Changing Nature of Ecommerce & Niche Marketplace Opportunities
Marketplaces are changing the nature of ecommerce. Not long ago, the term ecommerce typically referred to a business selling physical products from their own inventory to customers. Whether the business manufactured products or acted as a retailer for other brands, the model was similar and most costs were made up of the cost of goods. Ecommerce has evolved, and is still evolving, in terms of what is considered ecommerce and the business model.
No longer is ecommerce restricted to physical products and accordingly, TechData defines ecommerce as “the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet.” With that definition, ecommerce can be expaned to include nearly online transaction. While that may seem too all-encompassing, it’s not far off as digital goods become more pervasive, services are sold as products, and transactions become more global.
Besides the types of products are included in ecommerce, many of the most successful ecommerce businesses are now utilizing a marketplace model, where inventory is held by third parties. After years of eBay dominating physical product ecommerce, Amazon has used the model to grow their revenue tremendously, with their third party accounting for roughly half of Amazon’s estimated $160 billion in retail sales in 2016. Wal-Mart, Jet, Overstock and others are pushing to grow their marketplaces, seeing it as a low risk opportunity to grow their catalog and sales.
Besides physical products, marketplaces exist for all kinds of digital goods and services. Digital products are sold on sites like Gumroad, Udemy, and even Amazon. Job/gig sites like Upwork, Fiverr, and Freelancer.com allow for hiring directly online, without any need for contact off their platform, which certainly seems to fit into the category of ecommerce.
Marketplaces of all types are only possible in recent times due to connectivity, since there needs to be enough interest on each side of a marketplace. Much like satellite tv made niche channels possible, we’ve now reached the point that seemingly small niches have spawned active marketplaces. CommerceBrain put together a list of 34 marketplaces in late 2015 that included marketplaces for luxury watches, part-time retail associates, and visual content from social media.
While marketplaces aren’t easy to build, the business model makes them quite attractive. Big players have used marketplaces to grow, but like the unbundling of Craigslist, there are opportunities for smaller players to dominate specific niches. In some ways, marketplaces may be even more beneficial to small, cash-strapped businesses that can’t afford to purchase inventory to grow. Instead, marketplaces can leverage the assets of others while focusing on attracting customers. Once the buyers are there, sellers will naturally be incentivized to participate. Building a marketplace is clearly different than opening a Shopify or Amazon store but the core function, connecting customers with goods and services they want, remains the same.
Often, it may seem like ecommerce is established and unlikely to change. By changing the types of products sold, and the business model, a whole new array of possiblities comes into play.
Do you know of any innovative businesses selling goods in a different way online? Or are there niche marketplaces that have caught your attention? Leave a comment below.
Originally published at EcomLoop.