The Rise of E-commerce Marketplaces
Nowadays, maintaining a leading position on the market is an extremely difficult task, especially in a dynamic environment such as online trade. You need to acquire a dynamic approach to change, continually look for new promotion and sales channels, and implement new solutions and technologies. Gaining new customers requires a lot of commitment to stand out from the competition and build a strong, recognizable, reputable, prestigious brand that customers will trust. Marketplaces help you achieve the above-mentioned goals. And that’s what we want to discuss today.
The development of online marketplaces in terms of business needs and customer expectations opens wide prospects for entrepreneurs who want to quickly and effectively scale their online trade businesses. What are the advantages and challenges of marketplaces? How can the popularity of marketplaces be used in your e-commerce business? Let’s find the answers to all these questions.
Understanding E-commerce Marketplaces
What is an online marketplace, and what is its significance in the digital landscape? Marketplace e-commerce is a place where sellers and customers meet to do business. It is a trading site run in an online environment that operates under the rules set by its owner. Sellers and buyers must comply with these rules, as well as with applicable laws. Marketplaces constitute one of the sales channels that allows you to reach many new potential customers.
The most important features defining each e-commerce marketplace are:
- The easy availability of products from third-party sellers
- The variety of the assortment
- The opportunity to read reviews about them
- Broad marketing possibilities allowing you to promote your products
The popularity of e-commerce marketplaces becomes evident when considering April 2023. As the dominant global marketplace, Amazon recorded an average of 4.8 billion visits per month. In second place was eBay, amassing some 1.2 billion visits.
Types of E-commerce Marketplaces
The rise of e-commerce marketplaces resulted in the development of several types of platforms discussed. Their diversity makes it possible to meet the needs and expectations of thousands of customers. Below you will find information on the most significant types of marketplaces you can come across on the Internet.
Horizontal marketplaces are based on a very diverse assortment offers. Customers who are interested in buying products in various categories can order them comprehensively on such an online marketplace. Typical examples include Amazon, eBay, and Polish Allegro.
Vertical marketplaces are characterized by their specialization in a specific field or category. It can be anything from bedroom furniture and shoes to mobile phones etc. They offer products from one category but on a very wide scale. They are diverse, available in different sizes, colors, etc. In terms of numerous parameters, you can clearly specify which product you are interested in. At the same time, customers can count on professional assistance and can take advantage of the expert knowledge of customer service in a specific field. Typical examples include Etsy, Zalando, and AirBnb.
Lastly, we have global marketplaces. They are similar to horizontal marketplaces, but they are characterized by a much wider, almost unlimited assortment and global reach. This means that transactions can take place between sellers and buyers from all over the world. Examples of such online selling platforms are Amazon and AliExpress.
Examples of the Best-Known E-commerce Marketplaces in the World
Now that you know the online marketplace definition and its types, it’s worth learning more about two of the most popular marketplaces, namely Amazon and eBay.
The best example of the growing popularity and importance of industry marketplaces is Amazon. This store started as a bookshop back in 1995 and has grown to the size of a global giant in e-commerce. Currently, you can buy literally everything that is shown in the graphic below. However, you cannot place an order for houses, cars, live animals, or cigarettes.
What can you sell on online marketplaces like Amazon? Electronics, computers, fashion, automotive items, home and kitchen accessories, video games, pet supplies etc. – literally everything except the items mentioned above.
Another marketplace commerce is eBay. It is a multinational e-commerce corporation that currently conducts its business in over one hundred countries around the world. The beginning of eBay can be traced back to 1995 when Pierre Omidyar was working on the code for an online store. The following year, he hired the first employee to operate the online store, and thanks to good business cooperation with Electronic Travel Auction, he increased the number of hosted auctions on the platform eight times during the year. This is another proof of how you can dynamically increase your sales thanks to online shopping.
Among the prohibited and restricted items sold on eBay are illegal drugs, food, alcohol, and adult items. The list published by eBay also includes hazardous materials, real estate, slot machines, and even live animals and human body parts. The picture below presents a menu that shows the main categories of products offered on eBay.
E-Commerce Marketplaces: Benefits for Sellers
What are the benefits for marketplace retailers? First of all, online selling platforms play the role of an additional sales channel, thanks to which sellers can reach new customers or even start a new business without the need to set up a whole brand-new online store.
Access to an Extensive Customer Base
Buyers trust the best online marketplaces that protect their interests and are recognizable. Therefore, they are more credible than, for example, a brand without a reputation that wants to sell its products outside the platform. Online marketplace sellers see a lot of potential in selling through the chosen platform, so they cannot afford to act against the given e-commerce platform’s policy. After all, they could lose a large part of their revenue this way, and their reputation would suffer, too. Trust in the marketplace means that proven and verified sellers gain access to millions of potential customers who find this form of shopping convenient, simple and quick.
When considering what is a better option: Your own platform vs. marketplace, a good solution is to supplement your own online store with the aforementioned sales channel to gain new customers from the global market.
Simplified Logistics and Infrastructure
Well-organized logistics and infrastructure make management very easy for online marketplace sellers, buyers, and their operators. Properly organized logistics and other processes taking place at the back end of online selling platforms can largely determine their success.
Most often, the best online marketplaces for sellers effectively participate in the flow of information between the seller and the buyer. They inform about the purchase and shipping details, and keep both parties informed about the shipment to the customer and payments.
The best online marketplaces to sell help sellers organize their shipments, e.g., by signing favorable contracts with carriers. Both sellers and buyers benefit from these services.
Amazon, which is one of the top marketplaces to sell on, takes a step further and offers a convenient sales model comprising outsourcing of logistics services. Under this model, Amazon stores the sellers’ goods in their own warehouses. If there is an order, Amazon also takes care of its comprehensive fulfillment.
This makes Amazon very competitive when it comes to delivery times. It also offers return services. The buyer receives their order quickly, and the seller is relieved of typical logistics issues. B2B online wholesale markets are a great support for both sides of the business and have huge benefits for final consumers.
Marketing and Advertising Possibilities
The popularity of marketplaces is growing every year, both for sellers and buyers. This is also due to the modernization of these platforms and the introduction of advanced promotional tools. With a variety of advertising options, sellers better promote their products and increase profits. Even if there is no such thing as a free marketplace, even the use of paid options is beneficial for the financial and image aspects of the company.
Benefits for Buyers
What buyers gain is, above all, a very wide selection of products and the ability to do shopping in a convenient way in one place. They often save time and reduce shipping costs.
Moreover, customers can compare products from different sellers in terms of price, availability, delivery speed, and possible special offers.
A great support in shopping and facilitation for buyers is also the possibility to compare reviews about the product and sellers, which affect the overall perception of the offer and may positively or negatively affect the brand image.
Challenges and Risks
What challenges and risks await sellers who want to implement their offer on e-commerce marketplaces?
E-commerce marketplaces are dynamically conquering the digital world. They truly constitute a great place to increase sales. However, your competition uses the marketing options provided by marketplaces as much as you do. At the same time, you should comply with the general rules adopted on a specific marketplace and algorithms that determine the way offers are displayed and their favorable positioning. It is a big challenge to comply with marketplace requirements and, at the same time, stand out from other sellers.
Trust and Reliability
While online marketplaces offer convenience and a wide array of products and services, they also present risks that all users must be aware of. One of the primary concerns is the presence of fraudulent sellers or scam artists who may advertise fake or counterfeit items, leading to financial loss or potential harm.
It is essential for users to exercise caution, thoroughly research sellers, read reviews, and ensure secure payment methods are in place to mitigate potential risks and safeguard their personal safety and information when engaging in online marketplaces.
Data Privacy and Security
A big challenge is also the protection of the personal data of sellers, buyers and commercial transactions they perform. A data leak can be dangerous for their business, involve serious risk of abuse, and, as an outcome, result in criminal liability. In fact, privacy and data security are critical considerations, as personal information shared on these platforms can be vulnerable to unauthorized access or misuse.
What Will Be the Near Future of Marketplaces?
To sum up, using the marketplace as an additional or even main source of income is highly recommended. It can happen, though, that your business needs are more diverse and specific. In such a situation, you can consider creating your own sales channels, such as your online store, although it involves some investment in technology, marketing, and operational management. Nevertheless, the upward trend in the development of marketplaces clearly indicates that, in the coming years, they will gain in popularity and become an even more profitable sales channel.