Online Marketplaces are the Future… if Congress Doesn’t Break the Business Model for Small Sellers

Millions of small businesses use accessible and affordable tools and services provided by digital platforms to launch, operate, grow, compete, and hire more employees. Technology provides small businesses with more easy-to-use options than ever before to help them reach markets beyond their local communities. And while brick-and-mortar stores and wholesale remain the most popular sales methods for small sellers, nearly 70% of small sellers use online marketplaces to sell products.

Competition among marketplaces for small sellers’ business is fierce, as roughly 90% of small sellers that list products on one of the “big five” online marketplaces (Amazon, Walmart, eBay, Target, and Etsy) also sell on other marketplaces. Undoubtedly Amazon is the most popular marketplace, but 87% of small sellers on Amazon also sell on at least one other online marketplace, including Walmart (54%) and eBay (50%). 

Our members report that Walmart, Target, and other traditional retailers are rapidly improving their technology and seller services and aggressively recruiting sellers to join their marketplaces. Walmart’s efforts have made headlines and are succeeding. Applications to sell on Walmart Marketplace have increased 4x, the number of sellers has increased 60% year on year, and  240 million items are now offered on its U.S. marketplace. 

Walmart’s changes include improving its fulfillment services, which remove headaches and make life easier for small sellers. Amazon offers similar services to its sellers, and participation allows small businesses to join the popular Prime program and get products to customers within the two-day Prime delivery guarantee window. 

Enter Sen. Klobuchar (D-MN) and Rep. Cicilline (D-RI). Despite robust competition among several marketplaces pursuing small sellers’ business by making it easier to go to market and make money, these policymakers and others are determined to undermine the marketplace revolution before it can take root. If the anti-tech legislation American Innovation and Choice Online Act (AICOA/S.2992) becomes law, Amazon, Walmart, and eventually, every thriving marketplace will be prohibited from saving small businesses and consumers money by integrating and streamlining products and services. If Sen. Klobuchar and Rep. Cicilline have their way, no marketplace will be able to offer integrated services despite decades of evidence that consumers value these products and services. 

Online marketplaces are growing, attracting more third-party sellers and offering more products daily. Recent research estimates the anti-tech AICOA would cost small businesses more than $500 billion in sales within the first five years of becoming law, amounting to a monthly “digital economy tax” of $1,712 on every small business.

For small sellers setting up shop on an online marketplace, the opportunity to boost sales and expand their customer base far beyond the immediate geographic area is critical. The future of retails is clearly about giving customers the diversity they’ve come to expect through the expanded offerings in marketplaces. As the old saying goes, if it isn’t broken, don’t fix it, especially when the fix would cost every small business $100,000.