UK brands shift to third-party sales amid cost pressures

A survey conducted by Rithum highlights a significant shift among UK retailers and brands towards third-party selling to mitigate challenges posed by rising operational costs and competition.

The report, commissioned by Rithum and carried out by Wakefield Research, involved 550 executives from retailers and brands in the US, UK, and Germany. It explores the adoption of the third-party e-commerce model as a strategic response to economic uncertainties.

According to the study, 57% of UK retailers and brands intend to increase their engagement with third-party selling over the next 12 months in response to lower profit margins and heightened market competition. This model allows brands to sell directly to consumers using dropship or marketplace pathways, thereby redistributing inventory risk from retailers to the marketplace facilitators.

Third-party commerce offers different advantages to retailers and brands. Retailers can access unowned inventory, allowing them to sell products directly to consumers without holding physical stock. For brands, this model extends their reach by utilising channels they do not own, enhancing their multichannel selling strategies.

Many UK brands and retailers have reported success in expanding their customer bases through these platforms, with 69% noting an increase in sales via third-party channels in the past year. Currently, 30% of brands attribute more than half of their sales revenue to these platforms, with 99% of respondents acknowledging the importance of third-party sales to their overall profitability.

Philip Hall, Managing Director for EMEA at Rithum, commented, "Brands are embracing the flexibility that third-party commerce provides to thrive during turbulent times. With online shopping more fragmented than ever and margins becoming tighter, having a presence across multiple marketplaces is becoming a virtual necessity for most brands."

He further stated, "A brand can't dictate to their consumers where they shop, so managing the increasing number of marketplaces is a growing challenge. Some are turning to AI to solve the issue, with tools like Rithum's Magic Mapper making the manual process much more efficient."

Hall also observed, "Retailers and brands are feeling the pressures of the complex e-commerce market from all sides. What may feel like a crisis is actually a turning point filled with opportunity. As the industry evolves, it's great to see how businesses are not just surviving but thriving when they adopt the 3P commerce model."

Rithum is the commerce network helping brands, suppliers, and retailers work together to deliver connected e-commerce experiences. The Rithum platform helps brands and retailers accelerate growth, optimise operations across channels, scale product offerings and enhance margins.