Investing in online marketplace startups. 6 marketplace niches that offer great opportunities in 2022
The popularity of digital marketplace platforms has seen significant growth over the past years, involving sectors such as e-commerce, online fashion, ridesharing, healthcare, and food delivery. Thanks to reduced travel expenses and increased safety, the majority of consumers prefer ordering goods and services via the Internet. In this regard, marketplace investment offers huge opportunities to win the audience and generate profit.
This article considers the main online marketplace niches in 2021–2022s. Our experts also describe the current landscape of marketplace fundraising.
Investing in online marketplaces. The current landscape
According to Definanzas, global venture capital (VC) investment into marketplace apps and websites hit a new record high in the first quarter of 2021. The research found that VC funding surged almost threefold from $9.9 billion in Q1 2020 to $28 billion in Q1 2021.
Dealroom.co informs that the value of public and private marketplace platforms jumped by 70% since January 2020—from $2.9 to $5 trillion—outpacing the Nasdaq and the MSCI World Index. The COVID-19 pandemic and widespread adoption of innovation are the key market drivers. Aiming to ensure business continuity and gain a competitive advantage, companies across different industries are digitizing their operations.
Online fashion, food delivery, and digital healthcare have witnessed the most considerable valuation growth during the outbreak, rising by 142%, 132%, and 120% respectively. The majority of marketplace investments in the first three months of 2021 focused on logistics and last-mile delivery services. Additionally, e-learning and recruitment initiatives continue gathering pace in the wake of changing customer habits.
Investment in online marketplaces during Q2 was also high, with $12 billion of VC funding within the first five weeks of the quarter, involving capital raised by Travelperk ($160 million), Kry ($312 million), and BlaBlaCar ($115 million). It is noteworthy that 25% of all unicorns are marketplaces, as reported by Dealroom.co.
Since January 2020, 81 marketplace startups have joined the list of billion-dollar companies, with 20 unicorns in the US. Experts at Dealroom.co predict that marketplace investment will soar from $59 billion to $132 billion in 2021, increasing by more than 50%.
However, sectors like property, travel, and mobility suffered the most in the wake of the COVID-19 crisis, with share prices reduced by 40% between January and May 2020. Nevertheless, marketplace startups across these verticals managed to successfully end the year with valuations accounting for 60%, 52%, and 32% respectively.
We are seeing increased investor interest in marketplaces because they have demonstrated how they are particularly resilient to economic developments and easier to scale upwards and downwards than traditional, more asset-heavy companies.
Mathias Ockenfels, General Partner at Speedinvest
Let’s take a look at the most popular online marketplace niches that introduce huge opportunities for investment.
Top online marketplace niches in 2021‑2022
1. Online fashion marketplaces
The demand for online fashion marketplaces has significantly increased during coronavirus. Coming up with lockdowns and social distancing, the COVID-19 outbreak forced people to stay at home and purchase goods using their tech devices. However, the pandemic has just accelerated this shift, as online shopping provides access to a variety of goods from numerous vendors without the need to visit physical stores and spend time on travel from home.
The worldwide apparel market is anticipated to rise from $1.5 trillion in 2020 to nearly $2.25 trillion by 2025, according to Statista. The survey by Croud showed that 59.6% of customers globally are going to buy clothes and shoes via the Internet more in the next six months, especially in the US (65%).
Analysts at Croud revealed that the primary reasons for online shopping are the choice from a wider range of products (23%), discounts (22%), and time savings (17%). Therefore, today there are more opportunities for marketplace startups to drive traffic, win the audience, and raise the conversion rate.
Online luxury fashion marketplaces have seen remarkable growth, demonstrating resilience during the outbreak. For instance, the Gross Merchandise Value (GMV) of Farfetch has recently exceeded $1 billion, increasing by 40% year-over-year and more than doubled in comparison with Q2 2019. In its “Second Quarter 2021 Results”, the company reported a revenue increase of 43% y-o-y to $523 million.
If you aim to start a marketplace in this field, it is reasonable to employ technological advancements for engaging consumers. With this aim in view, you can use virtual (VR) or augmented reality (AR). According to Croud, VR and AR are underused by online fashion marketplaces, with only 16.5% of shoppers who set up VR or AR filters to try on clothes in 2020. It is worth remarking that high-income customers were more willing to apply AR or VR.
2. E-commerce marketplaces
E-commerce is the industry that offers great opportunities for investing in online marketplaces. Digital Commerce 360 informs that the e-commerce market soared by 21.9%, from $335.15 billion in the first half of 2020 to $408.51 billion in 2021. Analysts found that e-commerce spiked by almost five times in Q2 2020—reaching a record 43.7% growth year-over-year.
In the US, e-commerce sales spiked by 9.3% in the second quarter of 2021, accounting for $211.70 billion. It is noteworthy that 92% of US online customers purchased goods on digital marketplace platforms in 2020.
The business-to-business (B2B) marketplace segment is also witnessing rapid growth. Influenced by the COVID-19 pandemic, organizations had to temporarily close their physical stores and start delivering services via the Internet.
Striving to adjust to new circumstances, many companies registered on B2B e-commerce marketplaces, which allowed them to reduce marketing expenses, facilitate supplier management, and improve consumer satisfaction. Insider Intelligence estimates that sales generated via B2B e-commerce websites will value at virtually $1.5 billion in 2021, rising by12.2% from the previous year.
Mobile e-commerce is experiencing a surge, too. Insider Intelligence predicts that m-commerce volume will amount to $488 billion in sales—or 44% of transactions—progressing at a compound annual growth rate (CAGR) of 25.5% until 2024.
In addition, AppsFlyer reports that installs of mobile shopping applications between January and July jumped by 48% worldwide, with a 55% spike on Android devices and a 32% increase on iOS. Thus, now is the perfect time to invest in e-commerce marketplace development.
If you are going to create a marketplace similar to Amazon, read our guide that includes time and budget estimations.
3. Online food delivery marketplaces
Online food delivery services are among the most popular marketplace niches in 2021 and are expected to be in 2022. Changing consumer preferences, increased penetration of smartphones, and lockdowns imposed by governments during coronavirus gave an enormous boost to the sector. Lies ahead, this trend is poised to continue to prevail in the dining environment.
According to PR Newswire, the world’s online food delivery market is projected to increase from $115.07 billion in 2020 to $192.16 billion in 2025, registering a CAGR of 11%. Bloomberg Second Measure informs that 50% of US customers ordered delivery menus in September 2021, up from 44% from the previous year.
The average sales per consumer at Doordash were 114% higher in Q3 2021 compared with the same time period of 2019. The sales volume per customer at Uber Eats, Postmates, and Grubhub also surged between 2019–2021.
Since the industry has high potential, investing in online foodservice marketplaces is growing. For instance, Rebel Foods, an Indian marketplace startup, hit a $1.4 billion valuation after attracting $175 million in a Series F round that took place in October 2021. Operating a network of more than 45 kitchens across 10 countries, the company obtained a unicorn status with funding from Qatar Investment Authority.