What is a marketplace?

According to a Xerfi survey, in 2021 around a third of online purchases will be done through marketplaces. Given that the e-commerce market represents almost 2000 billion US dollars, it is clear that online marketplaces will play an important role in the years to come. With the current health crisis, activities will move towards digitalization and marketplaces will get even stronger.

Uber and Amazon, among many others, have changed our purchase and consumption habits. Although the concept of online marketplace seems quite recent, its idea goes back to almost 30 years ago and in the current era of the digital economy, marketplace creations are constantly evolving to fit the needs of multiple industries. The slowdown of certain platforms like Ebay has not discouraged marketplace users and numbers will continue to rise. As you probably already know, the connection between different parties can take many forms and it can lead to fulfill personal needs through C2C or B2C service marketplaces (e.g. walk your pet, find a hairdresser, etc.), as well as professional needs in B2B service marketplaces (e.g. rent offices, find consultants, etc.).

“It is not so far from a directory”: yes and no. It is true that a simplified marketplace model can resemble a directory in the sense that it allows users to go through a list of providers and then contact them. However, the greatest added value of online marketplaces is the ease of use and efficiency with which you can find and assess options to finally buy the one that fits your needs in the best possible way. Saving users time and money will lead a marketplace’s success.

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The spectrum of marketplaces

If you are reading this article it is because you have also noticed the rise of marketplaces or, even more, you understand their relevance and key role in today’s economy. The first ones to be developed were mainly ecommerce product marketplaces and they were quickly followed by service marketplaces and community platforms. Business models therefore vary considerably among projects but in general they all include clear transaction flows that encourage user purchases, as well as an integrated monetization solution to collect commissions from providers, customers or both each time a transaction is completed.

Being able to adapt to the target industry is a must for all successful marketplaces and verticalization can be a useful way of moving forward. Focusing on a specific industry and its type of users makes it possible to tailor service marketplace functionalities to ensure that they fully answer to their needs. For instance, rental marketplaces could benefit from setting seasonal prices so a yield management system could be a great asset. Yet, marketplaces based on professional services such as consultancy will not have much use for it but they will need more versatility in how their services are provided, such as face-to-face or through videoconference. Similarly, some marketplaces need to set their prices based on a specific time unit, such as per hour or per night, whereas others will need to set a price per service regardless of its duration. These needs have to be taken into account when defining the online marketplace’s operational framework to make sure the best service is being provided to users. Keep in mind that verticalization might not always be the best solution and some marketplaces will benefit from offering a wide range of services, but it is still something worth considering.