Research from E-marketer shows that global marketplaces accounted for 62 per cent of online retail sales last year – up four points from 2022. Their share almost certainly rose further this year. 

“We think it is accelerating,” says David McLean, CEO and founder of last-mile logistics and Pick-up, Drop-off (Pudo) specialist Hubbed, which works with some of the world’s largest marketplaces, a growing number of local direct-to-consumer retail brands and The Iconic. In a warning to Australian retail brands, he sees the market share of marketplaces growing even further. 

Why are marketplaces expanding so fast? The answer lies in brand recognition, a diverse product range, innovation, the use of technology to understand customers’ needs and preferences, and aggressive pricing strategies. 

As a last-mile logistics specialist, McLean focuses on how marketplaces compete with delivery options. 

“We manage millions of parcels annually through our Parcelpoint Pudo network with some of the world’s largest marketplaces. We work with Amazon, which grew by 11 per cent last year to $700 billion in sales. We also look after Shein, now the world’s number one fashion marketplace, and Temu, the fastest-growing app in 17 countries, including Australia, last year. And make no mistake, TikTok Shop is now coming to this market. 

“When it comes to marketing and customer acquisition investments, they are relentless, but from Hubbed’s perspective, we look at their customer centricity around delivery choices because that’s the part of the e-commerce business we focus on,” explains McLean. 

Locally, he says, the global marketplaces have established a key differentiator to local retailers in terms of the number of ways they focus on delivery by thinking outside the square – not just focusing on fast home delivery.. 

First, they prioritise returns and click and collect. “They do this because they understand that offering multiple delivery choices, including easy returns, enhances the customer experience and gives those customers flexibility and control over how they receive their products.”

A key point here is that marketplaces do not treat their customer base as homogeneous regarding delivery. They understand that different customers have different priorities. 

“We have the data to show that sometimes only fast delivery will matter, other times security is more important – they want somewhere safe to leave their stuff, they don’t want it left on the side of the street – and sometimes they want to know that they can pick their parcel up on a Sunday evening. Marketplaces leave no customer behind, and they think about how that influences the customer’s purchasing decisions.”

Reducing cart abandonment

McLean adds that offering more delivery choices can reduce cart abandonment rates. 

“Customers are more likely to complete the purchase if they have confidence in the convenience and hassle-free opportunities around returns and pickup. They understand that returns are a critical part of building trust. Retailers might see returns as a negative in business – especially when they observe bracketing behaviour. However, good customers should be given a sophisticated returns experience.

“By leveraging data analytics, we should be able to segment that customer base and ensure that we’re offering people the right services.” For example, providing delivery choices through collection points creates a consolidation opportunity, driving down delivery costs. The last-mile delivery partner, like Hubbed, can move more parcels at a lower rate than an individual parcel shipment sent to a home. 

McLean says customers have sometimes been conditioned by global marketplaces, so to a retailer, the logistics cost of optimisation is simple: “They say we want the best price and the highest service level; to support that, we will give you more volume. By giving us more volume, we drive consolidation, and by driving that consolidation, we drive down the delivery price. By driving down the price, we can improve our service levels because the more volume we get, the higher the service level is within our network.”

The approach to flexibility and investment is fundamentally different for global marketplaces compared with local retailers. 

“That’s a trick that we are missing. Marketplaces invest in technology, and they are incredibly data-driven. They use data to tell them what their customers are looking for regarding delivery choices, and they’re constantly adjusting their businesses to support that. Beyond that, their measurement around the return on investment is based highly on the efficiencies it provides as they bring logistics and technology together to reduce costs and increase service levels,” says McLean.

“That’s a significant point of difference for them. Sometimes, retailers might be too rigid in their approaches. They treat delivery choices such as click and collect and returns as an opportunity for growth; they don’t consider returns as a negative issue but as an opportunity.” 

Pricing and preferences

Price and preferences are fundamental differences between working with global marketplaces and with some Australian retailers. 

“There’s a misnomer in this market that we need to get over,” explains McLean. “Roy Morgan’s research shows that 70 per cent of Australians shop on Chinese marketplaces, with Temu being one of the most popular. David Jones customers are twice as likely to shop on Temu than the average Australian. What is that telling us about the idea that your customer is different? They’re not, and these overseas marketplaces are conditioning them to be used to having choices around delivery.

“Your customer who is buying from David Jones is also buying from Temu, and they have become conditioned to expect the same level of service when it comes to logistics.”

Retailers should not for a moment believe delivery choice does not apply to their customer base because they are different. 

“They are not different, and this has been further exacerbated by the cost-of-living crisis that a lot of Australians are going through: they’re buying products from a competitor that has all the other marketing capabilities and the price difference and the product range, but then they are getting more options around delivery, and they’re getting a higher level of service in some instances and what these marketplaces are doing is they’re bleeding the delivery change into their pricing. 

“We know from our research that 84 per cent of shoppers said they’re likely or highly likely to use a collection point if it was cheaper than home delivery or free.”

McLean does not expect the growth of marketplaces to stop. “Their share of overall shopping will continue to grow as long as they continue to deliver convenience by making it easier to find products, compare pricing, make trade-offs around delivery choices, have expectations set by effective notifications, making the end-to-end journey as seamless as possible, and continuing to improve the sophistication around targeting audiences,” he says. 

Retailers can compete with marketplaces but must understand it is not always about price. 

“Building a strong local brand is an obvious deliverable, and providing a superior user experience through technology. Take advantage of the natural flexibility and agility a local retailer should have versus a global organisation. Don’t be beaten on local culture and preferences.”

Regarding delivery options, McLean advises local retailers to provide a complete set of delivery choices that match those of the marketplaces. “Ensure you have Pudo on par with them for click-and-collect and returns with sophisticated notification solutions to ensure your customers are well informed,” he concludes.

“Retailers must ask themselves if they are leaving customers on the table because they are not providing the appropriate delivery choices.” 

• To learn more about Hubbed’s delivery options, visit Hubbed online.