The Decreasing Popularity of Third-Party Marketplaces

What once assumed the spotlight in digital grocery is now losing momentum. Third-party marketplaces within the digital grocery industry are experiencing a downturn in attention as buying behaviors continue to shift. At the end of 2022, third-party app contributions to overall grocery sales decreased by 10%. Consumers are no longer turning primarily toward convenience and are instead focusing on a hybrid between convenience and value. Retailers must now decide if moving away from third-party marketplaces and migrating more of their operations in-house is best for their business needs and shoppers. The advantages of moving operations in-house include everything from increasing revenue to taking ownership of the brand’s image and customer experience. All of which will drive a successful e-commerce and fulfillment operation in this hybrid tech environment.

It’s no surprise that utilizing third-party marketplaces comes at a cost. Unfortunately, that cost is likely too steep for little ROI. 59% of grocery retailers claimed that their third-party delivery partnerships are unprofitable. The wide array of fees/markups a grocer pays for a third-party provider, such as delivery, pickup fee, fuel surcharge, service fee, etc. can begin eating away at revenue. It’s critical to remember that a loss doesn’t only happen in monetary value with third-party marketplaces. Ownership of customer data also becomes vulnerable. Younger consumers are motivated by the convenience of technology to aid their in-store shopping experiences, while older generations are still driven by prices and deals. Without access to shopper data, retailers cannot fully understand their shoppers’ preferences in brands/products and how they want to obtain them. According to US grocers, approximately $18 billion in products are wasted due to poor inventory management. In January 2023 alone, 57.9% of all digital grocery sales were pick-up. Having instant access to this insight allows retailers to make decisions that drive revenue and reduces the risk of third-party marketplaces leveraging the data for their platform, giving them a competitive edge.

Managing the overall customer experience depends on the data a retailer can access. When working with a third-party marketplace for operational functions, the retailer ultimately puts their brand in the hands of another entity. An example would be how Instacart recently reduced their internal valuation by $10 billion. This decrease in valuation is representative that companies like Instacart may not be performing well enough to maintain retailers’ interest. Not only could their quality of customer service be fading, but they are also seen as a struggling business. Third-party marketplaces may bring in increased traffic, but grocers can also begin creating a solution that helps them manage the valuable relationship between customer loyalty and reputation. 

Complete access to customer data will help grocers make more efficient business decisions. For instance, according to Grocery Doppio, digital grocery predicts a 16% increase in pickups this year and a 47% increase in shoppers using mobile devices in-store while shopping. Understanding how customers shop can help retailers decide what areas to invest in to avoid unprofitable operations/efforts. Using customer data, grocers can see what their shoppers are buying and use that intel to promote relevant items or know what promotions will satisfy shoppers. Leaving customer data in the hands of third-party marketplaces can lead to slower decision-making, unclear strategies, and missed upsell/cross-sell opportunities. Additionally, third-party marketplaces are beginning to develop and acquire their digital storefronts furthering their ability to collect and hoard even more customer data. Ownership of data is one of many reasons why grocers are working to move more of these operations in-house. 

While third-party delivery services and marketplaces seemed convenient in previous years, it is now evident that if grocers want to grow their profitability and connect more with their customers, they should focus on building their customer journey and having more control over operations that they can implement in-house. Retailers should focus on finding e-commerce and fulfillment solutions that provide an easy-to-use experience for retailers and their customers, while also enabling access to the shopper data that helps retailers make quick and effective decisions. Understandably, making this decision can be a complex process. Feel free to check out Wynshop’s Commerce Data Sheet for information on the benefits that our solution offers.