Marketplace explained. Understanding online marketplace
Accounting for over 50% of all online shopping, online marketplaces contribute to the lion share of the business that happens today in the world. No wonder why among the most successful companies of today operate under this model, such as Amazon, Uber, Flipkart etc.
How the marketplace is different from an online store. Many people who invest in e-commerce industry are very much exposed to the term online store or an e-commerce store, but surprisingly the term marketplace is intriguing to many of them. But those who know the term marketplace may think twice before starting a marketplace because the hegemony of Amazon and business alike may make the vendors retreat from creating an online marketplace. Is marketplace as confusing and heavy as it seems to be or it’s just a myth attached to it. Let’s declutter a marketplace.
Created by a marketplace owner, Marketplace is a platform where any number of sellers can display their products or services for sale to a collective customer base. It’s the job of the marketplace owner to get the sellers to join under the platform and to get the sellers to club with the customers. The success of the marketplace depends upon the marketplace owner’s ability to generate more sales by wooing more customers as well as sellers into the marketplace.
The curation of a marketplace is that customers get access to a lot more products at different prices set by different sellers, sellers get more visibility and space, and the marketplace owner earns a commission from each sale.
Online store vs Marketplace
Online stores are run by a single owner or company who is selling their products and services online. The owner takes care of marketing and operational aspects of their business leaving no room for error, and everything is handled by the owner from top to bottom. On the other hand, marketplace simply facilitates both sellers and customers, not providing operational support to sellers. Instead, the marketplace owner concentrates on the brand building and promotion of the marketplace platform with a view to drive sales through more traffic. Each seller in a marketplace is independent.
Marketplace does not own any warehouse or inventory unlike an online store. Therefore the marketplace has no bearing on the functioning of vendors selling under their brand , and it’s the responsibility of each seller under the marketplace to take advantage of the marketplace brand. Marketplace owner focuses on promoting their brand and increasing the volume of the business in their marketplace through promotions and advertisements. In a marketplace, customers see the products and not the seller, nor does the customer know who’s selling a product.
Features of a Marketplace
Scalability
Marketplaces offer great support to their owners because they don’t have to spend a single penny for managing the business apart from promotion. Plus, they can achieve this with a small team, and the firm may have to hire more employees when the organization gets bigger. As we all know how flexible it is to sell groceries without owning a single grocery store(Amazon groceries) or offer cab service without owning a single car(Uber).The marketplace owner just ensures that their external sellers are doing well and adhere to the norms set by the marketplace
No inventory and store management
The products offered by the marketplace are stored by each seller, so marketplace doesn’t have to store an inventory, nor does it have to manage a physical store. This would be of great help in terms of finance to manage the cost of store and manage inventory. But nowadays some marketplaces do offer warehouse support and inventory management to their sellers, but it’s a different case altogether as it remains the choice of a marketplace.
Fewer operating costs
A marketplace owner doesn’t need to worry about the store management, inventory, customer management and much more since it only focuses on marketplace promotion and brand building. Also setting up a marketplace is not so difficult nowadays with the advent of SAAS solutions providers. Marketplace services are being offered at a much cheaper price, and the owner doesn’t need to worry about the site maintenance or upgrade as it will be done by the SAAS provider Marketplaces allow the owners to focus on end users only barring the promotion and advertisements required for moving the marketplace business. Moreover, it gives you fewer operational duties, such as keeping the inventory, store management, customer service etc.
It’s easier said than done. But a lot of work should go into building a marketplace starting from handling sellers to fraud detection to finding niche markets and so on. Despite all this, marketplaces keep generating high revenues and continuing to be the successful business model of today’s age. Launch your marketplace now by Signing up on Skartio for a free trial today.
