Online marketplaces, thanks to the possibility of reaching a pre-existing customer base, have become very popular selling channels. Check our basics about marketplaces.
What is an online marketplace?
An online marketplace is an eCommerce website, sometimes even application, that provides products and services to consumers from external companies. The key to marketplaces is offering inventory from multiple providers. The marketplace itself doesn’t sell its own products, but there are exceptions like Amazon. This type of business model allows you to make purchases from many different sources. All of the transactions are processed through the marketplace owner.
Who are marketplaces for? If you are wondering about implementing an online marketplace in your business, you’ve come to the right place. Marketplaces allow you to reach a wide range of customers quickly. This selling channel is worth considering for producers that want to sell their own and unique products like clothing, jewelry, and interior decoration elements. It is also a solution for retailers who want to sell niche products such as vinyl records and gadgets for collectors. The last group that could benefit from marketplaces is retailers offering products at lower prices, such as electronics and sports accessories. Online marketplaces can bring benefits to different types of companies, including both single and larger brands.
Now that you know what a marketplace is, we can move on to some examples.
Examples of online marketplaces
There are several types of marketplaces on the market today. Every marketplace, without exception, is unique in its own way. However, there are various classification systems. We can divided marketplaces into several categories, depending on:
- type of relationship: B2B, B2C, C2C e.g. Alibaba, Amazon, Bla Bla Car
- type of offer: products, services, others e.g. eBay, Booking.com, Spotify
- other, like industry or type of monetization.
Each marketplace can belong to different categories.
Another marketplace division includes the type of platform. We distinguish between two types of platforms:
- vertical e.g. Airbnb, Uber, Udemy
- horizontal e.g. OLX, Amazon, eBay
Vertical marketplaces focus on one category of products or services. All the inventory is limited to one industry/category. The perfect instance is Uber, which provides car transport services or delivery.
Horizontal marketplaces consist of multiple categories of products and services. These types of marketplaces are not defined in one category. The best example of a horizontal marketplace is Amazon. You can find there basically everything, from baby products, through groceries to fashion and musical instruments.
The less well-known categories of marketplace division include a range of activities. There are two types: global marketplaces and hybrids. Global marketplaces, for instance Airbnb, sell products and services from different companies. Hybrids, like Amazon, offer products and services from third parties, as well as their own.
Global marketplaces (e.g. Amazon)
Amazon Marketplace is an eCommerce platform that allows third-parties to sell products on Amazon.com. In addition to selling products of external companies, Amazon also offers its own. The online marketplace created by Amazon gives external companies access to Amazon’s extensive base, with millions of customers. Third-party sellers that decide to join the Amazon Marketplace get a ready-to-use website. Amazon allows them to start selling immediately after choosing a selling plan and registering. The company operates international sites in 13 other countries worldwide. Amazon also has a fulfillment service (FBA) that offers access to world-class logistics solutions, fast and free delivery and customer service in its local language. FBA allows the sale of products to both local and international PRIME clients. Prime clients are the most active and loyal customers on Amazon. FBA services offer a set of international logistics solutions that make it easier to sell on European markets.
Social media marketplaces (e.g. Facebook, Instagram)
Facebook has changed a lot since its release in 2004. In 2016, the most popular social media platform in the world introduced its user to the Facebook marketplace. This Facebook feature allows users to discover, buy and sell items via a social networking site. First of all, Facebook doesn’t participate in payments. The Marketplace app only allows users to search for offers and contact sellers. The whole concept is simple, both for the buyer and the seller.
An interesting case is Instagram. Everything changed when the platform introduced a new function, Instagram Checkout. This is not exactly a marketplace, but it is definitely something that is worth following.
Brands owned marketplaces (e.g. in healthcare)
Maybe this choice will surprise you, but even the healthcare industry needs its own marketplace. With this case, I want to show that no matter what business you have, or what products or services you sell, you can still use a marketplace.
The Health Insurance Marketplace is a marketplace created by the federal government of the United States, and it operates at HealthCare.gov.
The Health Insurance Marketplace helps users to find the perfect health coverage. Today’s health plans offer very similar benefits, like doctor visits, prescriptions and hospitalization.
On the marketplace, users can compare the plan and make a decision based on quality, price or benefits.
Marketplaces in the healthcare industry are developing much more slowly than marketplaces from other industries. However, it didn’t stop the Zocdoc company from creating a successful platform for patients. Zocdoc is a convenient marketplace which lets patients find the right providers. Based on insurance, specialties, and location, patients find their supplier. It’s all in less time than regular visits. I think it is an example of a truly healthy marketplace!
The limited popularity of marketplaces in this industry has not discouraged Medicover, an online medical platform with a comprehensive range of services and packages for patients. the Divante team participated in the creation of MediStore. We were responsible for the design and implementation. Read more about eCommerce development by Medicover in cooperation with Divante.
Why do retailers implement online marketplaces?
Marketplaces bring a lot to a retailer’s business. Each seller wants to succeed in the marketplace. It’s no surprise that the number of online marketplaces has increased over the last couple of years. The most important thing is to create a bond between customers and businesses, and the marketplace has done it.
One of the main reasons why retailers decide to join and start selling on a marketplace is access to customers. Marketplaces have their base of ready-to-buy customers. Therefore, the marketplace user receives a customer base and a ready-to-use website. What is important is that online marketplaces have well positioned sites (around the top 10). Using the marketplace position will help sellers with marketing and advertising activities. It is a definitely SEO reinforcement.
Managing marketplaces is easy and intuitive. The marketplace platforms are designed so that even a beginner can handle them. Being part of the online marketplace provides trust between business and customer. Building trust in an online customer is crucial for repeat business. In the end, we want to prevent customer churn.
In conclusion, we know that implementing a marketplace is fast and much cheaper than going it alone. The majority of the risk is on the marketplace side. All that the seller has to worry about is the products/services on offer and their development. All things considered, it’s obvious why business owners are implementing online markets.
Top online marketplaces by traffic
Three of the top five largest marketplaces are located in China (Taobao, Aliexpress, JD.com) and the other two in the US (Amazon, eBay).
Source: eCommerce Trends 2019
The first place of course belongs to the previously presented Amazon, so we will skip this here ;) Another well-known marketplace is eBay. The marketplace offered by eBay is very similar to the Amazon one. Running since 1995, the marketplace operates in 37 countries. What distinguishes eBay from Amazon is the fact that it does not sell its own products. Any products signed with an eBay logo are the result of a contract between the market and an external company.
Moving on to Chinese marketplaces, Taobao is a website owned by Alibaba. The company ranks first in the division going by gross merchandise value. Taobao, unlike Tmall is intended exclusively for small brands. Taobao is a free-fee marketplace where neither the seller nor the buyer incurs transaction fees.
AliExpress is another Chinese online retail service owned by Alibaba. It is a solution made for small businesses to sell to customers all over the world. The company focuses on selling a smaller amount of wholesale products, in contrast to Alibaba. Sales on AliExpress involve the need to have an Alipay business account, appropriate documentation and to pay an annual technical service fee.
Last but not least is Tmall, owned by the Alibaba marketplace. The company is separated from Taobao and operates a B2C business. Tmall is oriented to local Chinese and international businesses to sell brand name goods to consumers. Tmall marketplace is designed for medium and large brands.
If you want to know what the top marketplaces are by gross merchandise value, check the Digital Commerce 360 infographic.
Online marketplaces in mobile-first eCommerce
As I mentioned before, online marketplaces often launch native applications to expand their businesses. Sometimes they introduce social marketplaces like Facebook. However, there is one more interesting solution. I am talking about Progressive Web Apps. A PWA works on any operating system without adaptation to Android or iOS. Marketplaces can give their customers a fast and safe app-like experience without creating a native app. Furthermore, progressive web apps can work offline. This solution is already used by AliExpress and OLX. Check more examples of top marketplaces using PWA.