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What is a Marketplace?
A marketplace is an online store or a platform that facilitates both buyer and seller in many ways. An online marketplace is just like an e-commerce website or mobile app where sellers meet buyers and offer products and services. The website is responsible for all the transactions i.e. payments, transactions and process.
Definition. According to the oxford dictionary, “the marketplace the activity of competing with other companies to buy and sell goods, services, etc.”
However, the owner of the online store doesn’t have the inventory of all the products that he’s presenting. The e-store is just facilitating the transaction by selling the products of other businesses to customers. Amazon, eBay, and Alibaba are very good examples of the online marketplace.
Characteristics of a Marketplace
One of the most interesting features of a marketplace that offers you almost everything at one platform; you just have to download the application on your mobile phone and start using it. Different suppliers are making their products available to the customers on one platform. Instead of offering their products separately at their different respective stores, and they have to manage everything like store management, customer dealing, and delivery.
Types of Marketplaces
Three major types of marketplaces are as follows;
A vertical marketplace is an online store that sells only one type of product but its sources are different. TrueFacet.com is a very good example of a vertical store because it offers only jewellery and other related items, but it doesn’t sell clothes, shoes, and electrical stuff at its store.
Since jewelry is a very costly and luxury item. Therefore, TrueFacet.com has managed to maintain authenticity and guarantee of such high-value products. Tirath Kamdar, CEO and founder of the store, said in one of his interviews that TrueFacet is allotting a separate value identifying number (VIN) to all of its jewellery. That’s how the store is maintaining the authenticity of all of its products.
The horizontal marketplace is a store that offers different types of products but they all share the same category characteristics. For example, Panjo is an online store where buyers and customers connect and make the transaction of their vehicles and automobiles.
CEO of Panjo, Chad Billmyer, said that his platform would bring traffic and people would buy and sell their products on his platform because he provides data, infrastructure, and community.
Dote is an example of a horizontal marketplace and it offers only female products of different retailers at one platform. Women don’t have to download the applications of different retailers on their mobile phones separately. Dote would provide them products from all the retailers at a single platform.
The global marketplace is a type of store that sells almost everything of different categories and different types. eBay is a very good example of global marketplace stores, where you can buy and sell different types of products. It ranges from the vehicle, clothes, shoes, automobiles, electrical, electronic, etc.
Vice President of seller experience at eBay, Bob Kupbens, said that the reason people buy and sell their products on eBay is that they know that they would get the right price and value of their commodity. He also said that the environment of eBay offers a community and efficient online market environment to its customers.
Advantages of Selling on Marketplace
Some of the advantages of the online marketplace are as follows;
Access to the International Market
Having an e-commerce store provides you with an opportunity to access the international market. Different people across the world would be your target market and they’ll visit your platform. In other words, you won’t be restricted to one market and one country only. If you perform better with your marketing campaign, then you can increase the demand for your products.
Sell Products without having a Store
There is a marketplace that provides you an opportunity to sell you your products and services at a fair price, and you don’t have to worry about acquiring the online store and spend resources on establishing it. Already establish store would manage payment method, advertisement, logistics, and product details for you.
It’s much cheaper to sell your products at a marketplace than owning a store. You don’t have to pay costs like domain and hosting, SEO, copyrights, themes, web design, and other management costs. The marketplace would manage these costs and you’ll have a fully established store.
Credibility and Trustworthy
While starting an online store, it requires a lot of time to establish trust and credibility with your customers because people don’t trust new stores. However, people trust the online marketplace that is already established. If customers don’t like the product they receive, then they can complain about the marketplace. But ordinary stores have trust and credibility issues once you made the payment.
Disadvantages of Selling on Marketplace
Some of the disadvantages of the online marketplace are as follows;
Commission on Sale
You don’t worry about administrative and management costs, but you have to pay a certain percentage of commission on every sale you make. It could be 5%, 10%, 15%, or 20% depending on the type of the marketplace, the percentage of commission rate would vary.
When there are more sellers in the same category as you’re. It is highly probable that they would compete in terms of prices by lowering it to win the market share. Therefore, you have to constantly revise your products’ prices if they aren’t working.
Surrender your Clients’ Contact Details
When you make a deal with any marketplace, then you’ll have to surrender your clients’ detail to the marketplace. In other words, there’s no leverage left. It means that you’ll have to work with them, whether you like it or not in the future.
Lose Everything if You Leave
If you plan to leave the marketplace because of the competitive pricing or other reasons, and you would have to give up your sales history, product description, client data, recommendations, reviews, and statistics. Marketplace will acquire your clients and you’ll be left with nothing.
Control over Your Niche
The product category and niche you have started because of your clients and suppliers, and it becomes profitable later on. When you leave the marketplace, the platform would keep the niche and pressure the suppliers to keep it running. The marketplace has a monopoly over all the operations of the business.
Conflict of Interest
If you have your e-commerce store and a product category and they’re running and operational at the same time. If the marketplace set prices higher or lower than your stores’, then it would damage your brand image, company’s profitability, and customer dissatisfaction. Therefore, you have to check before making any deals to avoid conflict of interest in the future.
Example of Marketplaces
Amazon is one of the world’s biggest marketplaces. If you’re planning to sell your products/services, then you must check out Amazon, because most of the internet searches and transactions happen on this marketplace. It should be a top priority.
It is a French platform targeting the western audience. Fnac is a bitter younger marketplace than others. But it has added a great variety of catalogs of different products on its platform.
Alibaba is also one of the world’s biggest marketplaces. According to an estimate, it has roundabout more than 500 million active clients across the world. The sale volume of its marketplace is much higher. If you’re planning to sell your products/services in some marketplace, then Alibaba is a great choice.
Of course, having complete control over suppliers and clients is a great option. But if you’re new in the market and you have a limited budget, then choosing a marketplace and selling your products and services there isn’t bad, because you don’t have to bear so many other expenses.