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A Beginner’s Guide to Understanding the Marketplace Model

Marketplace model

In today’s digital age, marketplaces have become a staple in the world of e-commerce. The world of e-commerce is growing rapidly and many companies are starting to launch their own marketplaces. But what exactly is a marketplace and why are they so popular? How can you understand if you are suitable for a marketplace model? If you are, which one is the most suitable one for you? How can you become a marketplace? We will talk about the answers of these questions in this article.

What is Marketplace?

A marketplace is a platform where vendors can come together to sell their products or services to a curated customer base. The role of a marketplace owner is to bring together the right vendors and the right customers to drive sales through an exceptional multi-vendor platform – sellers have a place to gain visibility and sell their products, and the marketplace owner earns a commission from each sale. Marketplaces can be online or physical, but they’re typically digital platforms where people can list their items for sale and find new buyers.

Marketplaces can be classified into two main categories based on their target audience: B2B (business-to-business) and B2C (business-to-consumer). B2B marketplaces, like Alibaba and AmazonBusiness, allow businesses to buy and sell goods and services to each other, mostly in high quantity numbers whereas B2C marketplaces, such as Trendyol, sell directly to consumers.

Additionally, marketplaces can be further categorised based on their offerings into service-based and product-based marketplaces. Service-based marketplaces, such as Armut, offer a platform for individuals or businesses to list and sell services, such as repairs, consulting, or other professional services. These marketplaces bring together people who need services with those who can provide them, creating a simple and efficient exchange of services. Product-based marketplaces, such as Etsy, offer a platform for individuals or businesses to list and sell tangible goods, such as handmade or unique items. These marketplaces are often focused on specialty or niche products and offer an opportunity for smaller businesses and artisans to reach a wider audience and grow their customer base.

Do people prefer to shop on marketplaces? If yes, why?

The answer is simple: Yes, people prefer to shop on marketplaces. Only 6% of B2B buyers don’t currently use online marketplaces. In 2019, even before the pandemic, 47% of digital purchases worldwide happened via online marketplace platforms and it is known that after the pandemic, online shopping numbers were multiplied by at least 3 times. The top three online marketplaces in the world sold $1.78 trillion in 2021. So, yes there is a big demand towards the marketplaces worldwide.

The reason it that they offer a variety of products in one place. Customers can compare prices and features, find products that are hard to find in local stores, or even buy items from different brands at one place. This makes shopping much easier and convenient.

Marketplaces also offer a huge opportunity for brands to reach new customers. They can create their own storefront and sell products directly to consumers, or run a sale on the marketplace. Particularly for small brands or when brands are expanding into new markets, this can help them increase awareness about their brand and generate sales leads that they can later convert into customers through other channels.

What are the general marketplace models?

There are 3 main structures for marketplaces

  1. Pure marketplaces: marketplace that sell only items from 3rd party merchants, and does not have any input into what is sold. (i.e. eBay or Alibaba) Pure marketplaces are mainly trading platforms.

  2. Mixed marketplaces: marketplaces in this group sell a mixture of marketplace owned brands and products of 3rd party merchants. (i.e. Amazon, Trendyol)

  3. Retailer-owned marketplaces (aka enterprise marketplaces): As a recent trend, this group belongs where retailers transform themselves to become marketplace and add products to their e-commerce website from complementary 3rd party merchants. (i.e. Mediamarkt)

Exploring the Marketplace Model

In conclusion, the rise of the digital age has led to the creation of marketplaces that provide businesses with a unique opportunity to connect with a curated customer base and sell their products or services online. With the many benefits that marketplaces offer, such as increased brand awareness and new customer reach, it’s no wonder that they’re becoming increasingly popular.

However, launching a successful marketplace requires careful planning and consideration. Businesses must assess demand, supply, business models, and market shifts and regulations to ensure their idea is viable. In our upcoming blog posts, we will dive deeper for about the evaluation of marketplace transformation and planning its steps.

Stay tuned for our upcoming blog posts on how to become a marketplace and the steps of becoming a marketplace!

If you’re interested in creating a marketplace, don’t wait any longer. Contact Metheus Consultancy today to learn how we can help you navigate the complex world of marketplaces and build a successful online platform.