In 2022, we all know the convenience of online shopping. We can buy anything from any corner of the world, right from our homes. But, another growing trend among online shoppers is online marketplaces. More than eCommerce websites, people today prefer online marketplaces for shopping online.
Yes, an online marketplace often attracts more visitors than stand-alone websites. People surf these websites even if they are not looking for something particular. They browse through all the product categories and even end up buying something from the list.
Of course, a marketplace benefits both buyers and sellers. When buyers can find numerous products under one roof, the sellers can take their products to a wider audience. So, yes, it’s a win-win situation for both buyers and sellers.
This blog will walk you through the basics of an online marketplace, how does it work, its business models, its benefits, and top online marketplaces.
What is an Online Marketplace, and how does it work?
An online marketplace is an eCommerce sales platform that connects various sellers and buyers. Businesses use online marketplaces to reach customers who need their products/services.
Sellers sign up for a vendor account on an online marketplace and use the platform for sales. Often, sellers have to pay a commission to the marketplace upon every sale. Some marketplaces may also charge a fixed monthly fee from vendors.
Every seller gets their own store after registration. It looks similar to an eCommerce website with the seller’s catalog, category, search, and visuals. This kind of store can be either a free or paid option. You can see such stores on the site Aliexpress.
Sometimes, sellers process orders and ship goods by themselves on an online multi-vendor marketplace. Some marketplaces collect goods from the sellers and deliver them directly to customers. Here the marketplace acts as a mediator and handles any dispute that may arise between the sellers and customers.
Many people prefer the marketplaces for shopping as marketplaces often tend to solve the dispute favoring customers. Yes, most marketplaces hold the customer’s money until the customer receives the order. The marketplace releases the money to the seller after getting confirmation from the customer.
These online marketplace platforms use high-end advanced marketplace software. Thus the marketplace supports vendor administration and handles high loads with the help of the software. Often, established marketplaces are hosted on dedicated servers.
Types of Online Marketplaces:
Majorly, there are four types of online marketplaces:
- Vertical Marketplace:
This type of marketplace sells one type of product or service from various sources. For instance, Udemy, the site offers different online courses for targeted users with similar needs. - Horizontal Marketplace:
Such marketplaces sell various products/services of similar types. For instance, websites like Etsy and Overstock. Etsy sells handmade items, whereas Overstock sells excess inventory like an outlet store. - Global Marketplace:
These marketplaces sell physical goods. Apart from that, they also encourage trades and services like babysitters and freelance work. Craigslist is a well-known example of a global marketplace. Customers prefer such marketplaces as they can get many items, information, and services without surfing many websites. - Service-Based Marketplace:
This marketplace predominantly sells on services rather than products. Freelancer, TaskRabbit, Care.com are some service-based marketplaces that sell services ranging from design, writing, childcare, and labor.
How do Online Marketplaces Make Money?
Online marketplaces provide various revenue options and monetization strategies to earn profits. Every business model has its pros and cons for both marketplaces and merchants. Thus, choosing the most suitable business model is crucial to running a successful marketplace online.
Here are some of the business models for online marketplaces:
- Subscription Model:
In this business model, customers and merchants pay a monthly fee to sell their products on an online marketplace. Though it offers some guaranteed income for marketplace owners, it may discourage people from leveraging your site due to additional costs. - Commission Model:
This business model enables you to make a commission from every transaction on your marketplace. Thus, this model not only guarantees revenue but also encourages trust among your merchants and customers as they pay you only after-sales. - Mixed Model:
Many marketplaces use a combination of business models to drive sales. Thus, they are more likely to sell products that are less likely to sell. For instance, Etsy uses a combination of business models to keep up its business success. - Sign-up Model:
In this model, the marketplace charges sellers a flat payment when they apply for selling through the platform. Often, sellers are ready to pay fees upfront when they get to sell on a reputed marketplace. Thus, this model guarantees fees upfront. - Product Listing Fees Model:
This business model charges merchants to list their products/services on the marketplace. The charge can be a fixed flat rate or a percentage of the product value. - Referral Fees Model:
In this model, sellers pay a fee every time they make a sale. The charge is ideally a percentage of the total sales price, and it varies based on the product category.
Why Should You Sell on Online Marketplaces?
Most online shoppers today prefer purchasing through virtual marketplaces rather than on independent eCommerce stores. Yes, if you closely observe, more than half of the online customers do the product search on the marketplace giant Amazon. Rather than googling, they go straightaway to Amazon.
You can try it out for yourself. Go to Google. Search for any gadgets or even fashion products. If you see the results, there will not be any online shop for your surprise. The search results will predominantly be multi-selling platforms like online marketplaces.
Often, modern customers prefer online marketplaces mainly for the following advantages:
- An extensive product range:
People prefer online marketplaces for this reason. Thanks to the multi-seller business model, these popular online marketplaces like Amazon and Aliexperess have numerous products. They don’t even need to store the goods in their own warehouses as the vendors handle all of them.
Since many vendors can connect to the platform, there will be an unlimited number of product ranges. Thus, customers will always find what they want instantly. Yes, even the rarest of the item will be available on these marketplaces. - Affordable Prices:
An online marketplace will have unlimited sellers worldwide. Thus, the prices will be competitive to attract customers. Most sellers offer discounts and deals to compete with fellow vendors. Finally, customers can get the best products at the best prices. - Excellent shopping experiences and hassle-free Returns and guarantees:
A marketplace acts as a mediator between sellers and customers. Plus, the marketplace often favors both customers and sellers. Most of the vendors on the online marketplace accept returns, give refunds, and guarantee the quality of products.
So, when you extend your online business to marketplaces, you are getting more customers, new audiences, and thus more sales.
Top Ecommerce Marketplace Applications:
- Amazon:
Hands down, Amazon, the name speaks volumes about itself. As the biggest eCommerce marketplace and the customers buying over 400 items every minute on Amazon, the platform generates billions of revenue. Moreover, Amazon is known for its extraordinary services, quick returns, affordable prices, and super fast delivery. It offers priority services for customers’ ease through Amazon Prime.
Amazon welcomes both individuals and companies to sell on their platforms. Amazon is an excellent choice to reach a larger global audience for sure. - eBay:
A name well-known among online shoppers, eBay is one of the marketplaces where you can find almost anything under the sky. Though eBay charges higher fees for selling, you get excellent exposure on the platform. So, if you want to reach a global audience, eBay is the second-best platform next to Amazon. - Aliexpress:
Aliexpress invites both individuals and businesses to sell on its platform. Plus, online stores worldwide can leverage Aliexpress and use its dropshipping model.
Aliexpress charges fewer commissions and no other hidden charges. Since Aliexpress operates in many countries, it is a great platform to sell worldwide at many affordable rates.
Final Thoughts:
With technology advancements like Machine Learning and Artificial Intelligence, online marketplaces have made personalized customer services possible. So nevertheless, digital marketplaces enable businesses to reach new audiences and retain existing customers with personalized services.
With a suitable business model, an online marketplace can help you expand your business, reach a global audience and make excellent profits. So, are you a business owner looking for a robust eCommerce marketplace application for your business? You have landed at the right place.
