Expert's Eye : The relevance of marketplaces

Understanding the relevance and impact of marketplaces in today’s ecommerce landscape

Many of the world's most successful companies operate under marketplace models: Airbnb, Amazon, Uber, Etsy. With the constant evolution of marketplaces, Ecommerce Foundation decided to interview Eduardo Aznar, Chief Growth Officer at Shopery. Together, we discussed the relevance and impact of marketplaces in today’s ecommerce society. Shopery empowers leading ventures and brands to build and scale their marketplace businesses through a SaaS solution.

1. What makes a marketplace a marketplace? (as opposed to online stores or directories).

In a marketplace model, there is one business (called the marketplace owner) that gathers the catalogue from several external parties (called the marketplace sellers) that sell to potential clients under the same roof. Amazon, Uber, Airbnb and MyTaxi are examples of highly-consolidated marketplaces.

What makes marketplaces a very interesting and lean model to pursue is that the inventory offered in the platform is not held by the marketplace owner, but by each of the sellers comprising the marketplace. For example: Uber does not own the cars, Airbnb does not own the apartments it offers, and Amazon or Alibaba do not own all the products they offer. Indeed, in a marketplace, sellers are can offer their products and services rather autonomously: they just need follow the marketplace seller policy and guidelines, regarding content quality, customer satisfaction levels, and pricing arrangements between the seller and the marketplace owner.

While sellers typically take on the most operational part of the business (selling and fulfilling - different models apply), the marketplace owner is in charge of promoting the marketplace brand with the goal of actually driving traffic to the domain or app and converting those visits into sales. In exchange, the marketplace owner will place a commission on sales or charge a monthly fee. This duality of roles between marketplace owner and sellers clearly differentiates a marketplace model from other e-commerce forms, such as online stores, where a single-seller takes on multiple hats: promoting, selling and fulfilling.

Lastly, we normally refer to marketplaces as those platforms that not only meet the above criteria, but are also transaction-oriented: that is, the focus of the marketplace is for the buyer to carry out a purchase or booking in the platform. This sets transactional marketplaces apart from its closest relatives, classifieds businesses (such as Craiglist, or Schibsted), where the intermediary collects contact information, puts buyer and seller in contact and lets the transaction happens outside the platform.

2. What is the role of marketplaces in the current digital ecosystem?

Many of the world's most successful companies operate under marketplace models:Airbnb, Amazon, Cabify, Glovo. Indeed, marketplaces have been a source of disruptive innovation, shaking up many industries and  providing new value to clients. For instance, while Uber has provided a more flexible and affordable mean of transportation besides public transport and taxi, Etsy has created an increased assortment of crafted products from independent creators around the world.

Marketplaces have reshaped digital commerce in ways previously unprecedented, quickly becoming the cornerstone of e-commerce. According to Lengow, over 60% of digital sales already happen through marketplaces, and according to Euromonitor, over 50% of sellers will either list their products in marketplaces or become a marketplace themselves by opening up to external sellers in 2020 .

3. What is it that makes marketplaces so interesting to consumers?

As we were mentioning earlier, marketplaces provide a broader catalogue that is provided from many sellers (which would by the way be virtually impossible to gather by one single seller in the online store model). More particularly, in hyper-local and hyper-vertical marketplaces, the catalogue is highly curated and addressed at a specific niche (a geography or a segment, respectively) and can even more successfully cater the specific needs of their specific target. All in all, this makes marketplaces a very interesting channel to browse products and compare different alternatives

Moreover, with many different sellers selling under the same roof, buyers can typically encounter cheaper prices, which make marketplace the go-to channel to purchase online .

On the side to this, many of the most reputed marketplaces also provide industry-leading services thanks to their extensive industry experience (whether that be faster shipping or more engaging customer service) which end up making the purchase experience delightful to customers

4. What do you envisage to be upcoming trends in the marketplace landscape?

In an article we just published for our Marketplace Insights unit (LINK), we just discussed the following trends:

1. Marketplaces will continue to outpace traditional e-commerce: marketplaces are better positioned to address consumers' needs and will continue to grow at higher paces than other ecommerce models

2. The rise of hyper-vertical and hyper-local marketplaces: marketplaces will increasingly become more specific, offering specialized products or services in order to carve out dominance within a niche.

3. The consolidation of B2B models: Although they are often less well-known than their B2C counterparts, B2B marketplaces are becoming a force of their own. The large volume and high fragmentation that typifies B2B environments, combined with the relative lack of competition from digital pure players, has lead to oceans of opportunity

4. A rising mix of marketplace owners: although entrepreneurs and ventures will continue to be the main agents behind marketplaces, they will no longer be the sole owners of them. Increasingly, marketplaces will be owned by manufacturers, retailers, retail associations and public administrations.

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