumer Trends Report - 2023', 88% of Australian shoppers have bought from a digital marketplace in the past year, which shows the pervasiveness of marketplaces in the online shopping landscape.


These behaviours and utilisation are likely to become increasingly embedded as global marketplaces continue their onslaught in the Australian market and local players also dial up efforts to fend off their global counterparts.




Global players increasingly dominating local marketplaces


As recent as the last 12 months, the marketplace landscape in Australia has changed demonstrably with Temu’s entrance into the local market. Since its launch, Temu has substantially grown its online audience. In June, its audience reached 9.2m Australians and was the number one downloaded IOS app in the country, beating not just shopping applications from Amazon, Woolworths and Shein, but also social media apps from behemoth-tech corporations.


Significant investment in marketing spend, combined with a cost of living crisis, has enabled Temu to unseat homegrown marketplaces including the likes of Kogan, Catch and MyDeal.



Temu in Australia


Unlike other marketplaces, however, Temu's business model is slightly different, with merchants only responsible for production, listing and shipping their items to warehouses, whilst Temu sets prices as well as manages sales and marketing, and fulfilment.

The big guns jostling for position...

  • Amazon:  75.6M visits December 2023 | Largest Shopping & eCommerce Site

  • eBay.com.au:   54.3M visits December 2023 | 2nd Largest Shopping & eCommerce Site

Whilst many have been underwhelmed by Amazon’s entry into the Australian market, others are of the belief that they are the sleeping giant which will slowly and surely become a powerhouse of the Australian retail landscape. Over the last 12 months, Amazon has surpassed eBay.com.au as the number one shopping and eCommerce site in Australia, and by far the largest marketplace.


Locally, Amazon has been expanding, with a recent $70 million-plus investment into a new Perth DC. At 20,000 square metres, it doubled its local capacity. In addition, Amazon is building its second fulfilment centre in Melbourne in Craigieburn, which will be around 209,000 square metres across four levels – the equivalent to 11 Melbourne Cricket Grounds. The half a billion-dollar investment is on track to be completed in 2025 and is the second robotics enabled centre in Australia. The investment in capacity reinforces not only Amazon’s commitment to the market, but its confidence in its market trajectory.   


Central to delivering its growth aspirations is driving uptake of the Amazon Prime membership to fuel repeat users. According to the Pattern marketplace report in 2023, 43% of Australian online shoppers now have access to their own or someone else’s Amazon Prime account, and this is continuing to grow year on year.


Amazon's local sales are still somewhat modest, reflecting in their scale a mid–larger retailer in Australia. However, Amazon is seeing a doubling of sales over the past 12 months, and if we look ahead, Statista data demonstrates significant growth, particularly in spaces like electronics, appliances, apparel and footwear. As brands increasingly utilise Amazon as a core distribution channel, we will continue to see growth in their media offering – with media investment anticipated to reach $1.9bn for Amazon by 2026 in Australia, according to data from Statista.


Amazon sales graph



Can Kogan, catch.com.au and others compete with global leaders?


  • Catch.com.au:  8.1M visits December 2023 | 11th largest Shopping & eCommerce Site

  • Kogan.com:   7.9M visits December 2023 | 14th largest Shopping & eCommerce Site

  • Mydeal.com.au: 4.7m visits December 2023 | 16th largest Shopping & eCommerce site

As the global juggernauts continue to scoop up share, local players are having to work harder to stand still. Retail conglomerates continue to invest heavily in the marketplace space, taking advantage of their audience size and scale, and as a result Kogan looks to be in the most compromising position to hold share and drive growth over the long term. As Wesfarmers OneDigital pushes heavily into its ambitions to build a strong digital ecosystem, catch.com.au benefits from a distinct set of advantages. Firstly, as part of the Wesfarmers network it benefits from the growth and investment into OnePass. The membership which spans Kmart, Target, catch.com.au, Bunnings, Officeworks and InstantScripts provides consumers with the opportunity to gain access to free delivery, 5x Flybuys points at selected retailers, discounted membership for Disney+ and much more.


Wesfarmers' 2023 annual report suggests OnePass members are valuable, and increasingly engaged and connected across the group. Around 70% of members have linked their account across two or more group brands and OnePass transactions represented an increasing share of retail partners’ online transactions during the year, with penetration rising in the second half. OnePass members are also typically younger, digitally native and spend more online than non-members, with over twice as many online transactions per year and higher conversion rates of online baskets. 


Catch.com.au also benefits from the physical footprint provided by both Kmart and Target stores, by enabling click and collect for a portion of the range. 


Despite its distinct advantages, year-on-year revenues for catch.com.au have declined from $510m in FY22 to $354m in FY23 - a sign that global marketplaces that are aggressive on price are having an impact.


MyDeal - which was acquired by Woolworths in September 2022 - also benefits from being part of a much larger digital ecosystem being built by Woolworths. In November 2023, Woolworths launched its Market Plus which will enable sellers to sell products across Woolworths group marketplace businesses, including MyDeal, Everyday Market from Woolworths and the newly launched BIG W Market’. This creates an opportunity for sellers to tap into a growing network and for Woolworths to provide sellers with greater reach – providing distinct reasons/benefits to leverage the Woolworths portfolio of sites. As is the case with OneDigital, mydeal.com.au also leverages Everyday Rewards as a loyalty proposition to provide added reasons to shop.




Developing an effective marketplace strategy


With marketplaces set to reshape the Australian retail landscape over the next 5 years, it's vital that both retailers and CPG / FMCG brands begin to heavily lean into developing a robust marketplace strategy...


  • Assess and determine the right marketplaces for your brand or category: Whilst Amazon and eBay boast by far the biggest audiences, assessing which categories sell best, the type of products that sell best and how products are fulfilled, matters. Good marketplace strategy isn’t just about being available everywhere, its about determining the most effective channels and ensuring you have the right propositions to engage the target market.

  • Continuously monitor the market for new entrants and key market shifts: Marketplace offerings are rapidly evolving, new entrants in niche spaces are entering the market and the fight for eyeballs and stickiness will fuel more innovation, making it paramount to continue to monitor the market and adapt your strategy accordingly.

  • Know what drives discoverability and conversion: Algorithms and content are paramount to drive discoverability and conversion on marketplaces – but each marketplace is different and therefore it's important to understand the critical elements that determine how your product ranks and drives repeat purchase to maximise exposure.



 


Arktic Fox is a leading consultancy and advisory helping retailers and CPG | FMCG brands alike to derive value from eCommerce and the digital shelf.  Need some assistance? Get in touch.

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