The growth of e-commerce platforms and its importance for online commerce

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Why are e-commerce platforms growing? What does the growth of platforms mean for manufacturers and consumers? How should we respond to the growth of platforms?

E-commerce platforms have grown significantly in recent decades, and their role in global commerce has grown with it. Platforms such as Amazon, eBay, Walmart, Etsy and Temu have changed the way products are sold and bought online. This growth has been made possible by advances in technology, improved logistics solutions and changing consumer buying habits.

The Digital Commerce 360 graph shows the revenue performance of the top 100 e-commerce platforms. The Gross Merchandise Value (GMV) of e-commerce platforms has doubled in just six years, with no end in sight.

The growth of e-commerce platforms has provided new opportunities for product manufacturers who might otherwise not be able to reach a global market. This is an attractive opportunity, especially for small and medium-sized enterprises that would otherwise not have the resources to reach international markets. Platforms offer a ready-made customer base, reliable payment systems and often logistics services that facilitate international trade. This has significantly reduced barriers to market entry and enabled new business models to emerge.

Read also: International selling on Amazon – how to enter new markets?

The growth of e-commerce platforms also presents new threats and challenges for product manufacturers. Large platforms dominate the market, and challenging them as a single vendor can be difficult or almost impossible. The explosive growth of Temu in Finland is an example of how quickly a large e-commerce platform can take attention and shoppers away from traditional online stores. Platforms also impose criteria on sellers completely independently, which can pose new challenges for product manufacturers. Consumer brands need to constantly evolve their products and practices to remain competitive. The analytics and marketing tools provided by platforms help to do this, but also require skills and resources.

Read also: The most common tripping points when going to Amazon – and how to avoid them

Overview: what are the different platforms and how do they work?

Amazon: The world’s largest e-commerce platform, where most sales are made by third-party sellers. Amazon offers highly attractive global demand and sales support functions to help sellers. Amazon enables sellers to quickly reach a large customer base globally.

Read also: Why Amazon: the world’s largest shopping site opens up opportunities for businesses of all sizes

eBay: A well-known online shopping platform where sellers can sell both second-hand and new products, either by auction or at a fixed price. Sellers are responsible for inventory management and delivery.

Read also: eBay – International e-Commerce Platform

Walmart Marketplace: The online shopping platform of one of the largest retail chains in the US. It provides access to a broad customer base and Walmart’s logistics services. Sellers must meet certain requirements, including US business registration and a proven track record of e-commerce success.

Read also: Walmart Marketplace –Growing E-Commerce Platform

Etsy: e-Commerce platform specializing in handmade and customized products. Etsy is popular with manufacturers of handmade products and sellers are responsible for inventory management and delivery.

Read also: Etsy: A Growing E-Commerce Platform for craft enthusiasts

Temu: A new and fast growing platform offering very low prices directly from Chinese manufacturers. Temu’s popularity is driven by aggressive marketing campaigns and gamified shopping experiences.

Read also: Temu: an e-Commerce Platform of Explosive Growth

Threats: What does the growth and popularity of platforms mean for product manufacturers?

The growth and popularity of e-commerce platforms brings with it significant threats and challenges for product manufacturers. Firstly, the highly competitive nature of the platforms requires significant investments in marketing, advertising and quality assurance. This increases costs and risks, and requires considerable skills to succeed. The price competition inherent in platforms can lead to reduced margins, putting pressure on profitability. The social proof review feature is part of almost all e-commerce platforms, placing even greater value on quality assurance and standards. 

Read also: Marketing on Amazon – How to differentiate from competition

Companies’ dependence on the platform ecosystem makes them vulnerable to platform decisions, rules and algorithm changes. Changes in visibility algorithms can quickly and dramatically affect sales. Companies that are strongly tied to one platform can suffer significant losses if the platform’s policies change. On Amazon, for example, your competitors may buy your products, rate them poorly and even report a fake security risk. In the worst case, the platform may completely block your sales because of a security risk until you have been able to disprove the claim. This poses new threats to vendors from platforms and requires platform-specific expertise to resolve the situation.

When the big platforms come to Finland, they bring with them an international offering and significant financial resources. This means that Finnish companies must be able to respond to the international competition that is inevitably coming to Finland as platforms grow. This requires local companies to invest in platform sales skills before it is too late. At worst, this could mean that local companies are left behind, with Finnish consumers’ money going to foreign operators. The explosion in popularity of Temu among Finnish consumers is a vivid example of how a large international e-commerce platform can take market share and shift cash flows abroad.

Read also: Amazon vs Temu: How will Temu challenge Amazon in Europe?

Opportunities: What opportunities do e-commerce platforms offer?

E-commerce platforms offer significant opportunities for product manufacturers. Platforms such as Amazon and eBay allow products to be sold to international customers without large upfront investments. This opens doors, especially for small and medium sized enterprises, which can reach a wider customer base and grow their business.

Growing with different platforms requires strategic planning and resource allocation. Companies need to make effective use of the analytics and marketing tools offered by the platforms. E-commerce platforms can boost exports and international business by offering ready-made customer bases, reliable payment systems and often also logistics services that are vital for SMEs.

Read also: Amazon FBA-model – What it is and why do we recommend it to our customers?

In summary, e-commerce platforms are a double-edged sword: they offer great opportunities for growth and expansion, but also require careful planning, quality control and competitiveness. Product manufacturers need to make effective use of the tools and services offered by platforms and adapt to ever-changing market conditions in order to survive. However, this does not mean that the opportunity should not be seized. 

Read also: This is how your product will succeed on Amazon

Our expert tour guides will be happy to discuss your company’s potential in the e-commerce jungle with you – contact us for a low threshold.