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Learn how OC&C thinks about the future of digital marketplaces
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Industry NewsThe News 📰
Bain’s new boss pulling firm back from China - The firm will reduce its advisory work in “sensitive industries” in China amid heightened uncertainty of how China’s regulatory environment will evolve. Read more.
BCG launches center for geopolitics - Boston Consulting Group has launched a new center for geopolitics to help businesses navigate the complexities of global political risks. The center combines geopolitical insights with BCG's expertise in international strategy and market analysis. Read more.
Election clash over consultancy spending - Both UK parties plan to cut consulting costs, with Labour aiming to save £745 million annually for public services and the Conservatives seeking to restore civil service levels. Read more.
PE and professional services firms face tax crackdown in UK - The UK’s HMRC is cracking down on LLPs, potentially costing PE & professional services firms hundreds of millions. The move focuses on "salaried member" tax rules, probing whether some LLPs have misclassified some members as self-employed and paid less tax as a consequence. HMRC's sudden change has drawn backlash from sectors and trade bodies. Read more.
Just 5% of the main skills job candidates need today will be the same in three years - McKinsey highlights that companies must adopt skills-based hiring and foster continuous learning to bridge the gap between current employee capabilities and future needs. This shift is crucial for maintaining a competitive talent pipeline. Read more.
Consulting job security wanes - Consulting firms, facing reduced demand and economic pressures, have cut job vacancies by over 80%, with top firms posting just 248 jobs in 2023, down from 1,389 in 2022. Redundancies are rising, with professional services witnessing 3% of employees laid off, a number set to increase by the end of 2024. Read more.
New EY chief rules out split plan - EY’s new CEO, Janet Truncale, has decided against reviving the firm's plan to split, instead opting to reduce bureaucracy and streamline operations. The new strategy, named "All in," emphasizes unity and investment in client advisory services. Read more
Best of the rest: Private equity groups poised to own one in three top US accounting firms,
BCG Appoints Dr. Nikolaus Lang Global Leader of the firm’s Think Tank, The Henderson Institute, Interpath Advisory has announced the launch of a new office in France, Kearney adds four to PE practice
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Interesting Detours 🔗 The Next Wave of Digital Marketplaces - OC&C
E/S: OC&C’s report underscores the robust growth of digital marketplaces. Despite generalist marketplaces remaining the dominant model, there has been a notable shift towards specialist models in most regions. GenAI is set to transform consumer interactions and marketplace dynamics.
Marketplaces on the rise
Marketplaces globally have grown significantly, representing $4.1 trillion in annual gross merchandise value (GMV1) in 2022. This growth spans both first-party (1P) and third-party (3P) sales, with 3P sales making up >80% at $3.4 trillion.
From 2019 to 2022, consumer spend on marketplaces increased by $1.6 trillion, with marketplaces now accounting for around 60% of eCommerce spend.
Some categories, such as DIY/Garden, have seen a decline in marketplace penetration post-COVID as consumers return to physical stores.
Shift to specialists
Specialist marketplaces include vertical-focused (Zalando), second-hand (BackMarket), and hyper-local marketplaces (Pinduoduo), and are gaining share by undercutting high seller fees, offering more customised services and lower take rates vs. large generalists.
Overall, specialist marketplaces grew at an annual rate of 36%, compared to 23% for generalists from 2019-2022.
Generalist marketplaces have seen slower growth in GMV but have managed to increase revenues through higher take rates, which have grown by 30-50% over the last five years. Growth in take rates is driven by offering value-added services such as payments, fulfillment, finance, digital store fronts, and analytics.
GenAI can improve targeting, post-transaction management, marketing, and discovery, offering more personalized and efficient customer interactions.
Regional differences
There are notable differences between marketplace structures in the West and China. In China, generalist marketplaces dominate due to their integrated services (e.g., payment, logistics, & customer support), economic advantages, and widespread consumer trust.
In markets like NA/EU, where a wider range of brands sell D2C online, and maintain control over their distribution and customer experience, the digital marketplaces landscape is more fragmented.
Whereas in China, few generalist marketplaces dominate through economies of scale, Chinese consumers’ preference for SuperApps, and the Chinese government’s support of large e-commerce players to compete globally.
In Europe and North America, the prevalence of direct retail ecommerce has led to more vertical-focused and curated shopping experiences. The trend towards specialist marketplaces is most prominent in Europe, which has a highly fragmented marketplace landscape.
BTO Take:
Opportunities presented by GenAI including consumer personalization, post-transaction support, and lowering the barriers to entry to offering value-added services, could accelerate the shift to specialised marketplaces. A key differentiator will be those who can leverage AI to win at the ‘search and discovery phase’, helping consumers quickly source desired products.
CCP’s financial support to help their largest ecommerce brands compete globally seems to have resulted in a more consolidated domestic market with less competition, potentially hurting Chinese consumers’ wallets.
Charts of the Week 📊
To read the article, see “The rapid evolution of payments in Latin America,” May 7, 2024.
Contribute 🛣️
Working EffectivelyVBA Prompting: Supercharge Excel 💻
Prompt 1: Conditional formatting based on cell value
Create a VBA macro that applies conditional formatting to the range
‘Range’in the ‘[Sheet_Name1]’sheet. The macro should highlight cells with values greater than ‘[value]’in ‘[colour]’and cells with values less than[value]in ‘[colour2]’.Include error handling to ensure the sheet exists and the range is not empty.
Prompt 2: Summarize data and create a report
Write a VBA macro that summarizes data from the ‘
[Sheet_Name1]’sheet. The macro should calculate the total, average, maximum, and minimum values for the range‘[range1]’. It should then output these statistics to‘[Sheet_Name2]’in cells‘[range2]’, respectively. Ensure that the macro checks if‘[Sheet_Name1]’and’[Sheet_Name2]’sheets exist and that the range‘[range1]’contains numeric data only.Excel Shortcut: Insert the Current Date using CTRL + ;
That’s all folks. Don’t forget your timesheets.
BTO Team
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