In 1995, the world was first introduced to eBay (under the name AuctionWeb at the time), an e-commerce and auction website that was the first to use the marketplace business model to connect and facilitate B2C and C2C transactions. Since its launch, the company has been able to expand its product categories, provide more services to their users through strategic acquisitions, and set up an efficient—not to mention lucrative—recurring payment system.
With eBay currently operating in 27 countries and earning 9.6 billion in annual revenue, its success as a multinational online marketplace has inspired other companies to try and replicate that success, following the same business model.
For example, Amazon started off as an online bookstore, but eventually moved to diversify its product catalogue by adding many new innovative features (like customer reviews) and services, increasing its value proposition. When people think of industry juggernauts in this space, they think Amazon, which earned 56.6 billion in revenue in Q3 of 2018.
Of course, eBay and Amazon aren’t the only virtual marketplaces out there. There are many that don’t function as general e-commerce platforms, but instead cater to a specific region or product. Think Etsy for hand-made goods or NASDAQ for securities trading.
No matter what kind of online marketplaces you choose to use, getting started is widely viewed as a low-risk venture with a high probability of success. Let’s chat about why that is.
Why retailers should use online marketplaces
Now that you’ve seen examples of thriving marketplaces, it’s time to dig in and discuss why this industry is booming and, from the looks of it, won’t be stopping anytime soon. For one thing, most of today’s consumers shop on marketplaces—97 percent of them to be exact. Like a physical mall, consumers like the convenience of shopping for multiple products in the same building or, in this case, on the same website.
This means that in exchange for a small commission or listing fee paid to the marketplace, sellers get access to a huge audience they would otherwise be unable to reach. Many platforms even have an app, which allows sellers to reach the increasing number of mobile shoppers without the expense and hassle of developing their own app.
Another thing retailers won’t have to worry about is maintaining a digital storefront or website. Instead, the marketplace deals with product listings and store design, leaving the retailer to just focus on their product. Sellers don’t have to worry about as many overhead costs as they would striking out to sell on their own website either—expenses like inventory management, marketing, and warehousing, for example.
The way marketplaces handle product reviews is another boon for retailers and consumers. Most consumers read online reviews before purchasing and generally trust them as much as a word-of-mouth recommendation. Having a repository of product reviews all on one platform helps sellers prove the value of their products without forcing consumers to check multiple websites for the information they need to make an informed purchase.onli
Advertisers should get on board too
If B2C isn’t something a retailer is interested in, an advertising marketplace can provide many of the same benefits but with all the comfort and ease of B2B. Through an advertising marketplace, retailers can easily connect with advertising partners that have the kinds of audiences they want to target. From there, it’s as simple as buying ad space, designing an ad, and sending it off to be shared with the masses online or via package inserts that ship out to consumers with their e-commerce orders.
Traditional advertising costs a substantial amount of money, requires more than one person to launch a campaign, and is difficult to effectively track ROI or conduct test methods. Conversely, online advertising allows one to have more control over their campaigns, the placement of their ads, and make sure an ad spend doesn’t break the budget.
Last thoughts on online marketplaces
Marketplaces are powerful tools designed to create a simple and easy online shopping experience for consumers and a streamlined selling experience for retailers. With widespread adoption and huge user bases, coupled with the ability to generate recurring revenue, grow and scale efficiently, the marketplace model is here to stay.
Whether you’re interested in using online marketplaces to purchase ad space or to sell product directly to consumers, don’t think twice about getting started today.