Online Marketplaces Provide Billions in Value for US Small Businesses
Washington, D.C. (September 16, 2020): The Connected Commerce Council (3C) today released “Economic Benefits of Online Marketplaces for U.S. Based Small and Medium-sized Businesses,” a report detailing how online marketplaces like Amazon, eBay, Etsy, Target, and Walmart provide U.S. small businesses with billions of dollars in economic value. In 2018, the most recent year with accurate data available, online marketplaces provided $145.1 billion in economic value to small businesses, including $59 billion in gains from helping businesses reach more customers, $37 billion in increased brand exposure, and nearly $30 billion in cost savings.
“Online marketplaces provide individual sellers and local stores access to millions of customers worldwide. And can refer shoppers to small sellers who do not have the sophistication, marketing budget or scale to reach these customers,” said Jake Ward, 3C President. “Marketplaces provide access to more customers, boost sellers’ legitimacy, and give consumers more confidence than they would have with independent websites.”
The report also found that marketplaces add value to small businesses in the following ways:
- Facilitating customer feedback: $19.3 billion
- Providing cost-effective online sales: $13.8 billion
- Reaching more regions: $8.2 billion
- Reducing expansion and start-up costs: $7.5 billion
Online marketplaces have grown tremendously in recent years and are competing fiercely for small and medium-sized businesses’ business. Between 2014 and 2016, the 18 largest global marketplaces grew by 51.7 percent, and in 2017, online shopping was ubiquitous, with 96 percent of all shoppers using at least one online marketplace. According to DigitalCommerce360, the 57 U.S. based online marketplaces grew sales 15 percent in 2019. When data regarding online shopping during the pandemic is analyzed, it is likely that nearly 100 percent of shoppers will have used an online marketplace and the value to small businesses will likely surpass $300 billion.
Despite their value to both consumers and sellers, Congress, The Department of Justice, and several State Attorneys General are investigating and considering regulating marketplaces.
“Given the value that digital platforms and services provide to small businesses, particularly during this uniquely challenging time, state and federal policymakers should be supporting this partnership or at least acknowledging its benefits, added Ward. “Calling for outdated regulatory frameworks like Glass-Steagall for the Internet and threatening to break up America’s leading digital companies will sow uncertainty for small businesses, which is particularly harmful during a pandemic.”
This report was commissioned by 3C and written by Tarun Wadhwa, Visiting Fellow, Department of Political Science, Emory University Founder and CEO, Day One Insights. The research included a systemic review of data sets and literature from government, marketplace businesses, research firms, academia, and high-quality media sources to consolidate and analyze available information.
