Marketplace
In the e-commerce world, a marketplace is an online platform where the operator can allow third-party merchants to sell products or services. Marketplace technology is a great way for businesses to scale while reducing risk, as the operator shares inventory management, fulfillment, etc. with third-party merchants.
What Marketplace Means
Marketplaces are e-commerce platforms that connect vendors with prospective buyers through the use of a website or application. It is a space where sellers and buyers converge to offer and purchase products. These platforms generally host multiple companies offering a wide range of products and services.
A marketplace is an intermediary, the digital equivalent of a shopping mall. It makes the interaction between customers and suppliers much easier and more convenient, as it serves as a storefront where many products and services are displayed.
by 2023, at least 70% of the enterprise marketplaces launched will serve B2B transactions
Gartner
Marketplaces currently have a strong tailwind and will change global commerce in the long term. The idea of third-party vendors congregating on a website to sell products to consumers was very much a novelty when Amazon launched its online marketplace in November 2000. The marketplace accounts for 62% of global online retail sales nowadays. As global marketplace giants such as Alibaba, Amazon, eBay, and Etsy make continued efforts to grow their market shares, online marketplaces will become increasingly apparent to potential vendors and businesses.
Within both B2C and B2B industries, marketplaces offer businesses immense opportunities and growth potential. If companies would adopt marketplace models, they would have the opportunity to scale at a much quicker pace while reducing risks. Gartner predicts that 15% of medium-to high-gross-merchandise-value digital commerce organizations will have deployed their marketplaces by 2023 – thereby creating an entirely new digital ecosystem.
How do Marketplaces work?
Every marketplace is unique in its own way. The convenience offered by marketplaces to consumers has resulted in them being the drivers of the internet economy around the globe. Marketplaces are considered the cash cows of online businesses as they push for liquidity through commissions, marketing, and other value-added services.
Marketplaces today have eclipsed all forms of internet sectors when it comes to generating online traffic. Online shoppers now rely on such marketplaces as they have more options to choose from both large and small retailers rather than visiting multiple websites to buy directly from the retailers. Online marketplaces don’t have to deal with maintaining inventory, logistics, product photos, product descriptions, and other hassles. They can easily offload their burden to online sellers, who can use a dedicated space to manage the orders and sell their products. Online shoppers can electronically access suppliers’ inventory and real-time product information.
Modern-day marketplaces typically function in two distinct ways. On one hand, is the 3rd party Marketplace model and on the other is the 1st and 3rd party Marketplace model. Businesses choosing to run a 3rd party marketplace assume the role of the marketplace operator and then invite third-party merchants to sell goods on their platform. However, in a 1st and 3rd party marketplace, the business or platform owner plays both roles. The marketplace operator manages the activities of 3rd party merchants and also offers its branded products directly to customers.
In the last few years, B2B organizations within traditional sectors have seen their counterparts tilt in favor of digitization. The race toward digital transformation has created ample growth opportunities for marketplaces, particularly enterprise marketplaces. According to Gartner, by 2023, at least 70% of the enterprise marketplaces launched will serve B2B transactions. As brands seek new ways to extend their products to a larger community, getting more stakeholders on board will be a task that they will have to accomplish. These stakeholders or merchants will require an efficient platform to conduct their activities and reach new customers.
Benefits of online marketplaces
Online marketplaces provide a variety of benefits to every stakeholder involved. Both operators and merchants can save costs in operating, selling their products, and attracting new customers. These platforms generally provide the supplier with everything they need to sell: product sheets, analytical tools, technical support, paid advertising, and so on.
Customers tend to rely completely on these platforms, both out of convenience and because they have a wide choice of how to meet their needs, thanks to a range of customized services.
- Benefits for operators
- Benefits for merchants
- Benefits for customers
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Scalability
It can be very cost-intensive to source large amounts of inventory and manage the entire distribution process. This risk can be avoided by having merchants broaden their product portfolio and attract more customers.
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Wider offerings
More merchants in the platform equals diverse products and services, enabling also the testing of niche products without stock risks.
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Ownership
More resources are available for the operator when merchants take over a variety of operational tasks. Nevertheless, the operator always maintains full ownership of the platform and can regulate products and price levels offered by the merchants.
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Visibility
Selling one's products on a marketplace allows for enormous visibility. In fact, a marketplace makes it easier to launch a product without geographic limitations and take advantage of the fame already gained by the site.
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More trustful customers
A marketplace allows for a much higher level of national and international traffic than your own e-commerce website. On well-known marketplaces, buyers feel more secure in terms of anti-fraud systems and are more willing to purchase.
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Rocket launch
Starting a business in a marketplace alongside other merchants could present an unbeatable growth opportunity. No fuss with building and running an entire platform or making significant investments. Moreover, marketplaces are ideal environments to test new products or ideas.
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Price transparency
Marketplaces offer price transparency. In a marketplace, it’s easier for customers to compare prices and services by different merchants, choosing the best product or service for the cheapest available price.
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Highly stocked products
There’s a huge variety of vendors’ products to choose from. This means that stock levels remain relatively high, and customers don’t experience difficulty sourcing products.
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Trust
Marketplaces are trusted platforms that provide a sense of safety, whether it's with their payment information or a smooth order fulfillment process.
Markteplace RESOURCES
Learn More About Marketplaces
Marketplace KPI Guide
How do you determine which KPIs to measure when opening your own marketplace? Internal and external criteria are essential in building up the right strategy to measure success and finding the right partners and merchants. This Guide will help you establish the right set of numbers and other factors to look at.
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