Why are marketplaces the future of e-commerce?

Graphic depicting the rise of online marketplaces as a dominant force in the future landscape of e-commerce.

Are you ready to jump to the next level? Marketplace vs e-commerce.

It’s no surprise at all that e-commerce has increased enormously within the last few years. I don’t want to be boring, but yes, it’s been the pandemic and a few other market trends. 

Anyway, we know it for sure, there’s no way back.  The boomers generation used to say “If you’re not on Facebook, you don’t exist”. Today Facebook seems to be really old school, but still we all know, you have to be online if you don’t want to be missed out.

It applies to the retailers as well. E-commerce means all transactions made via internet, which means online shopping commonly speaking. Today internet sales is being accounted for a quartet of the total retail market, and there are no signs of stopping this growth.   I can hardly think of any popular retailer that doesn’t sell online nowadays. These are only little local shops like my favorite grocery downstairs. And that’s it.  

The opportunity to sell online has changed the retail industry forever and irreversibly.

There are many pros of selling online. Some may seem very obvious, whereas the others don’t. You cannot however ignore any of them.

Let’s have a look at a few key advantages of selling online:

Larger market - you are no longer limited to your local society, but selling online means no geographical limits as long as you’re able to deliver.

Consumer insight - google analytics, user experience, tracking options…. Just to name a few tools letting you analyze your target audience and customers. You get facts and figures. 

Cost optimization - selling via the internet doesn’t require typical operational expenses such as expensive rent or numerous staff. Cheaper means more cost effective.

Simple and unlimited access - people can shop when they want or have time while getting comfy on their own couch with a cup of tea. No opening hours, limited time or time spent on commuting in traffic jams.

I’m pretty sure you’re already there. When most of your competitors had already enjoyed all those benefits, you couldn’t be left out, could you? As life never stops, neither will e-commerce.  Today it’s not enough.

Marketplaces are the future of e-commerce

Today, the question is not if you’re selling online, but how far can you reach?

The e-commerce means unlimited possibilities and all you need is to keep up with the progress. Where are you present at the moment? How far can you reach? Have you already gone from local to global?

Marketplaces seem to be the future of e-commerce. The sooner you understand this and implement it into your sales and marketing strategy, the further you go. I mean it. 

The world is moving and your competitors are not asleep. If you want to be a step ahead, you cannot ignore this trend. 

As always in business, it’s all about the people. Understanding those, who you are pitching to, is crucial for your success. It’s not a quiz and there is no prize for guessing. You should know. Everything you do in your business is supposed to take you closer to your target audience. 

Why are marketplaces so important for e-commerce?

You can learn a lot from watching people. Think how do they behave? How do you behave when you need to buy anything? How does your mum behave? What about your kid? Where do you start? What do you like? And, what’s most important, how do your customers behave? Do they really surf through a number of online shops or websites? 

Where do people start shopping?

Most people still would google the required product. 46% product searches start on Google (Jumpshot, 2018). And what do they get? A list of suggestions from different shops! That’s right! The very first marketplace starts here. Why? Because we love to have everything in one place. We love to have a great choice. What’s more, we are all a little bit lazy and if there’s a chance to avoid struggle, we will take it! 

People have always loved shopping malls and local markets. Why? Because you can find everything you need under one roof! As simple as that!

This is the idea behind online marketplaces. A marketplace is like a big shopping mall. And this is where most people start their online shopping. A marketplace can be either a unique website or an app, or both. 

I’m sure, you know amazon or ebay, don’t you? Who doesn’t, right? These are the most popular examples of marketplaces. We love them. You may even have downloaded their apps on your phone, haven’t you?

What makes marketplaces successful?

According to Ian Friedman, CoHead of Goldman Sachs Investment Partners, Venture Capital & Growth Equity team, there are three things marketplaces must do well to succeed.

First, they need to create sufficient liquidity on both, selling and buying sides. Second, to encourage participation  they must engender a greater level of trust and transparency. And third, they have to create reactive and proactive mechanisms for addressing inevitable issues that come up between buyers and sellers.

Which marketplace is best to sell on??

It depends! As always. It should however mirror your marketing and sales strategy. However, once you know this, you are ready to decide what type of marketplace will suit it best. Some of them will offer almost everything, others will specialize in some industries only. 

There are three different types of marketplaces:

  • Global  sells everything to everybody,
  • Vertical sells products from many sources, but all of one type,
  • Horizontal sells products of many types, but they all share a characteristic.

Global Marketplace

This is the most popular type of marketplace, and probably, the one you imagine when you think of a marketplace at all. They sell everything. They are developed for delivering items from a really wide range of categories. You can find anything you need there. 

One of the best examples are Amazon or Ebay. Can you think of a single product or category that is not available there? Well, if you know one, leave a comment, please! I’m very curious about it. 

Being there means being in a place, where most people will start searching.

Vertical Marketplace

They focus on an individual niche i.e. jewelry or shoes. There are marketplaces that offer the same products from many different sellers. They are not as popular as global marketplaces. There are still a lot of unexplored opportunities. 

A good example is Airbnb or booking.com. Because they focus on one industry only, you get customers who are truly interested in what you offer and that is why they’re here. You also get a very strong competition, because you’re all trying to win the same target audience.  

Horizontal Marketplace

They are a blend of global and vertical marketplaces. They offer a wide range of products from different categories and various sellers, but they all have something in common. A great example of this is Etsy. You can find almost everything there, but the idea behind it is that they are handmade. 

So, it is very likely that customers will have similar expectations and behaviors. You probably meet here fans of eco and slow life more often than in Apple Store. Being here is like guaranteeing the product is fair trade and wasn’t made in a massive factory somewhere in the Far East.

Which marketplace model is perfect for your e-commerce business?

It’s the one mirroring your strategy and the one that will help you to achieve your business goals. The success doesn’t depend on the model only, but on many factors like the e-commerce platform and other solutions including PIM or ERP, just to name a few. It also depends on your customer service, branding, marketing and many more. 

However, once you enter the e-commerce world, there is nothing that could stop you from scaling your business.  

When you decide which model suits your strategy best, it’s time to choose the specific marketplace. Here are a few points to consider that will have impact on your revenue:

  • Commission
  • Subscription fee
  • Listing Fee
  • Featured listings
  • Advertising.

Revise them carefully as there are probably some strong pros and cons everywhere. The choice depends on your priorities and what would be most effective for your business.

Why do marketplaces attract valuable power shoppers?

Ebay says that 96% of small businesses using the marketplace in the USA export to an average of 17 countries. Wow! As you can see, even if you’re not a global business, you can still go global. This is what you get from using marketplaces as e-commerce platforms for your business.

What are other benefits you can benefit from? Let’s have a look!

Increase in sales

The main goal of each e-commerce business is to sell. Anything that can help to increase sales makes sense.. Well, as long as it’s legal of course ;) Online marketplaces help little local businesses reach a bigger audience, as it is no longer geographically limited. All you need to do is present your products to customers. You even can count on promotion and reach that would not be possible offline.

Better marketing

Marketing is always crucial if we’re talking about any business. I hope you treat it as an investment, not a cost. With a well known marketplace, you get visibility that would never be possible for you offline. You can choose from clickable banners, google ads or SEO practices for better customer reach. 

Low setup cost

Optimizing costs is extremely important when you start from scratch. With a marketplace you can have a professional, global online shopping platform with few clicks only and no need to make big investments upfront . It is possible to set up an online shop and start selling within a few hours only.  You will have to pay a fee and marketing cost, but it’s up to you how much you want to invest. You only pay more when you sell more.

Lower risk

Low cost and outsourced e-commerce platforms mean overall lower risk. If anything goes wrong and you decide to withdraw you can also do it very quickly and at minimal loss. The only risk you take is meeting your customers’ demand when your business grows at a rapid pace. Well, but that’s what we want actually, don’t we?

Trust factor

Most people do not buy from small businesses because they don’t know them and don’t trust the quality of their product. If you use a large online marketplace you benefit from their credibility. Most people think of buying on eBay or Amazon, instead of buying from John or Kate. They treat the marketplace as a one big shop. 

Where’s the catch?

Sounds very convincing, doesn’t it? Still, there are some cons as well. You have to be aware of a very high competition. You’re not the only one representing your industry there. There are plenty of small companies like yours. Marketplaces focus on promoting products and categories, not brands. This is how they make money. As I’ve mentioned above, people buy from Amazon or eBay…. At least, this is how they see it, which means you must focus on delivering the best quality product and services as well as having a good marketing and communication strategy to stand out from the crowd. 

Also, every marketplace charges a certain fee from the sellers. This can be very high in some cases and definitely it’s worth checking before you decide to use it. 

Still, the pros are much stronger than cons, don’t you think?

“It’s an app, stupid!”

Let me paraphrase James Carville in 1992, when he was advising Bill Clinton.  

Truly last, but not least….Do you remember as I said, marketplaces can operate as websites or apps?  Yes? I’ve got some more strong arguments for you. 

According to Ericsson’s Mobility Report, mobile network data traffic grew 44% between only Q4 2020 and Q4 2021. A Global Digital Overview by Kepios shows there are 5,31 billion unique mobile phone users in the world at the moment. Also 92,1% of total internet users use it via mobile phones. 

Marketplaces which have their own apps win the market and hearts of potential customers.  And let’s be honest, most of them do! On the other hand, consumers don’t like using apps from single retailers as their mobile devices soon would be overloaded. It’s much more convenient to download an app that offers product ranges broader than one store can offer. That’s one of the major appeals of a marketplace.

Believe it or not, some people even made a business from it! Dote ( www.dote.com) offers women who don’t want to download individual apps the ability to shop at multiple retailers simultaneously. They are able to see different products all together and at the same time in the same app. 

Marketplaces are the future of retail

Back to the point, what’s motivating marketplaces? Well, there is no greater motivation than having a huge competitor with unlimited resources and potential, don’t you think?

The conclusion seems too obvious. Marketplaces are replacing multi-brand retailers which is very convenient for customers and can be a part of your omnichannel strategy. As we have already moved a big part of our life into virtual reality, shopping habits would only follow this.  And so on. Being present online gives unlimited opportunities of being anywhere actually. Should you go for it or not?

Don't miss your chance. Check how Ergonode PIM can help you to improve your product content and benefit from selling to unlimited number of customers worldwide.














Next step

Start your journey with
Ergonode PIM

Get rid of the product data mess, once and for now!