Online marketplaces are a type of e-commerce platform where products or service information is provided by third parties. It is often known as an electronic marketplace. Whether it is a website or an app, online marketplaces facilitate shopping from various sources however it does not own any inventory, their business is present to other people’s inventory to a user and facilitates its transaction. This is one of the major appeals of online marketplaces as they profit from charging a commission from each transaction with either a percentage or a flat fee. Some of the best widely known online marketplaces are eBay, Amazon, Etsy, Alibaba, Rakuten and so much more. It is also known that online marketplaces can be dated back since 1995 when eBay and Craigslist were founded. In addition, marketplaces are growing at a very rapid speed as analysts predicted that it would account for 40% of the global online retail market in 2020.
There are some big advantages of an online marketplace and the reasons vary as businesses would rather sell via online marketplaces as that it is an additional source of revenue. Furthermore, this allows companies to internationalize its business and cut marketing costs. In addition to this, online marketplaces are a great way for customers to compare prices between brands and generate trust between their brand and customers. Customers would most likely purchase from an online marketplace as it provides a wide range of options. The future of your business’ success on an online marketplace is to focus on your niche as giving the customers what they want via online would also enhance their customer experience.
The world’s biggest online marketplaces are on a rapid upward trajectory as 50% of all e-commerce sales take place online like Amazon and eBay. According to Foot (n/a), marketplaces contribute $1.7 trillion to the global economy each year and in the United States alone, Amazon accounts for an estimated 44% of the country’s e-commerce market share. Moreover, if you’re looking into getting into the online market to increase sales, setting up on a new marketplace is a great way to increase and boost your exposure as you may want to expand your brand worldwide.
The emergence of digital discrimination has often made shopping online requiring a leap of faith. There are also challenges when it comes to online marketplaces, one of them being that it is harder to overcome information when you can’t hold a certain product. Secondly, online sellers can be arguably new to the business and over time reviews and feedback from customers are extremely crucial as it has allowed e-commerce sellers to build up reputations. Various websites have the seller’s discretion over whom they do business with on the basis of looks or even just a name. Although most marketplaces have more or less rigid rules of acceptance when it comes to sellers, their system isn’t as simple as we think. With search engines, marketplaces have some products that do stand out above others depending on algorithms.
There are different types of marketplaces and each marketplace is unique as it offers different services, catalogues, public image and cost for retailers. There are five main types of online marketplaces according to Saleslayer, there are on-demand, managed, community-drive, SAAS, and decentralized. Firstly, on-demand is known to be one of the most common marketplace services as it offers instant response to users’ demands like Uber or Deliveroo. Managed on the other hand is a type of B2C and B2B e-commerce marketplace that manufacturers and distributors offset their products in a platform managed by a third party; which also manages the sales and sellers’ commissions, Amazon and Rakuten are considered the most used marketplace among customers and retailers combined. Moreover, community-driven is engaged with smaller sellers and artisans who personally manage their sales, deliveries and customer service, like Etsy. SAAS is free and open software that attracts small businesses who want to build their website inside a bigger platform; this requires more technical knowledge and maintenance effort as it may not be entirely free. Lastly, decentralized uses a P2P (peer-to-peer) system that allows anyone to sell and buy anything without third parties being involved. This could be concerning as it can be used as a platform to also sell illegal merchandise.
Many shoppers use online marketplaces as their search engine, this way it allows your company to make a presence across channels. The increased digital visibility will make customers more confident in buying products online. In addition to this, your clientele who knows your brand will continue recommending it and you may end up getting a new demographic of users and new sales opportunities. Furthermore, adding sales and distribution platforms to your e-commerce strategy would go on with ease thanks to online marketplaces as they can store and ship your products however you like.
If you are looking into using this strategy with online marketplaces, make sure to study and research the types and think about which one would suit your company and products best and would likely be more profitable. Online marketplaces enable you to operate around the clock, any time constraints and problems with international trading hours would be removed. Therefore, this allows new opportunities for overseas sales thus, providing new trading partnerships with supplies. In conclusion, whether you’re getting ready to launch your product through e-commerce or have been selling online, online marketplaces should definitely be considered as a part of your strategy as it can be relatively painless to get started with this business model. Although it may seem daunting at first, once you start to experience the potential of selling through e-commerce on online marketplaces you’ll probably never look back.