Today, businesses are looking for easy ways to sell their goods and services, reach a large customer base, and cut their marketing and running costs. Online marketplaces were created to address these problems.
A marketplace brings together customers and sellers and provides a centralized location for processing payments and orders. To provide services, a business or individual need only create a profile and add pertinent information; they are not required to build or publicize a website or application.
Over the previous few years, markets have seen significant growth in popularity as a direct result of these benefits. According to research conducted by McKinsey & Company, about eighty percent of B2B decision-makers favor virtual human interactions or digital self-service because they are easier to schedule meetings, less expensive to travel, and safer.
In this regard, creating an online marketplace presents an excellent prospect for investment. This article will help you choose the best option by describing the many available markets. Let’s get started.
The different types of markets and their respective target audiences
Online marketplace platforms are usually grouped by who they are for, what they focus on, and how they are run.
Many people believe that the term “marketplace” primarily refers to online shopping; however, it encompasses a wide variety of industries, from manufacturing to education, insurance, and healthcare.
Marketplaces for business-to-business transactions
A business-to-business (B2B) marketplace links firms (consumers) with other enterprises (vendors). For example, Manufacturers, wholesalers, and retailers buy from them. By placing orders and completing transactions through a digital commerce platform, Companies improve the openness of financial transactions while also making some business activities more accessible, like sales and procurement, and increasing the transparency of business transactions involving money.
Compared to alternative methods, such as building an e-commerce website or opening a physical store, the time it takes for service providers to begin providing their goods and services is drastically reduced when they use this kind of website. They can broaden their sales channels and reach a new audience using a B2B marketplace.
When it comes to special considerations, businesses typically opt to make bulk purchases or utilize the expertise of a group of knowledgeable specialists. Because of this, the total value of the orders amassed in the system frequently ranges from hundreds to millions of dollars. As a result, clients must take precautions against fraud and ensure they receive high-quality service.
To gain more trustworthiness, a market should do the following:
- Create a feedback and rating system to enable clients to establish an opinion regarding the services’ quality and make better-educated judgments regarding their purchases.
- Demand that merchants provide the appropriate legal paperwork and licenses, then verify that they are in order.
- Check the identities of new users before they are allowed to register on an eCommerce platform.
- Request vendors to supply customers with information regarding money-back guarantees, return policies, delivery particulars, and service terms.
Popular business-to-business (B2B) marketplaces include Amazon Business, e World Trade, and Thomas.
Some business-to-consumer (B2C) marketplaces, such as eBay, have already begun supplying various products to enterprises to boost their overall revenue. This is because these markets are looking to expand their customer base.
Marketplace For business-to-consumer sales
An app or website connecting individual suppliers with consumers directly is a business-to-consumer (B2C) marketplace example. Booking.com is a business-to-consumer (B2C) platform that brings together many hoteliers and property owners from all over the world with commuters.
We have developed a marketplace allowing customers to book tables at restaurants and cafes, drawing upon our previous experience constructing business-to-consumer online markets. During the outbreak of COVID-19, those who provided food service could maintain their normal levels of profitability owing to this solution. A further project that our group just completed is an online pharmaceutical marketplace that connects customers with around 1,500 different medical item providers.
Currently, the most common type of online marketplace is a business-to-consumer platform, which includes industry titans like eBay, Booking.com, AliExpress, Amazon, and eBay. It is expected to continue to be dominated by monopolies for many years to come.
It is reasonable to assume that developing a specialized marketplace is necessary for commercial success. A niche market is a collection of consumers with similar demands and tastes. Therefore, before developing an online marketplace, you should first research the expectations and problems the target population faces. This may help you gain a competitive advantage, develop an efficient marketing plan, and decide on an appropriate monetization model.
Peer-to-peer marketplace
Peer-to-peer (P2P) or customer-to-customer (C2C) marketplaces connect users on a single platform to trade goods and services.
This kind of software or website brings together people with common interests and concerns. The ability of a user to act concurrently as buyer and seller is the defining characteristic of a peer-to-peer (P2P) marketplace. Additionally, depending on their requirements, customers can change roles.
Types of markets based on what they sell
Horizontal marketplace
A horizontal marketplace is analogous to an online department store in that it satisfies the diverse requirements of its customers by providing a wide range of products and services from several different sellers.
This category of app or website typically offers products from several different geographic areas to attract the greatest number of clients.
Both Amazon and AliExpress are well-known horizontal marketplaces that provide customers access to practically every product imaginable, including apparel, home furnishings, and electrical goods.
Vertical market place
A vertical marketplace sells products and services under a specific industry or classification. For example, companies that make connected home devices send them to contractors and people who install home automation systems.
Etsy is a well-known online marketplace that caters to sellers of vintage and handcrafted items. TaskRabbit is a marketplace in the United States that connects customers with independent contractors. Customers can employ specialists through this platform to carry out recurring duties related to cleaning, home repairs, office administration, relocation, and other similar activities. By selecting this kind of market, you can focus on a certain segment, and as a result, you improve your chances of distinguishing yourself from other businesses.
Marketplaces are classified according to management strategy
Unmanaged Marketplace
When a marketplace is not maintained, the owner does not need to request papers or invest in quality control of third-party goods or services. The platform provider is not typically busy verifying the identities of vendors and customers, nor is he or she responsible for conducting feedback analysis.
In unmanaged markets, a review and rating system is used to give customers more confidence in their purchases. One of the most significant benefits of this solution is its low transaction fees. The majority of transactions take place between individuals directly.
Lightly managed marketplace
Owners of lightly managed marketplaces focus on quality assurance, identity, and background verification. These organizations’ primary focus is customers. As a result, they need vendors to provide return policies, terms of usage, and assurances such as money back in specific circumstances.
Before allowing drivers to connect their accounts to the platform, Uber investigates their histories and verifies their credentials by examining their paperwork and licenses.
Fully managed marketplace
The owners are in charge of the entire sales process in this setup. Compared to other kinds of online marketplace platforms, fully managed marketplaces typically have significantly higher fees than other online marketplace platforms.
To maintain the audience’s confidence, these platforms carry out essential activities such as determining which suppliers can be relied upon the most, standardizing prices, validating vendor qualifications, and checking the legitimacy of the vendors’ documents.
Because of this, the level of customer care in this kind of market is exceptional. Considering real-world applications, Opendoor is a digital marketplace based in the United States that buys real estate from third parties and charges a fee. After that, the organization performs any necessary maintenance to relist the property for sale at a better price.
Final thought
Establishing an online marketplace platform has the potential to develop into a lucrative investment opportunity for your company when a specific market, an appropriate target audience, and an appropriate monetization approach have been identified.
If one wishes to be successful and make a profit, it is essential to research the market and examine the competition. In addition, one should identify potential clients and research their requirements, preferences, and problematic areas.
Because of our considerable experience constructing online marketplaces, we strongly suggest that you start by developing a minimal viable product (MVP).
If you implement only the most important functions, you will be able to verify its operational feasibility and make the necessary changes based on the feedback you receive from users.
Consequently, you will shorten the time it takes to bring the product to market and produce a solution that meets the target audience’s requirements.