What is a marketplace - briefly about the popular topic


What is marketplace?

A marketplace is a perfect solution both for vendors and customers. This type of platform allows ordering several sellers’ goods or services at once, which greatly eases the purchasing process. Good examples of a successful marketplace are Amazon, eBay, Alibaba Group, Etsy, AliExpres, Airbnb, Lamoda.

How they work

Marketplaces make the interaction between customers and sellers much more comfortable and simple by serving the purpose of a “display” where many products and services are presented. Such resources, usually, provide the vendors with all the things needed: pages for products and services, tools for the implementation (execution) of communicational and financial operations, tech support, etc.

Marketplaces vary depending on the kind of products or services they offer:

  • Product marketplaces (EBay, Google Play);
  • Service marketplaces (Booking, YouDo);
  • Job marketplaces (UpWork, Fiverr)
  • Marketplaces with various offers (Prom.ua).

Additionally, there are platforms dedicated to price comparison (price aggregators) and grouping of announcements (classified marketplaces).

The constant operation of a marketplace is supported not only by the vendors, buyers, platform operators, logistics specialists, and delivery companies but also by the payment gateway that allows automating the process of the payments’ turnover, as well as of their receiving and managing. To get a better understanding of what we’re saying, take a look at the following image that illustrates the process:

How the online marketplace works

Why are marketplaces practical for consumers?

Marketplaces are very attractive for the customers as they provide a variety of goods and services, as well as comfortable buying/selling terms – no need to surf through dozens of websites or go to the mall, everything can be bought from the single platform. According to the Omni-Channel sales report, 96% of Americans with an Internet access at some point in their life made a purchase online and most of them tend to start looking for a product on the marketplaces initially.

The opportunity to easily find the required goods, filter them out and compare the prices is also pretty advantageous. The tendency to do so is pretty understandable considering the pace of living of modern people who don’t have much time to look for the needed product or service, as well as for the discounts and favorable deals.

Due to the great variety of products and stores, people started to pay close attention to the goods’ quality, price, seller’s rating, and feedback of other consumers. Marketplaces, in turn, provide all the tools necessary for comfortably making a personal choice.

Purchasing on such platforms, however, you might face some risks which include the responsibility factor and a quality warranty. Although, any problems mostly can be solved easily by contacting the responsible parties directly.

Advantages for vendors

The main advantage for vendors here is the ability to access a wide audience and enter the international market. Distribution of the products and services via the marketplaces helps develop a new business and even achieve the leading positions on the market. Discussing this topic, it’s worth noticing the importance of the vendor’s reputation and of positive feedback that can aid the creation of the positive image.

Frequently, the marketplace platforms handle a great part of vendor’s responsibilities (for instance, the process of accepting the order) while the seller has to handle only the questions of delivery and customer communication.

Talking about the related risks, the competitiveness factor is worth of noticing. The fact that some other vendors have similar products priced differently can negatively affect your sales volume. One mustn’t forget about the necessity to stand out. The vendors that provide similar or the same as many others products are having a hard time trying to attract some attention and stand out among competitors. That’s why they should carefully pick the photos attached to products, describe the items in detail and, of course, work for the sake of positive feedback.

Sources of income

marketplace - profitable business model

Considering the wide range of capabilities provided by the marketplace’s elements, the discussed business model would be beneficial not only in e-commerce but also in the organization of banks’, delivery & logistics services”, and IT companies’ operation. This model also allows expanding the assortment without any risks and additional expenses whatsoever.

The sources of income on such resources include percentages from orders, as well as advertisement and distribution of additional features, logistics services, delivery services, etc. A great example is the DHL logistics company that created the Allyouneed.com marketplace to gain commission percentages and develop their main business simultaneously.

If you are planning to create a marketplace

Important criteria for creating a marketplace

There is no doubt that the marketplaces will stay pretty popular in the future. Any company that has its own technical resources, clientele & suppliers; payment, logistics and delivery services can create a project of the discussed format. Working on the creation of the new marketplace, one should pay attention to the following criteria:

  • Modern technical resources – the level of your technology must meet the customers’ requirements and expectations. If you’re planning on creating a simple project, you might as well use the readymade (out-of-the-box) solution featuring a certain set of functionality. Otherwise, if you want your marketplace to be as flexible as possible, automated, and featuring all the functions you wish, arrange an individual development.
  • Security and optimization of online payments – it’s important for your payment system to be prepared to handle the new format of work. Your marketplace must adhere to modern tendencies, i.e. be able to automatically calculate the resources’ commissions and users turnover. That way, cash inflows are divided according to the adjusted scheme, which makes interaction between all the parties simpler, decreases account department’s stress load, and allows promptly managing circulating funds. If you need some guidance in this subject, please leave a submission on our website.
  • Quality service warranty – the successfulness and popularity of a marketplace depend more on the products’ quality, formatting, and delivery, rather than on the number of the represented brands. That’s why one should think through carefully all the nuances and try to provide the high-quality service on each stage of interaction between the customer and the marketplace.

The marketplace takes full responsibility for itself, as well as for all the represented suppliers. In case if a customer is dissatisfied with a product or service, they can formulate a negative review. So it’s equally important for both your and each of your vendor’s services to be of high quality.

All in all, the marketplaces provide a wide range of opportunities for companies that wish to expand their user-base & turnover volumes, as well as to advance towards a new level of providing goods and services. 

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