Balance of power in digital world. Suppliers and Marketplaces.
Or, why it’s probably a good idea to empower suppliers to own their digital delivery experience.
Okay. Let’s take a scenario. This is 2005. You have to buy something. Probably a meal, a cell phone, new curtains, some furniture. Or you need to get something done, some plumbing thing, beauty treatment. Well, you would go to your local market and look around. You’d have a rough idea of shops you want to go because you know your local market and the shopkeepers. You’d have a conversation with them about what you want or browse the products in the shop, negotiate the price, pay them and get what you wanted.
Slowly supermarkets happened, and this behaviour changed because you started going to one big building for lot of different needs. But that’s another story.
Then digital marketplaces happened. For general retail, food, hotels, cabs, autos. Digital marketplaces added lot of value to both consumers and suppliers, and in the process, changed the way stuff is bought and sold.
Marketplace functions on supplier side
The ‘supplier’ word is used for the small-to-medium business owner. The value proposition of the digital marketplace to the suppliers is simple.
Since the customer are more likely to spend time browsing on their mobile phone/laptop instead of roaming around in market, let us list all your inventory at our platform. When the customer comes, we’d pass on the order to you and charge a little commission.
As a supplier of a product or some service, this made sense. From their perspective, it’s like hiring a selling agent, who’d go around and send customers to their shop. Gradually, digital marketplaces across different domains also started providing delivery to the customer.
Marketplace functions on customer side
Customers, on the other side of the equation got inundated with choices as all the stuff they want to buy came on their screens, literally on the fingertips. In the new world, few swipes and taps later, a product is on the way to their home.
Rise of Digital Marketplaces : Perspectives
As more transactions flow through a single digital marketplace, it becomes more dominant. As marketplaces gain capabilities, it can influence the market on both supplier and consumer side.
As the delivery of products/services increasingly happen through digital medium, there is an inevitable shift in balance of power towards centralised digital marketplaces. The centralisation of a single marketplace entity has an upper ceiling though.
In a different thought process, individual suppliers/small to medium business owners can be empowered to deliver their products/services digitally. The makers and hackers can think about some form of decentralised digital marketplaces or digital tools to empower the millions of suppliers do business in the new world.
