Remember a couple of years ago, the retail marketplace model was the “next trend”, the “future of e-commerce”. Not a single day passed without an outpouring of blog posts, interviews, and case studies of customers in e-commerce who decided to become a retail marketplace. There wasn’t a single day we didn’t hear about the benefits of becoming a marketplace. It felt like a magical formula to save e-commerce from being stuck in the same code for 20 years. A breeze of fresh air and excitement was blowing.
Websites and Front-ends have never been so attractive as now, but the customer experience within them has stayed largely unchanged: browse, put in cart, pay, receive.
But the cool kids of e-commerce are living in their valley of Death : slow decline of the model, fewer crazy valuations, fewer PR announcements, and even some retailers giving up on the model like REWE in Germany. Another sign of disillusionment is the intensification of market concentration: in 2024, 48% of total worldwide marketplace sales by the top 100 were made by just three actors (source: Digital Commerce 360).
In Europe, the top 100 retail marketplaces account for 87,5% of all marketplace sales according to Cross Border Commerce Europe, a business facilitator in the marketplace/platform business.
Why the Retail Marketplace Model Is Struggling
Why such a situation? Pretty straightforward answer: the marketplace model has become a financial bottomless pit to operate.
Ten years ago, when it was less regulated, all retailers envied it: bigger catalogues, crazy upsell and cross-sell opportunities, and substantial savings on fixed costs like logistics and payments.
ManoMano, BackMarket, Vestiaire Collective, ASOS, or even traditional giants like Carrefour were there to sell the hype. The triptych of personalisation, diversification, and monetisation was appealing. It was also fueled by Mirakl, the French SaaS platform that invested heavily to make anyone a marketplace operator. Everyone wanted to disrupt traditional commerce or reinvent their identity. Traditional retailers, especially, were losing relevance as hypermarkets and malls lost their Saturday afternoon appeal.
Consumers wanted a personalised experience, tailored to their expectations. In just three clicks, they could access a wild catalogue of goods they never knew they needed, just for them.
Marketplace Platforms Still Have Untapped Potential
Struggle does not mean it is finished, I still believe this model has incredible potential to rethink how we do e-commerce :
- It boosts overall commerce efficiency, offering multiple product distribution touchpoints, not just traditional, high-barrier channels.
- It brings digitalisation to vendors who were previously left out. COVID proved that even small shops with limited digital literacy can join the e-commerce game.
- It reimagines customer experience through endless monetisation possibilities, by inviting third parties to enrich the journey.
To explore untapped potential, platforms must offer more than just a marketplace of products; they must now create layered experiences. You and other participants co-create value, transforming a boring online store into something immersive.
This multiplies the creative potential of a website. Collaborations that traditional e-commerce would never consider, like exclusive segments, capsule drops, or pop-up stores, suddenly become brand storytelling tools.
The Hidden Cost of the Retail Marketplace Model
But behind my optimism for a brighter future, I can’t help but think this model is suffering. Why?
The cost of running a retail marketplace model has exploded: tax compliance, payments, logistics, customer service, you name it. The model, as it was expanding, became more and more regulated, especially in Europe.
Logically, regulations create market opportunities, and every SaaS vendor wants their cut of the retail marketplace model.
An interesting phenomenon happened: Operators (aka Retailers) got lured by the next-gen thing FOMO, and burnt millions into short-sighted projects, fueled by the greed of vendors. They sold the illusion of quick profits and exponential revenue to operators. Money calls money, VC burned their cash to Vendors who barely reached the break-even.
Retailers became conscious that being Amazon or any pure player in the field is more challenging than the vendors had led them to believe.
A Reliance on Chinese Vendors Backfires
Leading to a chain reaction: the extreme dependence on Chinese vendors. Operators scrambled to recruit them. Fueled by success in their domestic markets, Chinese sellers flooded into new regions. They brought affordable prices and massive inventories, but also poor customer service and scratching head payout problems.
These vendors have become a “must” for launching marketplaces. But paradoxically, they also contribute to UX decline. Instead of improving experience design, operators maxed out their catalogues. The result? A sea of stuff nobody asked for. An overwhelming and directionless offer.
How many times have you scrolled endlessly through vendors and felt nothing really matched your intent? That’s the trap: quantity over quality.
A Shift Away from Global Commerce
Since the pandemic ended, consumer behaviour shifted. People no longer crave items from across the world. During lockdowns, overseas shopping offered escape. Now that borders have reopened, shoppers prefer to buy physically abroad.
Add rising tariffs and growing protectionism from large economies, and the retail marketplace model begins to wobble. Marketplaces’ first idea was about global commerce, and cross-border trade was a must for scale and relevance. But today’s world is in fragments, dealing with cross-border issues is a game to play cautiously
Some say the model is simply maturing; obviously, it’s not for everyone. 10 years ago, I believed in something more open, before the current handful of platforms began defining what a marketplace “should” be. When it emerged in Europe, the idea was to revive digital commerce: to build platforms as convergence points, not cold transactional spaces. Not a checkout tunnel where you dump things in a cart and leave.
Payments Are the Breaking Point
I used to say a couple of years ago: “The marketplace is an investment in the future.” I wasn’t that wrong. But if we zoom in on payments, because we spill the tea on payments, the retail marketplace model in Europe also suffers from specific regional problems that seriously damage its profitability:
- The explosion of interchange costs on cross-border transactions makes it more difficult to attract cardholders outside Europe. Vendors are less interested in getting a big invoice for payment fees. Therefore, they challenge Operators on both the cost of service and its efficiency. They witness high costs for payment services (pay-in but also pay-out) versus a lack of efficiency. Many operators follow the traditional playbook of merchant acquiring, which makes the merchants (here, the vendors) pay for the whole service. But do vendors agree to pay an extravagant ticket price just to reach customers they could access through other channels?
- The PSD2 obligation to segregate and escrow funds adds a heavy operational layer, even for platforms that don’t transact high volumes through their marketplaces. It complicates the setup with the need for Payment Institutions, KYC obligations, even for merchants that only occasionally transact. It’s a binary approach that damages the model’s profitability. Regulation was designed with big platforms in mind, but without a gradual framework to ensure the model was sustainable. The result? Some offshore platforms scale their business outside Europe first, then invest heavily in the European market later. That doesn’t help local actors, and few survive.
- Acquirers and schemes remain uncertain about the model. Acquirers now prefer to consider marketplaces as merchants of record, which goes against the original principle of marketplaces. Operators don’t understand why they should suddenly assume the risks of others because their payment service providers can’t underwrite and map credit risk across sellers. But scheme rules and technical capabilities restrict the model’s growth; we monitor transactions poorly and ask far too much for relatively small volumes.
How to Inject New Life into the Retail Marketplace Model
So how could we put a little bit of va va voom into this model that still remains ambitious?
- Changing our vision of marketplaces from a compliance point of view. Consumer protection is important; however, it is important to balance it with the merchant’s capability to execute and the size of the business involved, as well. Consumers now prefer using cheap platforms from China over a European retail platform, and they’re still not as protected.
- Promoting easier and safer alternatives to card payments to alleviate the chargeback sword of Damocles hanging over merchants’ heads. A safer alternative could help merchants avoid being wiped out by chargebacks.
- Creating clearer and harmonised rules when it comes to processing a marketplace transaction via international card schemes. Acquirers today stay in the middle. I still believe they do not understand how this model works and only onboard mature models because the schemes did not harmonise. Today, it is still too obscure to build a standardised product that allows marketplace operators to process transactions seamlessly.
Schemes do not want to deal with marketplaces and instead support extreme concentration to mitigate their risk. But that is not a winning strategy. Once a better solution appears for marketplaces, they’ll abandon the current setup.
China still serves as a cautionary tale; the most developed market for platforms is now cardless, schemeless. Platforms there built their mechanisms to ensure efficient transaction monitoring. I wouldn’t be surprised to see Ant Financial begin selling its payment solution, ANTOM, to European marketplaces.
