While it started with the COVID ecommerce rush, rising operational costs and ongoing margin constraints are continuing to drive brands and retailers toward online marketplaces, otherwise known as third-party commerce (3P commerce). The benefits of having access to a near-limitless supply of unowned inventory (on the retailer side) and having access to other brands’ and retailers’ sales channels (on the brand side), has been compelling to put it mildly. It’s a key reason why so many companies on both sides of the equation are jumping into the brave new world of online marketplaces.
And new research from Rithum suggests that this is just the beginning. In a survey of 550 retail executives in the U.S., UK and Germany, Rithum found that 99% of respondents think third-party selling is the best model to weather economic volatility, and three out of every four respondents said it’s vital to their company growth.
The momentum surrounding 3P commerce is about more than just technological advancement; for many retailers and brands it also has required a philosophical shift. For many years, legacy retailers vehemently, and vocally, resisted selling on Amazon — and yet now, even brands like Gap and Victoria’s Secret have storefronts on its marketplace alongside countless others. Not to mention that many retailers also have launched their own marketplaces in order to boost their selection without the risk of holding inventory. It’s all part of an ongoing paradigm shift in ecommerce — not only have consumers bought in to the idea of 3P commerce, but brands and retailers have as well.
Rithum’s first annual State of 3P Commerce report, conducted by Wakefield Research, reveals how 3P commerce is growing exponentially due to consumer demand, while also helping retailers and brands weather economic volatility. And AI automation is poised to propel this expansion even further.
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“For retailers, 3P commerce provides the ability to offer an increased selection of products and helps reduce the risks of managing fulfillment — an issue we saw firsthand with recent supply chain disruptions,” said Lou Keyes, CEO of Rithum in comments shared with Retail TouchPoints. “For brands, it distributes risk by offering a way to establish a multichannel selling strategy, providing more access and control over how they reach consumers across different platforms. With recent advancements like AI and automation, 3P has become even more efficient and profitable, allowing businesses to streamline operations, reduce costs and maintain flexibility. Our study found that more than half of global executives say they wouldn’t be able to sell cross-border without 3P opportunities. This signals that 3P is now seen as a crucial lever for growth, now and in the future.”
‘A Significant Shift’ in the Way Brands go to Market
Consumers today are shopping across more online channels than ever before, and 3P commerce platforms have emerged as a key method for brands and retailers to reach those shoppers wherever they are. In fact, 40% of the companies surveyed by Rithum said that 3P commerce models help them reach a larger consumer audience.
“What we’re seeing is a significant shift in the way brands and retailers go to market,” said Keyes in a statement. “Businesses are embracing the agility that the 3P model provides to meet consumer demands and grow in ways that traditional models simply can’t match. Today, retailers and brands are feeling the pressures of the ecommerce market from all sides. What may feel like a crisis is actually a turning point filled with opportunity.”
And businesses are clearly leaning into that opportunity: 70% of global executives said that up to half of their total revenue now comes through third-party selling, with 29% saying it accounts for more than 50% of their total revenue. No surprise then that 59% of those surveyed said they plan to increase their use of 3P selling.
Automation, AI Critical for Multichannel Selling
While generative AI is getting all the hype right now, AI’s more practical uses, for tasks such as automating supply chain operations, also looks set to be transformative for the retail industry. Nearly all executives in the Rithum study (96%) said their company will never be able to meet growth expectations if they cannot get a handle on their ongoing supply chain challenges, and 91% see AI as very important to their ability to successfully manage their increasingly complex ecommerce operations.
This becomes particularly important as brands expand the number and type of channels they are selling through. In fact, 44% of executives said their businesses have missed or delayed fulfillment of orders because of problems managing multiple ecommerce platforms, and 43% said customer service also has suffered.
Despite these difficulties, organizations still see the value in 3P selling and will leverage every competitive advantage to implement the model into their strategy, including AI and automation tools. One-quarter of the businesses surveyed said they plan to keep their current number of ecommerce platforms, and only 4% of global executives said they will “pare back some” to make 3P selling more manageable.
