Online marketplaces are predicted to bounce back strongly after the coronavirus outbreak, according to new research which reveals how surging demand for online goods and services is leading to higher valuations. The Marketplaces Report, compiled by Dealroom.co, on behalf of global online classifieds company Adevinta, investors Speedinvest and Point Nine, launched today.
The report points to accelerating digital adoption behind the increase in the value of marketplaces operating in healthcare, pharmacies, grocery and food delivery, education and recruitment. However, large swathes of consumer spending are still undigitised, suggesting that much of the growth in the marketplace sector is still to come. Obstacles which had prevented early adoption of digital technology – including regulation – have been largely side-stepped during the crisis, allowing companies to see rapid growth.
“The coronavirus has put entire industries on hold, while in others it brought decades of progress in a few months. Healthcare and education are now experiencing huge digital demand which in some cases they are struggling to keep up with,” said Ovidiu Solomonov, SVP for global markets at Adevinta.
“Since only a fraction of consumption is currently digitised, there is still huge growth potential in marketplaces as more consumers in markets around the world adapt rapidly to buying goods and services through online platforms. This had already caused huge disruption to the retail industry but following the pandemic will affect other sectors increasingly,” added Mathias Ockenfels, General Partner, Speedinvest.
“In healthcare, education and industry specific B2B platforms, regulation or established business practices have previously hindered the transition to online marketplaces. The last three months have demonstrated that technology adoption, out of necessity, can create new opportunities much more quickly than previously envisaged,” said Pawel Chudzinski, co-founder and managing partner of Point Nine capital.
Some of the most successful marketplaces such as travel, mobility and proptech have suffered the hardest from plunging valuations, because of the decision by governments around the world to shut down economies and the opportunity for people to mingle. Travel companies and mobility firms, which made up half (49%) of the US$814bn global marketplaces valuation last year, have seen share prices plummet by as much as 40% between January and May.
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Expedia and Booking.com have lost in the region of 30-40% off their respective share prices, while Lyft and Uber have seen valuations fall by 20 to 40%. The marketplaces report estimates that up to 2,500 startups could be vulnerable because of the virus and may not make it through the crisis.
In contrast, one marketplace where there has been a decade’s worth of progress in just a few weeks is healthcare. The current health crisis has accelerated the appetite for consumers to seek out medical supplies and services online and this marketplace is expected to see substantial digital growth going forward.
Healthcare is seen as ripe for digitisation because of aging populations, difficulty finding staff and governments starting to embrace technology, which is encouraging innovators. Healthcare startups have a combined valuation of $68bn but this is still small in comparison to the overall size of the market, which is mostly operating offline.
Education has also been another beneficiary, with education apps being downloaded at four times the rate of last year. Both for children and adult education, the opportunity and desire to learn online is creating opportunities for new marketplaces. Education is a $5tn dollar market, but most of the money is spent offline. Coronavirus lockdowns around the world could unlock the floodgates to this market.
In housing, digital marketplaces are common for sales but we are yet to see the evolution of a marketplace that can tackle housing shortages or sustainability. And in work, the growing army of gig or freelance workers means that recruitment is moving from a marketplace used solely to find a position to one on which people depend for their income.
An increasing number of people will rely on such a marketplace for both the distribution of jobs and for income.
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