A Marketplace is more than just a platform, it is a business model and if understood properly it can offer organizations and enterprises a new way to extend business offering, grow sales and bring customer experience to a new level.
Simply put, a marketplace is a two-sided business model that connects potential buyers and sellers all within one platform to help sell/buy/exchange products or services.
Before diving in, let’s take a step back and understand where the marketplace model originated from.
Evolution of the marketplace
Before the internet, the most common way to find businesses, products and services was to search in the Yellow Pages (Yellow Book) – a telephone directory with the entire listing of businesses or vendors, organized by category. In the early ’90s, at the very beginning of the internet era, Yellow Pages concept moved online where listing websites like Yahoo listings or Craigslist offered search and categorization where in addition to viewing just listings of these businesses you could search for a business and find the one you’d like to engage with.
Listing marketplaces further evolved into comparison marketplaces where users were able to compare different vendors and products/services they offer or compare the companies’ reviews. At this level, marketplaces still lacked the transactional part – the lead or enquiry was ultimately the outcome of the search process.
From here marketplaces evolved to Consumer to Consumer marketplaces – sites like Ebay, or TaoBao, where consumers could buy products or services from other consumers. At this point, the evolution of the entire marketplace ecosystem started – the need for completing payments lead to the development of payment gateways (such as Paypal and Alipay), delivery and fulfilment solutions began to shift online as the need to get products to buyers and streamline the buying process became more important. B2B and B2C marketplace took off from there – the model expanded into every industry you could possibly think of.
Why is the online marketplace model gaining in popularity
The Marketplace model offers great benefits to all the participants. Sellers benefit by getting an easy access to a large number of customers, all for a relatively small commission. For some retailers, third party marketplaces become a vital sales channel, providing the business with stable and reliable revenue streams. This is especially valuable for small and mid-size businesses that don’t have established solid sales channels.
Buyers get a great variety of products/services/brands and vendors to choose from – all in one place. Moreover, if the marketplace provides a single ordering experience, the shopping process becomes nice and easy, saving time and effort. Some marketplaces provide additional information/reviews in a standardized format to help buyers make an informed purchase decision.
Finally, the marketplace owner/operator gains all the benefits of a reseller without the need to hold inventory or organize fulfilment – if built right, the platform will take care of the delivery and fulfilment processes through integrated carriers.