C2C e-commerce: Could a new business model sell more old goods?

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Countless headlines have marked the meteoric rise of e-commerce during the COVID-19 pandemic. As the disease took hold, digital adoption in Europe jumped nearly 14 percent—a rise that would have taken two to three years in most industries at prepandemic growth rates. And it is still growing fast. We estimate e-commerce will rise between 2020 and 2024 by at least 8 to 9 percent a year in France and Germany, 6 to 7 percent a year in the United Kingdom, 10 to 12 percent a year in Italy and Spain, and more than 20 percent a year in Asia.




B2C marketplaces have fared particularly well. Many retailers with a foot in the physical world struggled when sales suddenly pivoted to their online channels during crisis-related lockdowns, often finding themselves short on stock, slow to deliver, and overwhelmed by the volume of calls and online queries. In contrast, Amazon and other seasoned B2C marketplaces shone thanks to their more advanced operations. In 2020, Amazon sales soared in the United Kingdom by 51 percent, to a record $26.5 billion, and in Germany by 32 percent, to a record $29.5 billion.

Yet there has been another e-commerce success story much less commonly told: the growth of C2C marketplaces. Transaction volumes of what are largely secondhand goods have climbed both on horizonal sites (such as Germany’s eBay Kleinanzeigen and Facebook Marketplace, which offer a broad range of categories) and on vertical sites (such as Lithuania’s Vinted, a pan-European C2C site for used fashion items). Exhibit 1 shows how listings have gathered pace on a range of popular European horizontal sites that disclose transaction volumes. The United Kingdom’s Gumtree and France’s leboncoin have seen growth of more than 50 percent since the start of 2020, for example.





The growth of online C2C platforms during the COVID-19 pandemic has  been significant.



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The surge has been driven by the millions of people who spent time during lockdowns clearing out wardrobes, lofts, and garden sheds and selling their unwanted goods online.


The surge has been driven by the millions of people who spent time during lockdowns clearing out wardrobes, lofts, and garden sheds and selling their unwanted goods online. But this is no short-term trend. Trade will continue to expand on the back of consumers’ growing concern about sustainability. In addition, our research and work with C2C platforms in Europe suggest there may be room to encourage further growth and to monetize it by switching away from the traditional C2C business model, which charges sellers for listing items, to charging buyers instead.

Where growth lies

Twice over the past year and a half, we surveyed a total of more than 3,000 consumers who use C2C marketplaces in Germany, the Netherlands, and the United Kingdom. One of the things we found was the most popular C2C categories traded during the COVID-19 pandemic (Exhibit 2).

In all three countries, respondents report fashion and family items (such as toys) as the biggest secondhand category. Across Europe, we estimate that the category is already worth as much as €6 billion, having doubled in 2020. But the
growth is not entirely related to the COVID-19 pandemic. As Exhibit 3 shows, we forecast continued annual growth of around 35 percent in the next four years. Consumers of all ages will trade more, but the youngest consumers (those from Generation Z, largely 15- to 24-year-olds) will lead the way. They account for some 43 percent of market volume today—a figure that could rise to 47 percent by 2025.





The online C2C market for secondhand clothes and family items doubled in 2020 and is projected to continue to grow.



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An average of 30 percent of respondents say they were buying more secondhand fashion items online than before the pandemic. The main reason they cite was to save money. However, an average of 38 percent say it was because they were keen to create less waste (Exhibit 4).





People are buying more secondhand goods online primarily to save money, but creating less waste is also driving the change in behavior.



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A new model

A shift to a model that charges the buyer could further fuel growth in C2C transactions. C2C sites have traditionally been free to buyers—a model established in California by eBay’s founder, Pierre Omidyar, when he set up a private online auction in 1995. (He was reportedly astonished when the first item sold, a broken laser pointer, fetched $14.83.





) Traffic volumes on the site quickly became so brisk that Omidyar’s internet provider hiked up its fees, at which stage the entrepreneur began charging sellers a listing fee.




Many more C2C platforms have since emerged, using various business models. Most of them, including eBay Kleinanzeigen, Facebook Marketplace, and Gumtree, largely target transactions among people in the same local community and are entirely free to sellers. They rely on the revenue generated from third-party advertisers attracted to high-traffic sites. Some, such as eBay, charge the seller a listing fee on the value of the goods sold. And some, such as Vestiaire Collective (a site for higher-value used clothes), go deeper into the value chain and even offer authenticity checks for some branded items. But common to all has been that the platform has been largely free to buyers—until recently.

As the C2C sector has matured, a few innovators have begun to monetize their platforms by charging fees to buyers.


As the sector has matured, a few innovators have begun to monetize their platforms by charging fees to buyers. The fashion site Vinted and Spain’s horizontal C2C site wallapop are examples. By making the sites free to sellers, the companies flip the traditional e-commerce model, which focuses on attracting the most possible buyers to a site. The assumption is that by removing supply hurdles, there will be more sellers and hence more inventory, which will in turn attract more buyers and still more sellers. (Note that an average of 26 percent of respondents in our survey say they were buying more secondhand goods because a wider selection of products had become available.)

Monetization then stems from charging a commission on the back of the transaction or, more commonly among the newcomers, arbitrage opportunities associated with the offer of additional services. Several players in Asia, such as Mercari in Japan, are making significant pivots to transaction-based monetization using escrows. Often, such commissions can be as high as 10 percent of the transaction value.

In addition, our survey results suggest that buyers value additional services (Exhibit 5). Respondents rank buyer protection, in which funds are refunded in the event of nonshipment or poor-quality goods, as the number-one factor that would encourage them to buy more secondhand goods. Integrated payments and shipping ranked fourth and fifth. The respondents also value the authenticity certification of niche products (for example, Buddhist amulets that are assessed by providers such as Kaidee in Thailand). Players such as Carousell…

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