What Are Online Marketplaces And What Is Their Future?

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What Are Online Marketplaces And What Is Their Future? – An online marketplace is a website or app that allows shopping from several different outlets. The marketplace operator does not own any inventory; their business is to link users with other people’s inventory and facilitate transactions. eBay is the quintessential online marketplace; they sell anything to everyone. There are numerous others.

Since they provide genuine convenience to customers, the number of marketplaces has exploded in recent years. In 2017, if you were to open a department store, it will be an online marketplace; I refer to these as Department Stores 2.0. Since customers access suppliers’ inventory electronically and the marketplace does not have to own it before selling it to consumers, consumers have access to all goods offered by suppliers and there is real-time knowledge about the products presented to consumers on an online marketplace’s website or app. It’s a far larger selection than any store could possibly sell.

Consumers dislike using apps that are exclusive to a single retailer. They are much more likely to use an app that provides a larger selection of products than a single store does. That is one of the primary reasons for the existence of a marketplace.

Marketplaces are not without their drawbacks. Due to the fact that goods are sold by a variety of vendors, the details about them is often incomparable, and seller delivery times vary. This can come as a surprise to customers. Having a marketplace run smoothly requires bringing in a large number of vendors simultaneously and making the experience seamless for customers – which is difficult to do.

What Types Of Marketplaces Are There?

There are three types of marketplaces:

  • Vertical
  • Horizontal
  • Global

vertical marketplace sells goods from a variety of different outlets, but they are all of the same kind. TrueFacet.com, for example, offers only jewelry and related items. The platform does an excellent job of ensuring authenticity, which is critical given the high price of jewelry. I met Tirath Kamdar, the Founder and CEO of TrueFacet, at a conference called ShopTalk, which bills itself as the ‘next generation commerce experience’ for retailers. TrueFacet, Kamdar claims, is ‘creating the VIN for the jewelry industry.’ TrueFacet adds value by checking the authenticity of each piece of jewelry featured on the web.

horizontal marketplace offers a wide variety of items, but they all share one characteristic. For instance, Panjo, another Shoptalk presenter, is a marketplace for enthusiasts. According to Panjo CEO Chad Billmyer, ‘belly dancer enthusiasts act similarly to Porsche enthusiasts.’ Billmyer believes that by offering community, infrastructure, and data, Panjo can generate enough traffic for people to follow their passions while also buying and selling from one another.

Dote is another horizontal marketplace that was showcased at Shoptalk.

Dote enables women who do not wish to download individual retailer applications to shop concurrently at several retailers, including Madewell, Forever 21, J.Crew, Lululemon, Brandy Melville, Topshop, Free People, Ann Taylor, Loft, and Zara. Users can view items from multiple retailers in the same app. Dote focuses on a specific category of consumer and provides them a diverse selection of items from a variety of retailers.

global available on the marketplace. eBay is the apex of this. (I’ll admit it: I’m an obsessive eBay shopper. I am currently wearing this coat, which retails for $3895 plus tax at Saks. I purchased it brand new with tags for $1100.75 on eBay. The majority of what I wear follows a similar narrative. I’ve purchased and sold five cars and hundreds of other pieces on eBay, all at fantastic prices and with minimal hassle or frustration.) eBay has 167 million users, over 1 billion products for sale, over 80% of items are brand new, and will sell almost $90 billion worth of merchandise this year. Their popularity stems from the scope of their product offering. According to Bob Kupbens, eBay’s VP of Seller Experience,’scale results in clear pricing,’ and when enough items are purchased and sold, buyers will see what a reasonable price should be and feel like they’re getting a good deal. Additionally, Kupbens noted that an ecosystem like eBay ‘polices itself’ due to the presence of a group of users in a more competitive marketplace.

What’s Motivating Marketplaces?

Today, in almost any form of e-commerce, there is one factor that accelerates and streamlines the process: Amazon.com. Nothing is more inspiring than competing against a massive entity with nearly limitless capital, technical capabilities, and potential. Amazon is a hybrid marketplace, selling both its own and third-party goods, as well as a forum for buyers and sellers to transact via Amazon, either independently or with different forms of assistance from Amazon.

There are several additional hybrid marketplaces. Numerous businesses large and small, including Walmart, the country’s second largest ecommerce platform according to comScore, are now encouraging consumers to sell their own goods through marketplaces emerging on different ecommerce websites. If managed properly, marketplace adjuncts to ecommerce sites improve traffic and provide a greater selection of products, providing users with additional reasons to remain on a platform and not wander.

As the appeal of department stores dwindles, marketplaces tend to be one of the venues eclipsing the multi-brand retailer. We are now seeing an explosion of marketplaces. Ian Friedman, Co-Head of Goldman Sachs Investment Partners’ Venture Capital and Growth Equity teams and moderator of a panel discussion on marketplaces at Shoptalk, said, “For marketplaces to succeed, they must do three things exceptionally well:

  • Reduce friction in both selling and buying to ensure adequate liquidity on both sides of the marketplace.
  • Foster greater confidence and accountability to promote participation.
  • Establish proactive and reactive mechanisms for resolving inevitable disputes between marketplace participants’

The retail industry is accustomed to new retail ideas exploding and proliferating at the pace at which marketplaces are now. What is also typical is that after a period of time, a shakeout occurs, with only the most prosperous individuals remaining. Eventually, all online marketplaces would have to demonstrate their viability by providing customers with reliability and unique value. Many that are unable to do so will lose market share in the same way that department stores are losing market share today, and those marketplaces will finally vanish. Those that can thrive and compete successfully with Amazon will continue to add value and benefit.

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