Even if you don’t know what a marketplace is, you have certainly heard of some successful examples. Have you ever purchased something from Amazon, or booked an apartment on Airbnb? Or you might have used the services of other top online marketplaces such as Etsy and Alibaba.
A marketplace display offers from different vendors so you can order several services at once. Therefore, these online platforms simplify the purchasing process for both sellers and customers.
So, what is an online marketplace? How can sellers and buyers benefit from such a platform? In our material, we will answer all common questions about the multi-vendor marketplace business model and how to create a marketplace website. So, let’s get down to business.
What is Marketplace Business?
A marketplace acts as an intermediary between buyers and sellers. It provides vendors with a platform to display their products and services. Furthermore, marketplaces usually have a set of useful tools for business communication. They enable sellers to process offers, communicate with clients, and execute financial operations within the platform.
There are different types of marketplaces depending on their purpose.
You can find platforms specializing in:
- products (Google Play, eBay);
- services (YouDo, Booking);
- jobs (Fiverr, UpWork);
- multipurpose marketplaces.
Some platforms may have a more specific application. For example, classified marketplaces can effectively group announcements. If you want assistance in comparison prices, you can use price aggregator platforms.
A marketplace will remain successful only in case it has constant support by all related parties. We have already mentioned sellers and buyers, but marketplaces won’t exist without the coordinated work of tech support, logistic services, and delivery specialists. Another important factor is the payment gateway. It enables the automation of various processes related to payment processing and management. Following the scheme will make it clearer:
Why Do Consumers Choose Marketplaces?
A report by Omni-Channel revealed that 96 percent of Americans have at least once in their life purchased a product or a service online. Furthermore, the majority of respondents initially started searching for goods from the marketplaces.
What are the reasons for such popularity? First of all, marketplaces allow buyers to browse various goods and services on one platform. People create marketplace websites so customers can enjoy numerous offers and comfortable selling terms instead of spending time searching through many individual stores.
Furthermore, marketplaces are a solution for busy customers, providing them with convenient tools to search, filter items, and compare prices. The modern lifestyle is continuously increasing its pace, so people don’t want to spend valuable time looking for some goods. Therefore, a businessman who wants to be successful should build their own marketplace website with customer-oriented functionality.
Another factor that influences the situation is the competition in the market. There are so many various companies and stores available that consumers start paying even more attention to their purchases. They consider all kinds of different factors, from items’ quality and price to vendors’ reputation, and marketplaces offer the perfect functionality to make a personalized choice.
At the same time, online marketplaces may have their weak sides. Some people point out the risks related to quality, while others are afraid of irresponsible vendors. To prevent such issues, every entrepreneur who decides to create an online marketplace should provide their customers with the contact details of all responsible parties.
Advantages for Vendors
Marketplaces allow vendors to effectively expand their audiences and easily join the international market. These platforms create equal conditions for both new and experienced sellers, and companies’ success depends mainly on vendors’ reputations and customers’ positive feedback.
Marketplaces enable the easy distribution of products and services, creating an excellent environment to develop new businesses and overcome competitors in your niche.
What is more, marketplaces take responsibility for many important processes such as financial operations or processing purchases. It improves the selling process by allowing vendors to focus on orders’ execution, delivery, and customer relationship.
However, there are several risks related to competition within the marketplace. Other vendors may offer similar products and services, which can have a negative impact on your sales volume. If you want to achieve leading positions in the market, you should find a way to attract customer attention. Use different pricing schemes, make catchy and informative descriptions, and illustrate your products with attractive photos. The strategy may be different for every particular case, so choose it wisely focusing on positive feedback.
Sources of Income
The distinctive feature of the marketplace business model is a powerful functionality, which isn’t limited to e-commerce only. This business model can be applied in many spheres, including financial organizations, logistics services, and the IT sector. It helps to minimize risks and avoid additional expenses while improving your business and expanding your assortment.
Marketplaces offer the following sources of income:
- commission from orders;
- delivery and logistics services;
- advertisement.
The DHL logistics company is a great example here. They developed the Allyouneed.com marketplace that allowed the company to earn additional revenue from commissions. They invested this income in their main business, developing two projects simultaneously.
If You Are Planning to Create a Marketplace
Marketplaces create effective solutions for different business projects, so they won’t lose their popularity in the future. One may wonder: how to start a marketplace website? Almost any company with an existing client base, suppliers’ contacts, and technical resources have the potential to create its own marketplace. The project will also require functionality for payment as well as delivery and logistics support.
There are several factors to keep in mind while creating a marketplace:
Use modern technologies
The rapid technological progress allows you to bring any project to life. There are a lot of readymade solutions that can effectively handle simple processes. However, the technological level of your platform must meet its purposes. While out-of-the-box solutions may have enough functionality for a small project, a more complex marketplace will require individual development. Use automation and advanced functionality to make your platform comfortable and attractive to customers.
Optimize payments
No one doubts that security is extremely important for the payment system. However, in addition to secure transactions, a modern marketplace should provide advanced payment functionality. Create tools to automatically calculate commissions, and allow your clients to easily measure users’ turnover. Such improvements will simplify the interactions between the parties by making the fund inflow scheme clearer. Furthermore, it will be beneficial for the accounting department, making it easier to effectively manage cash circulation. In case you want to learn more details, contact our specialists.
Provide quality warranty
Many beginners make the common mistake of thinking that the marketplace’s success depends mainly on the number of vendors. However, the quality of the represented products, as well as delivery services, has a bigger impact on the platforms’ popularity. Therefore you have to be sure that all stages of communication with customers provide a high-quality experience. The buyers can leave positive feedback attracting other people to the platform. However, they can also leave a negative review that can ruin your reputation. Notice that the marketplace will be responsible not just for its own mistakes, but also for the vendors’ problems. So you should control all processes and get rid of irresponsible suppliers.
To sum it up, the marketplace model can become a solution for companies that wish to advance their business. It will provide them with numerous opportunities to expand the client base, increase turnover volumes, and achieve a leading position in the market.
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