Today we sat down with Bert Gregory, 1WorldSync’s Community Manager to discuss the importance of marketplace and the path to purchase.
What is a marketplace?
An online marketplace is a website or app that facilitates shopping from many different sources. The operator of the marketplace does not own any inventory, their business is to present other people’s inventory to a user and facilitate a transaction. eBay is the ultimate example of an online marketplace, they sell everything to everybody. There are many other types.
What is the difference between e-commerce and a marketplace?
Well to be fair, marketplace is a component of how e-commerce is evolving. If we look at the original model for e-commerce, the process went like this. Supplier sold product to the e-commerce site who warehoused the items and put them up for sale to the end consumers. Marketplace takes 2 big components out of that process, 1. The products are sold to a 3rd party [either a distributor or other ecommerce player] and 2. The product sold on the e-commerce site are supported and fulfilled by the 3rd party and not the site itself. But marketplace is not limited to goods, Airbnb is actually a marketplace, just with temporary housing as the items being traded.
What types of marketplaces are there?
Well that depends on what is being sold or traded.
- i) There are switch marketplaces – which are peer-to-peer, VRBO and Craigslist are great examples of this.
- ii) There are also vertical or industry specific marketplaces like Trivago and Hotels.com which offer very specific products to end consumers
iii) Then there are the retail marketplaces, also known as global. Best examples of these are Alibaba, Amazon and Ebay.
What pros and cons do marketplaces pose for end consumers?
Data gathered from the Internet Retailer 2016 Top 500 Guide shows that, collectively, the 26 retailers that disclosed their sales from online marketplaces brought in 14.4% of their total $3.1 billion in sales in 2015. That’s up 42.9% worth of goods sold through marketplaces in 2014 for the same 26 retailers.
Marketplaces represent an opportunity for sellers to expand their reach to more consumers, both nationally and internationally. With a plethora of online marketplaces available, merchants can choose sites that make the most sense for them.
End consumers benefit a couple of ways from marketplaces, they have extended selection of goods and services, the ability to comparison shop the ecommerce site rather than leveraging search engines and also the potential for lower prices due to increased competition. There are however some challenges for the end consumer as well. They may not realize that the product they are buying is not actually being sold to them from their trusted site, which can complicate communication and returns. Another challenge/con is the concern over counterfeit goods. Marketplace sites and sellers strive for perfection with this challenge, however the sheer number of products being sold can cause items to slip through the cracks.
How have marketplaces evolved over the years?
Quite a bit actually, I remember when Amazon was just selling books, and would allow an end user to sell their used books to others hence a peer to peer system. The same can be said for Ebay as peers were selling their goods digitally to others. This has evolved to major retailers, etailers and distributors now selling their products via the marketplace platform. Oh and let’s not forget that marketplace has also change how end consumers find hotels/lodging, buy airfare, shop for clothes and even go to rummage sales. Yep, even the weekend activity of shopping other people’s stuff has turned into a digital marketplace. Ebth.com [Everything but the house] and LetGo are perfect examples of this.