Blog post

Blog Article

Commerce media implications: The convergence of first-party online retailers and marketplace models

By:
Nikhil Raj
Rama Chanani

May 20, 2024

Online retailers and marketplaces are experiencing a convergence between traditional first-party (1P) online retailer business models and dynamic marketplace business models. Traditionally, 1P online retailers have managed inventory risk by purchasing and selling products directly to consumers. In contrast, marketplaces have served as intermediaries, facilitating transactions between various sellers and consumers without holding inventory.

Marketplaces shift towards 1P online retailers models

A clear example of this convergence of marketplaces towards 1P online retailers can be seen with food delivery. Historically, food delivery presented significant profitability challenges for online retailers and grocers due to various logistical and operational complexities. In response, companies like Grab/GrabMart, Delivery Hero/DMart and DoorDash/DashMart are venturing into quick commerce by adopting a 1P business model. This approach involves taking on inventory risks in urban markets to offer fast and convenient delivery services.

Traditional 1P online retailers embracing marketplace models

Meanwhile, many established 1P online retailers are increasingly moving towards the marketplace business model to broaden their reach. Retail giants like Home Depot, Macy's, Walmart, and Nordstrom have transformed their websites into marketplaces. This shift allows them to offer a wider range of products from vetted third-party (3P) sellers and manufacturers without the need to manage inventory, thereby increasing their e-commerce sales, improving profitability, and reducing risk exposure.

Implications for advertising businesses

The convergence of these two business models has profound implications for building a successful ad business. As 1P online retailers venture into the marketplace model, they must address the needs of a diverse range of long-tail sellers, including those with less sophisticated advertising experience. This requires strategic adjustments in commerce media features and go-to-market (GTM) strategies to accommodate the increased diversity. 

On the other hand, as marketplaces adopt 1P retailer models, they cater to a more sophisticated, brand-centric advertiser base. This shift demands a different approach, including partnerships with agencies, more controlled campaign management, and deeper reporting, diverging from traditional marketplace advertising strategies.

Building a successful commerce media platform

As businesses navigate the complexities of blending 1P retailer and marketplace models to create sustainable and unique business models, it’s essential to leverage commerce media platforms. These platforms should enable and support the unique needs of businesses and advertisers to thrive in an evolving landscape. By providing tailored solutions that meet the specific needs of each business model, commerce media platforms can facilitate the growth and success of online retailers and marketplaces alike.

Get a free consultation from our commerce media experts.

Nikhil Raj

VP of Business, Retail Media, Moloco

SEE MORE
Dark blue arrow to learn more about the subject

Editor’s choice

Shoptalk recap: Top 5 commerce media trends unveiled by industry leadersShoptalk recap: Top 5 commerce media trends unveiled by industry leaders

Explore the top 5 commerce media trends from the 2024 Shoptalk industry leader dinner, featuring insights on first-party data and commerce media advertising innovations.

read more
White arrow to learn more about the subject
How commerce media can boost product discoverability by 10-15XHow commerce media can boost product discoverability by 10-15X

Learn how commerce media boosts product discoverability by 10-15X, accelerating sales and enhancing visibility in the digital marketplace.

read more
White arrow to learn more about the subject
Machine learning for commerce media: The strategic separation of Organic and Ads MLMachine learning for commerce media: The strategic separation of Organic and Ads ML

Learn about the strategic divide between Organic ML and Ads ML in Big Tech and how to master commerce media advertising to improve campaign effectiveness with relevance and revenue generation.

read more
White arrow to learn more about the subject
Navigating the path to building a successful ad business with the right flexible technology partnerNavigating the path to building a successful ad business with the right flexible technology partner

Examine the strategic importance of building an ad business for online retailers and marketplaces, highlighting its impact on user experience, seller empowerment, revenue growth, and market competition.

read more
White arrow to learn more about the subject

Want to learn more?

GET STARTED
White arrow to learn more about the subject

Subscribe to our newsletter

arrow top