We have used the term marketplace many times to describe our FashionTrade platform but do you know what the term actually means?
In offline commerce, a marketplace evokes the image of a bazar where people meet to exchange produce. Many different stalls with a wide variety of products on array and buyers walking by from seller to seller. In one single space the shopper can find all he or she needs in one place without moving further, compare prices and directly buy at that place. The seller on the other hand has the advantage of many shoppers being attracted by the full range of products there and profits from the buyers being attracted by his neighboring seller. A shopper who came to buy products from seller A may just be intrigued by the products on offer at seller B and end up buying from that latter seller.
What does a marketplace look like online?
In online commerce the idea of a marketplace is very similar. Products by different sellers are on offer and different buyers come to discover, evaluate, compare and eventually buy these products. In online commerce, however, the marketplace is not physical and there is a structure organizing the marketing. Where in a city it’s the municipality putting up the space for the stalls, direct traffic so that the selling and buying can take place and advertising the city so as to attract new sellers, in online commerce this is what is called the marketplace. It’s a third party creating the virtual space, attracting sellers and bringing buyers to the stands (web traffic) so as to generate revenue for the sellers. It’s also the marketplace site that processes the transactions. For this service of exposing the seller to new customer, of marketing the products and of processing the transactions and payment, marketplace platforms usually charge a small commission or monthly fee based on the volume. The buyers on the other hand are rarely charged for the opportunity of doing commerce in the marketplace.
What are some examples of online marketplaces?
The most well known marketplaces online are eBay, Amazon and Rakuten, depending on the location and produce that is being sold. We have written a more detailed analysis on how to use each of these marketplaces, how to signup and how much in set-up or selling fees you will have to pay.
Online marketplaces are also referred to as multichannel ecommerce. Often sellers use them as a second store next to their own online or offline presence or to enter a new geographical market, benefitting from the marketplaces’ authority in that special area.
How to distinguish different marketplaces
Each marketplace is different in the way it works, in the region or product segment it operates in, in the segment of users it attracts and in the way it interacts with them and in its policy of letting actors participate (a closed versus an open marketplace). Some marketplaces only enable the transactions but the physical product is sent from seller to buyer independently like the case of eBay whereas others offer the service of drop shipping (like Amazon optionally offers) in which case the seller first sends its merchandise to the marketplace’s warehouse and the buyer then receives the product from the marketplace directly. On top of enabling transactions, a marketplace can include other functionalities like bidding or auctioning (as eBay prominently started out with), advertisement for resellers to highlight their produce, give discounts or directly reach out to buyers.
All in all, it really depends on what you want to get out of a marketplace. Do you want aim to offer your merchandise to a wide crowd, do you wish to expand to a new country or do you aim to create a selected, curated community around your brand?
There are many ways of using a marketplace! Why don’t you start your journey on a marketplace with us?