“Revenue growth for classified marketplaces, even for the big players, had started to slow before Covid-19 and this is likely to have continued, but there are still large many opportunities available,” said Malcolm Myers, founder & CEO of European Internet Ventures, in the opening presentation at this year’s virtual Global Online Marketplaces Summit.

Myers used data showing the proportion of recent investments in real estate and the automotive sector to illustrate that “there is lots of revenue for investors to fight for but some is going to competitors.”

In the autos sector in Europe and the U.S. the commission pool to fight for is $25 billion alongside $21 billion of private capital raised, including China. The ability to tap into this pool is diluted because many classified marketplaces have partnerships that mean increase costs meaning it’s harder to make a profit, so the model of “classifieds dependent on intermediaries looks even more precarious now,” he said.

With few marketplaces and the capability to have full control of the transaction, “marketplaces should partner with fintech services and provide more of the key transaction elements themselves,” Myers said.

Covid-19 has led to fewer opportunities for face-to-face contact, making it increasingly difficult to justify fees. This means profit margins are getting squeezed.

For example, AutoTrader.com has a margin of $160 for the sale of a listed vehicle, which translates into $116 EBITDA per sale. On the other hand, Cavana may make as much as $2,800 in profit per vehicle but, after costs, loses $1,300 per car, making it harder to turn a profit with expensive dealer showrooms and associated costs.

With the ability to cover the whole purchase, including delivery and payment, companies like Cazoo in the U.K. are transforming the value of marketplaces, which Myers thinks is “the model for the future.”

Classified platforms need to work out how they can emulate the marketplaces that work and adopt some of the capability of Shopify models like co-branding or partnerships to avoid having to invest heavily.

In real estate, Myers thinks agents will be an important factor for the time being, but maybe not in the long term. For auto sites, the automotive 3.0 model, an updated version of a marketplace should aim to get commission models attached, but for own-label models, which can be more difficult to build but potentially more disruptive, it’s about bringing buyers together without having to own the cars — similar to how Amazon functions.

Print Friendly, PDF & Email

Related Articles