- iBe identifies online marketplaces as key opportunity for payments business growth
- B2B sales through marketplaces is a major opportunity for businesses, with the market expected to reach $3.6 trillion in 2024
- B2C marketplaces already command impressive 50% of online sales but still set to grow further to reach $3.5 trillion in 2024
- P2P sales through marketplaces to reach $240 billion in five years
Based on its unique analysis,iBe, the pan-European financial services advisory firm, has today found that online marketplaces could be worth as much as $7 trillion in sales by 2024 should organisations capitalise on the full potential of the marketplace trend. Currently, marketplaces contribute $1.7 trillion to the economy each year and in retail ecommerce accounts for as much as half (50%) of sales annually. However, iBe predicts that sales driven from marketplaces are likely to exceed $7 trillion in the next five years, hailing a new era in ecommerce.
This rise is driven by more and more companies embracing marketplaces as the best platform to facilitate online sales, expedite cross border expansion, increase product range and improve logistics, costs and operations. This, complemented by an estimated annual growth of 8% in global online sales, will fuel the uptake of the marketplace model by a broad range of businesses, according to iBe.
Generally, marketplaces fall into three broad categories: business to business (B2B), business to consumer (B2C) and peer to peer (P2P). Currently, over half (56%) of European marketplaces are global companies like eBay, Amazon and Alibaba, but there is also significant local marketplace choice in Europe, and the local platforms’ market share is continuing to grow as they get established and build loyal following amongst domestic and international consumers.
Business to business (B2B) marketplaces, like Alibaba in China or Conrad in Germany, present the biggest growth opportunity. Currently, only $600 billion, a mere 7.5% of the annual $7.9 trillion worth of online B2B sales, are made via marketplaces. However, as businesses begin to realise the benefits of trading with partners via marketplace platforms and as more companies trade online, B2B sales will continue to grow. In fact, iBe expects this to reach $12 trillion by 2024, with B2B marketplaces’ share of online sales growing significantly to 30%. As a result, B2B marketplace sales can grow to $3.6 trillion by 2024.
Similarly, iBe forecasts that business to consumer (B2C) marketplaces, which form the most developed sector led by Amazon, Rakuten, Deliveroo and many others and is currently responsible for $1.1 trillion of marketplace sales, could be worth an estimated $3.5 trillion by 2024, accounting for over 70% of all online B2C sales.
Peer to peer (P2P) marketplaces such as eBay or Airbnb are the best known to consumers but are significantly lower in sales volumes than the other two categories, due to the nature of their business. Current P2P marketplace sales represent 60% of that category’s overall online sales and are presently at $30 billion. In iBe’s estimation these types of marketplaces are expected to generate over $240 billion by 2024, accounting for 90% of overall online P2P sales.
Note: All figures are in USD
|Type||Current online sales 2018||Current sales via marketplaces 2018||Predicted sales via marketplaces 2024|
From the B2B sector, presently, SME businesses are exploiting B2B marketplaces most actively, whilst the large businesses are, not surprisingly, utilising these marketplace platforms least. Furthermore, all these verticals can grow exponentially by 2024.
As a part of the most developed B2C sector, the retail vertical is the clear leader of the marketplace evolution whilst manufacturers selling directly to consumers have the largest opportunity to grow. Other strong potential for growth can be found in digital, travel and subscription services in the business to consumer marketplace industry.
Masha Cilliers, Specialist Payments Partner at iBe comments on the analysis:
“Marketplaces represent a staggering opportunity for businesses across a variety of sectors. For example, retailers can build global sales via an existing marketplace platform and they can broaden their range of products very quickly by allowing third parties to sell via their website, rather than scaling up in-house. On the other hand, manufacturers can cut out ‘middlemen’ by selling directly to consumers and thus drastically increasing their revenue. As for businesses selling to businesses, they can improve their operations by replacing legacy paper reconciliation processes with state of the art marketplace platforms, consequently increasing liquidity, improving speed to market and saving costs. It will also help businesses to find the best suppliers and buyers.
But before companies can fully embrace the marketplace evolution, there are still challenges that need to be overcome. Regulation and payment processing, for example, can often be the biggest barriers to entry. More needs to be done by the financial service players to ensure that businesses better appreciate the myriad of benefits and understand the specific restrictions and can find the most fitting technological solution. However, those financial institutions who understand the marketplace potential sooner will be those who will realise most of its potential.”
Francesco Scarnera, CEO at iBeadds:
“At iBe we are committed to helping businesses explore new avenues of growth. Our analysis shows that marketplaces hold a wealth of opportunities for companies large and small, from the financial services sector to the retail, travel, digital, manufacturing and service industries. Navigating new paths to business growth can prove challenging, however by enlisting the help of trusted advisors, solutions to roadblocks can be found. Marketplaces have the potential to be a new era in ecommerce, and we look forward to continuing to explore this with our clients.”
Investor payouts and job cuts jar with U.S. companies’ social pledge
By Jessica DiNapoli, Ross Kerber and Noel Randewich
(Reuters) – When Randall Stephenson joined 180 of his peers leading many of the richest U.S. companies in signing the Business Roundtable pledge on the “purpose of a corporation” in August 2019, the then-chief of AT&T Inc promised to look out for the interests of all the wireless carrier’s stakeholders, not just shareholders.
Two months later, the Dallas-based company outlined a plan for cost reductions that also prioritized dividends and stock buybacks for shareholders, succumbing to pressure from $41 billion hedge fund Elliott Investment Management LP.
Activist investor Elliott had said its proposals would deliver “substantial benefits” for shareholders, consumers and employees, but not everybody came out ahead.
By the end of September 2020, AT&T had eliminated 23,000 positions, or about 9% of its workforce, many of them during the pandemic. Already one of the corporate world’s top dividend payers with $14.9 billion spent in 2019, AT&T had raised its common dividend by 2% and bought back $7.5 billion of its stock.
“We are the face of AT&T and we go out of our way to help customers communicate with their families,” said Darren Miller, a 35-year-old technician whose job was cut last July. “But we are a dime a dozen to them. If they can get someone cheaper to do the job, they will do it.”
Miller, who worked in Reseda, California, said he accepted a buyout offer after managers told him he might be laid off later on less generous terms, something he said his local union representatives told him happened to dozens of other employees in the state.
AT&T spokesman Jim Kimberly said most of the workforce reductions “were from voluntary departure offers and attrition” and declined to comment on individual cases. He added the company had for years practiced a “meaningful commitment to all stakeholders” through programs that include worker retraining and environmental and social justice efforts. AT&T also ended share buybacks once the pandemic hit, and has not increased its dividend since, Kimberly said.
Elliott declined to comment.
Some advocates of a socially-minded stakeholder capitalism say AT&T’s case is representative of the hurdles they face in challenging the leverage investors have over U.S. companies.
The voluntary governance pledge signed by the CEOs didn’t spell out specific actions, but had the stated aim of moving away from “shareholder primacy”. https://s3.amazonaws.com/brt.org/BRT-StatementonthePurposeofaCorporationOctober2020.pdf
Yet while signatories subsequently reduced payouts to shareholders as companies put away cash to shield themselves from the financial fallout of the COVID-19 pandemic, they still give a greater share to investors than those companies that did not sign the pledge, according to a Reuters analysis of data compiled by financial information provider Refinitiv.
The analysis found that the 171 publicly traded companies that signed the pledge returned a median 60% of net income to shareholders during the first three quarters of 2020 through dividends and buybacks, versus a 50% return among the 355 S&P 500 firms that did not sign the statement.
By comparison, in the first three quarters of 2019, the signatories returned a median 73% of net income to shareholders versus a 68% return among the firms that did not sign the pledge, the analysis found.
Tim Gaumer, Refinitiv’s director of fundamental research, said pledge signatories returned more to investors because they had the ability to do so. “It is easier to pay out dividends and buybacks with confidence if your income stream is less volatile,” he added.
Business Roundtable spokeswoman Jessica Boulanger said the analysis didn’t account for how companies spent money they did not return to shareholders, nor for “industry differences, company size and longevity and trends in shareholder returns over time.” She added that signatories had upheld their commitment to work for all stakeholders.
The CEOs signed the pledge without legally binding their companies and largely without approval from their boards. COVID-19 stress-tested their commitments, as large swathes of the economy were forced to shut down.
The pledge’s lack of detail gave signatories wide discretion in deciding how the pandemic pain would be spread among shareholders, employees and other stakeholders.
“It’s a political signaling exercise that doesn’t mean very much,” said Harvard Law School professor Jesse Fried, who is on the research advisory council of Glass, Lewis & Co which advises investors over how to vote on corporate governance.
Defenders of the Business Roundtable pledge say many contributions to society cannot be measured as easily as shareholder spending or layoffs. For example, JP Morgan Chase & Co pledged $30 billion to address racial injustices, and Apple Inc launched a $100 million diversity drive.
Indeed, some signatories have won praise from progressive-leaning organizations for standing by employees during the pandemic.
Among them, Target Corp raised its minimum wage to $15 an hour in July from $13, which was already well above the $7.25 national level.
Some executives and investors argue that unless companies are attractive to shareholders and keep their stock highly valued, they won’t have the money to invest in their businesses for the benefit of all stakeholders.
“If you don’t have access to capital, then you’re not going to be around long enough to face tough societal issues like climate change,” said Todd Ahlsten, chief investment officer for Parnassus Investments, a San Francisco-based firm with $40 billion under management.
Less than two years after the signing of the pledge, key protagonists at AT&T moved on. Stephenson passed the reins to a successor, and Elliott sold what was once a $3.2 billion stake in the company.
AT&T’s layoffs during the pandemic attracted the attention of Democratic senators Elizabeth Warren and Bernie Sanders, who wrote to the company last July objecting to “corporations using the pandemic as justification for continuing to make anti-worker decisions that are aimed at boosting share price.”
“The long-term interests of our communities and employees cannot be met without attracting investor capital,” AT&T executive vice president Timothy McKone responded in a letter.
BlackRock Inc and Vanguard Group Inc, whose CEOs also signed up to the pledge, were among the AT&T investors who voted down a proposal last April to have an employee representative on the company’s board – a step its advocates argued would give stakeholders a voice. Both fund managers declined to comment.
SPENDING ON SHAREHOLDERS
Wharton School of the University of Pennsylvania researchers found that among signatories, the bigger share of profits companies subsequently returned to investors, the more likely they were to announce layoffs and furloughs.
A study from the London School of Economics and Columbia University found signatories violated environmental and labor-related rules and paid their CEOs more than similarly-sized peers.
Like AT&T, some companies that signed up continued payouts to shareholders even as they cut jobs during the pandemic.
Cisco Systems Inc bought back $800 million of its shares during the three months ended Oct. 24, 2020. The network equipment maker had announced a restructuring plan in August to cut $1 billion in costs annually, with the loss of about 3,500 jobs.
“Cisco believes in the Business Roundtable pledge balancing the needs of all of our stakeholders and fulfilling our own company’s purpose of powering a more inclusive future for all,” the company said in a statement.
Walgreens Boots Alliance Inc repurchased $522 million of its shares from April through July. That month, the pharmacy operator cut 4,000 jobs, some 7% of its headcount, bumped up its dividend and nixed its stock buyback program.
Walgreens did not respond to a request for comment.
The chairman of the Business Roundtable, Walmart Inc CEO Doug McMillon, downplayed the significance of the pledge in remarks to investors last February. He said “it didn’t feel like news” because companies sought to balance the interests of all stakeholders anyway, and that “of course, our shareholders are our priority.”
Walmart declined to make McMillon available for an interview. A company spokeswoman pointed to McMillon’s previous comments on multi-stakeholder capitalism being “the answer to addressing our challenges holistically.”
(Reporting by Jessica DiNapoli in New York, Ross Kerber in Boston and Noel Randewich in San Francisco; Editing by Greg Roumeliotis and Pravin Char)
Oil rises 1% on U.S. stimulus hopes, supply concerns
By Stephanie Kelly
NEW YORK (Reuters) – Oil prices rose about 1% on Monday as optimism around U.S. stimulus plans and some supply concerns boosted futures, but demand worries prompted by coronavirus lockdowns limited gains.
Brent crude futures rose 47 cents, 0.9%, to settle at $55.88 a barrel. U.S. West Texas Intermediate crude ended 50 cents, or 1%, higher at $52.77 a barrel.
Officials in U.S. President Joe Biden’s administration on a Sunday call with Republican and Democratic lawmakers tried to head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive.
“Newly inaugurated President Biden seems to be pushing for a quick approval of his proposed $1.9 trillion pandemic relief package, a development interpreted by the market as a clear indication that the new U.S. administration aims to kick-start an economic recovery, which will naturally benefit fuel consumption,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.
On the supply side, the Organization of the Petroleum Exporting Countries and its allies’ compliance with pledged oil output curbs is averaging 85% so far in January, tanker tracker Petro-Logistics said on Monday. The data suggest the group had improved its adherence to pledged supply curbs.
In Indonesia, the country said its coast guard seized an Iranian-flagged tanker over suspected illegal fuel transfers, raising the prospect of more tensions in the oil-exporting Gulf.
Output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.
Meanwhile, European nations have imposed tough restrictions to halt the spread of the virus, while China reported a rise in new COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer.
Barclays raised its 2021 oil price forecasts, but said rising cases in China could contribute to near-term pullbacks.
(Reporting by Stephanie Kelly in New York; additional reporting by Noah Browning in London; Editing by Marguerita Choy and David Evans)
Goldman Sachs-backed ON24 seeks $2.22 billion valuation in IPO
(Reuters) – Goldman Sachs Group Inc-backed webinar marketing platform ON24 Inc is aiming for a valuation of about $2.22 billion in its initial public offering (IPO), as it looks to cash in on continued investor appetite for tech listings.
ON24, which allows people to create webinars and host virtual events on its platform, said on Monday it would sell about 8.6 million shares priced between $45 and $50 apiece, looking to raise up to $430 million at the upper end of the range. (https://bit.ly/3plMhEm)
ON24’s IPO comes as U.S. capital markets gear up for another banner year for stock market launches.
The company, which lists SAP SE, IBM, Microsoft Corp and General Electric Co as customers on its website, expects to post net income in the range of $17.8 million and $20.3 million for the year ended Dec. 31, 2020.
ON24 said “one or more” funds affiliated with U.S. investment firm Tiger Global Management have indicated an interest in buying up to an aggregate of $75 million in shares in the offering.
Goldman Sachs invested $25 million in ON24 in early 2019. (https://bit.ly/39gEvpG)
Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and KeyBanc Capital Markets are lead underwriters for ON24’s offering.
The San Francisco-based company will list its stock on the New York Stock Exchange under the symbol “ONTF”.
(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Vinay Dwivedi)
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