Marketplace Briefing: The 3 biggest changes to marketplaces in 2024
This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →
Every year ushers in new changes, challenges and complexities to brands’ marketplace strategies.
E-commerce still represents a small portion of retail, accounting for 16.2% of total retail sales in the third quarter, according to the Department of Commerce. E-commerce climbed 7.4% in the third quarter, but it’s outpacing broader retail growth, which only grew 2.1% in the same period, as more shopping moves online. Online shopping is expected to total $1.2 trillion in 2024, up from $1.1 trillion in 2023, according to FTI Consulting.
In other words, it’s never been more important for brands to have a clear e-commerce strategy, especially as newer marketplaces like Temu, TikTok Shop and Shein battle for consumer dollars.
Here’s a breakdown of the major changes to marketplaces that happened in 2024 and how they’ll shape e-commerce platforms in 2025.
The rise of Temu, TikTok Shop and Shein
Amazon dominates online shopping, accounting for 40% of all e-commerce in the U.S. But the retail giant faces more competition than ever before thanks to the surge in popularity of Chinese e-commerce platforms like Temu, TikTok Shop and Shein.
E-commerce platforms with Chinese origins have attracted price-conscious American shoppers with rock-bottom prices and trendy products. Shoppers are more deal-conscious than ever as sticky inflation pressures consumer spending power. American shoppers have been increasingly trading down to cheaper products across most categories. And some of the biggest retailers in the country are taking notice.
Retailers, including Etsy and eBay, have used earnings calls to assure investors about how they’re staying competitive against the likes of Temu and Shein. In November, Amazon debuted its Temu-like discount store Haul, driving sales with an aggressive 50% storewide discount.
“These guys are getting traction,” said Jason Goldberg, chief commerce strategy officer at Publicis Group.
Data shows all three platforms are growing quickly in the U.S. Temu was the most downloaded free app in the U.S. App Store for the second year in a row, according to Apple. (Last year, Temu dethroned TikTok, which held the top spot in 2022.)
Temu, Shein and TikTok Shop are also picking up a greater share of holiday spending this year. TikTok Shop’s sales for the period between Nov. 1 and Dec. 4 more than tripled compared to last year, per Earnest Analytics; it debuted in the U.S. a little over a year ago. Meanwhile, Temu, which launched in the U.S. in 2022, saw sales rise more than 20%, and Shein’s sales grew more than 18%.
Meanwhile, Amazon’s sales were relatively flat during that time, despite the retailer’s best Black Friday performance on record. Target’s revenues fell nearly 5%, and Best Buy dropped nearly 8%.
Still, the era of easy growth for TikTok Shop, Temu and Shein may be coming to an end.
TikTok faces a U.S. ban, which could spell the end for the app in a market that has become a crucial sales channel. The Supreme Court is set to hear arguments on the divest-or-ban law targeting TikTok on January 10.
Additionally, all three platforms will have to navigate tighter de minimis regulations, which will likely force them to raise prices and expand local fulfillment networks.
All three platforms also face challenges recruiting more brands with name recognition, according to Sky Canaves, a retail analyst at eMarketer. “There’s a reputational issue brands have to take into consideration.”
Walmart Marketplace is gaining on Amazon
In addition to growing competition from China-linked platforms, U.S. marketplaces like Amazon face new threats closer to home in the form of Walmart Marketplace.
In November, Walmart said on an earnings call with analysts that its third-party marketplace, known as Walmart Marketplace, saw sales climb 43%, marking the fifth quarter in a row with more than 30% sales growth. Plus, the number of sellers on the platform is growing by double digits, and the platform now has 700 million unique product listings, the company said.
Walmart Marketplace is also scooping up more holiday sales. During the Black Friday and Cyber Monday period between Nov. 25 and Dec. 2, Walmart Marketplace reached its highest-ever sales day and also set a single-day conversation rate record.
Jason Boyce, a veteran Amazon merchant who now runs Avenue7Media, a consulting business for sellers, said merchants are becoming more interested in selling on Walmart Marketplace. The seller fees are lower, and the growth is higher, he said. But it’s also easier for Amazon sellers to pivot to Walmart Marketplace compared to a social commerce platform like TikTok Shop.
“It’s a much easier transition to go from Amazon to Walmart Marketplace versus, frankly, any of the other options,” he said. “Walmart’s got amazing logistics capabilities. They’re probably the closest to Amazon because they’re doing a nice job of building out fulfillment centers, as well as using their stores for final-mile delivery.”
For some sellers, it’s gotten too expensive to sell on Amazon
For brands and sellers, the growing popularity of China-linked e-commerce marketplace, as well as Walmart Marketplace, coincides with a rise in the fees Amazon charges its third-party merchants.
Last December, Amazon said it would impose new seller fees related to inbound shipping and low inventory levels, causing significant seller backlash. Fortune reported that it even triggered a probe by the Federal Trade Commission. Many sellers had to adjust their businesses to absorb the costs associated with the fees, from raising prices on goods to trimming their product catalogs, Modern Retail previously reported.
At the end of November, Amazon said it wouldn’t raise Fulfillment by Amazon fees or add new fees for its third-party sellers in 2025. The announcement was a welcome relief as rising platform fees have increasingly squeezed margins of Amazon’s third-party sellers, who generate 60% of the sales on the online marketplace. Still, many brands that have spoken with Modern Retail say they’re pivoting to and investing in new platforms in 2025.
“With skyrocketing FBA fees over the years, long-term storage fees and inventory placement fees, sellers are realizing that if they are 100% reliant on Amazon, they truly do not control their business,” said Jon Elder, CEO and founder at Black Label Advisor, which manages hundreds of brands. “Next year, we will see huge investments away from Amazon. The ROI is just too great to ignore.”
Judah Bergman, the CEO of Jool Baby, which sells baby products on Amazon, is one such seller who has been doubling down on TikTok Shop as a sales channel since the summer. Amazon remains a crucial sales driver, with Amazon accounting for 50% of his brand’s overall revenue. Still, even though he has been selling on Amazon for 10 years, he sees it becoming less important to his sales over time.
As he put it, “It’s hard not to give less importance to Amazon because there’s just a lot of other opportunities.”