Digitalization has changed everything. It has changed the way people buy and the way they sell. It also brought in a concept of online marketplaces. They are intermediaries between businesses (B2B model), business and customers (B2C), and customers or peers (C2C/P2P).
B2B marketplaces such as Alibaba connect businesses and enable merchants to buy goods for wholesale prices from multiple sellers. B2C marketplaces represent virtual stores, where many merchants offer their products or services. For example, Booking.com aggregates rooms from many hotels and gets a commission from reservations.
Such services as BlaBlaCar, Airbnb, and Uber exploit a peer to peer business model. Users on such platforms can be both sellers and buyers. For example, you can be a BlaBlaCar driver and cover your fuel expenses by sharing your trip with other passengers. And you can also be a BlaBlaCar rider and save some money on your journey.
Marketplaces are in trend. According to Coresight research, the global marketplace platform provider revenues may double from $18.7 billion in 2017 to $40.1 billion in 2022. And this tendency is going to strengthen.
Retail marketplaces such as Amazon or Alibaba will grow because they are convenient intermediaries between customers and sellers. Other types of marketplaces, such as resales (StockX, Chairish) and rentals (Runway, Sharedesk) will increase in revenue as well.
More consumers today prefer to use an opportunity to sell something they don’t need or to save money by renting cars, bikes, equipment, and even clothes. Besides, 60% of millennials who are the primary users of the web prefer renting goods to owning them, according to the Organisation for Economic Co-Operation and Development.
Let’s look at the five reasons why marketplaces are becoming so popular.
There are two major ways to sell something online: you can place products on your own website or you can go to an online marketplace. Quite often businesses don’t have enough money to build and develop a site at the start. Marketplaces offer a promoted website with an army of people checking it daily. For instance, Amazon’s traffic in July 2018 reached almost 2.64 billion people.
Marketplaces attract external visitors as well as merchants. 44% of Amazon goods belong to third-party sellers. Marketplaces can specialize in one field, for example, craft goods like Etsy or offer products of different kinds such as eBay. Merchants choose the most appropriate platform and can start selling hundreds of items right away.
(Image source: X-Cart)
- Transforming local into global
The world is getting smaller. Thanks to global platforms, people can obtain goods from almost anywhere on the planet and can spread products and services to different parts of the world. Some companies use marketplaces to conquer the online global market. This is what happened to a jewelry company Blink Link based in New York. A few years after the company had started selling via Amazon, their sales grew from 70% in Europe to 160% in Japan.
To enter the global market, companies have to choose well-sold products, compare them to their competitors’ offers, take care of shipping to new countries, and list goods on the marketplace. Depending on the number of items sold in a particular country, merchants can define favorable locations and invest in marketing to this locations. Marketplaces allow businesses to develop both locally and globally.
- Comparison and exploration of new brands
How could you ever find those cute shoes produced by a British brand or a pet shampoo from Korea with an incredibly pleasant smell if you didn’t use marketplaces? On the platform, you can search for something you need using filters, compare search results by different criteria, and choose a product you like the most. Some people prefer ordering the same stuff all the time, but many adventurist shoppers would eagerly try something new. The abundance of choice moves progress and raises awareness of brands. Moreover, if you sell a few different kinds of products under the same brand, you may attract more clients to each of them. If they liked the t-shirts of your brand, they might also buy a bag or a cup that you sell. It makes your brand known and reliable for customers.
- If you can’t beat them, join them
E-commerce appeared a bit more than 20 years ago. Online domination has brought new possibilities to the savvy traders. The e-commerce market is changing. Consumers have a wide range of choice. They are becoming more demanding. Still, competition reinforces development.
Big marketplaces are merchants’ competitors, but they are also their sales channels. Joining a marketplace may help you reveal strong and weak points of your brand. You may obtain loyal customers from the marketplace colossal traffic. Or you can improve some issues with your products to catch up.
- Business opportunities
Entering a marketplace is beneficial. It gives you marketing tools, a delivery platform, customers, and all the needed technologies while letting you omit the hosting expenses.
If you have a network in a particular industry, you can create your marketplace. It is not easy, but some brands managed to do it. German home furnishing retailer Crate and Barrel wanted to expand its products online and has successfully launched a marketplace. The company uses a marketplace model similar to Amazon and eBay. The difference is that Crate and Barrel focus on furniture.
(Image source: Business Insider)
Summing up, marketplaces are a perspective branch of e-commerce. Still, they have disadvantages as well. Among the most significant weaknesses is a lack of verification of parties. Hence the quality of products or services can be lower. Also, trust-based relations that P2P model offers sometimes may turn to be unreliable. Marketplaces are all about exploration and trust. When you buy something from a stranger, you should believe a person won’t cheat you at any stage of the deal.
Even so, the benefits of marketplaces are apparent. It is easier to start selling and attract new customers with a marketplace. Also, marketplaces are appropriate tools to make brands global. While you are thinking about whether marketplace is a good option for you, your competitors may have already started researching how to build an online marketplace.