eCommerce Dec 30, 2021

E-marketplace Boom: Why Multi-Vendor Platforms Promise to Keep Thriving

Jane Vyshnova

Jane Vyshnova

CEO

Author

E-marketplace Boom: Why Multi-Vendor Platforms Promise to Keep Thriving

Time to read: 15 minutes

Content

  1. What Is an E-marketplace?
  2. How Do E-marketplaces Differ from E-stores?
  3. Types of E-marketplaces: Criteria for Distinction
  4. Pros and Cons of Online Marketplaces
  5. Tips on Doing Trade on E-marketplaces
  6. How to Build Your Own E-marketplace
  7. Conclusion
Content

According to stats, the annual turnover of the top online marketplaces reached $2.67 trillion in 2020. Some of them such as Etsy (USA) and Ozon (Russia) showed 100% growth while the average growth rate increased by 29% across the sector. The top 100 marketplaces occupy about 62% of the global online sales. The trend continued in 2021 as well: the compound (2019-2021) growth rate of the Dutch marketplace Takeway.com, for example, reached 252%.

Against the background of the global economic stagnation due to the COVID pandemic, such achievements of online marketplaces really impress. What allows them to keep evolving so sustainably? The question can hardly be answered without diving deeply into the very nature of online marketplaces. What types of e-marketplaces are available? How do they differ from ordinary e-stores? And when is it worth using an e-marketplace instead of building your own online shop?

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We are going to address the most interesting features of different types of e-marketplaces in the present post to help business owners realize all the pros and cons of marketplace development.

What Is an E-marketplace?

To put it simply, an online marketplace is a web-based platform through which sellers and buyers find each other to interact. Various state health insurance marketplace types, for instance, help users find the most appropriate health insurance plans providers. Such a brief definition, however, does not explain how the process goes. Let’s define e-marketplaces more explicitly: an online marketplace is an intermediary entity between suppliers and consumers that bears responsibility for the following critical accomplishments:

The main value of an e-marketplace for sellers is in the efficient distribution mechanism capable of driving new customers to the sellers’ products. Consumers, in turn, appreciate e-marketplaces for an opportunity to buy everything they need in one place without wasting time.

Different types of e-commerce marketplaces may have a distinct focus on what to offer beginning from consumer goods for all occasions and up to various sectoral services (finance, health insurance, consulting, etc). Both companies and individuals (when the “customer-to-customer” scenario is available) can be suppliers on e-marketplaces.

How Do E-marketplaces Differ from E-stores?

Only a few critical differences are available between online marketplaces and ordinary e-commerce websites. Even though there are several types of online marketplaces, the following set of differences remain the same:

Number of sellers and goods

A conventional online shop usually offers goods from either one supplier (the so-called mono-brand e-stores) or several ones whose products constitute a group of products that somehow complement each other: auto parts, clothes, sports nutrition, health insurance plans, etc. In contrast, various types of e-marketplaces gather numerous suppliers that offer a great variety of goods/services going far beyond any certain category. Thus, e-marketplaces are akin to large shopping malls while e-stores are similar to boutiques when being compared.

Offline infrastructure

Many e-shops are just online manifestations of already available brick-&-mortar stores. Moreover, the online versions of such stores are oftentimes inferior to the offline infrastructures in many aspects: product diversity, trade volume, capital investment, number of staff, etc. In contrast, almost any type of online marketplace has no trading facilities in the physical reality. Their offline infrastructure can include storehouses and, at best, a fleet of vehicles for delivery.

Customer audience and location

In general, e-marketplace spends much more resources on customer engagement than ordinary e-shops do. On the one hand, every type of e-marketplaces has larger financial capabilities. On the other hand, their development (if not survival) depends on the continuous expansion across different local markets. That’s why a typical e-marketplace has more intensive internet traffic with a more diverse user audience in comparison with a typical e-store. Besides, e-marketplaces pay special attention to logistics and delivery services to cover as wide an area as possible.

Types of E-marketplaces: Criteria for Distinction

We at Dinarys propose to consider 5 basic criteria with which different types of e-marketplaces can be distinguished.

Type of product/service

The product range has long ceased to be the only distinctive feature for different e-marketplaces. Goods, services, information (content), and even investments are what various e-marketplaces offer to customers today. The following examples reflect who offers what in the online marketplace segment to name a few:

Business model

This criterion determines who is a seller and who is a buyer on a certain e-marketplace. Of course, there are several types of e-marketplaces where all available combinations of business models are mixed. But in general, the following 3 business models are widely accepted:

Product diversity

Multi-product e-marketplaces offer various goods/services with no regard to any certain sector/category. In contrast, specialized e-marketplaces offer only “niche” products: you can buy nothing but mobile apps on Google Play. When compared to offline stores, you can buy almost any kind of product in Auchan (food, clothes, books, etc) as opposed to Leroy Merlin where products for house and garden only are offered.

Mode of interaction with customers

All types of e-marketplaces have only two basic modes of interaction with customers:

Monetization model

Different types of online marketplaces earn money in different ways:

Pros and Cons of Online Marketplaces

Only one main attractor of e-marketplaces for buyers seems to exist: a broad diversity of products to select. Sellers, in contrast, can recognize various advantages in doing business via e-marketplaces: launching projects from scratch with no significant investment, getting access to new markets, covering a larger customer audience, and receiving well-targeted traffic.

It is worth considering the advantages and drawbacks of various types of online marketplaces in more detail, however.

Advantages

Reasons for either using e-marketplaces as a tool for online trading or building your own e-marketplace are not limited by the following ones. We have generalized the main pros for your convenience only.

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Drawbacks

Some specific threats are inherent in doing business via different types of online marketplaces. The following drawbacks should be considered as potential cons rather than actually available ones. Nonetheless, forewarned is forearmed, as they say.

Tips on Doing Trade on E-marketplaces

Despite numerous attractive opportunities, online marketplaces can hardly be the one-fits-all solution for each and every vendor. Besides, there are different types of online marketplaces, and selecting the right one is critical not to fail in business. The following tips can help realize whether the online marketplace is a worthwhile approach and, if so, which e-marketplace is better to choose.

When using e-marketplaces makes sense

As a general rule, e-marketplaces appear effective for those vendors who are not going to promote their products on their own. The promotion includes logistics and storage in such a context. Large e-marketplaces with sustainable customer flow help those vendors find their audiences. E-marketplaces seem to be the best choice for the sellers that mimic popular brands. Besides, small e-stores can expand their audiences by using e-marketplaces as an additional channel of sales.

What to sell on e-marketplaces

Products with stable and high demand are worth selling on e-marketplaces. The marketplace’s sales mechanism is based on search algorithms. In most cases, customers visit various types of e-marketplaces with a clear idea of what to buy. Sellers should keep the price/quality ratio of their products not worse than their competitors do. Even if a certain e-marketplace offers a “one product - one supplier” scenario, customers always have opportunities to compare every particular product with similar ones offered by other e-marketplaces. Experts indicate auto parts, toys, smartphones/tablets, food, and hand-made products as the most appropriate items to sell on e-marketplaces.

Cooperation models proposed by e-marketplaces

Various types of e-marketplaces offer different scopes of options to sellers. However, the following frameworks of cooperation seem to be most typical:

How to assess e-marketplaces

The following criteria help figure out which type of e-marketplaces can be the most appropriate for a particular vendor.

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How to Build Your Own E-marketplace

Let’s try to address the subject from another angle: why not build your own e-marketplace? There is every indication that running an e-marketplace is as promising as sustainable in terms of business activity. Hence, if there is a strong decision to create your own e-marketplace, the following questions should find their answers first of all:

In other words, the type/business model of a new e-marketplace (B2B, B2C, C2C, mixed), the sort of items to sell (products, services, investments, etc), and the targeted customer audience (local, international) all can determine the architecture, development technologies, design, user interface, payment gateways, and other parameters of the desired platform.

The following algorithm of proceeding is worth applying to the creation of your own e-marketplace:

Check the viability of your business idea

After a general image of your e-marketplace has been formed in your mind (for example, a B2C + C2C model for selling consumer goods at a local market), you should figure out whether your business idea has a chance to compete with the available rivals. The best approval of the viability of your project is the interest that both potential sellers and buyers demonstrate against your proposition. There can be two basic approaches to the issue:

After making sure that your business idea resonates with the actual needs of both sellers and buyers, you can take another step forward.

Choose a software platform for your e-marketplace

Your future success directly depends on the performance and scope of features that chosen software is able to provide. Both tailor-made platforms and out-of-the-box solutions are available to select from. With no regard to the origin you should assess the software with the following criteria:

Launch an MVP

MVP is the fastest and cheapest way to put your business idea into action. When selecting an MVP you should clarify the following issues with MVP developers:

Find vendors and buyers

Launching an MVP shows that you have already set the stage for running your e-marketplace. It means you know your user audience. Start your promotional campaigns on social media to catch as many sellers and buyers as possible. Discounts, special offers, coupons, free trial periods all can do when you enter the market.

Make your e-marketplace run

The evolution from an MVP to a fully-fledged e-marketplace can happen steadily and even quietly. Your modus operandi seems clear in this regard:

Conclusion

Even though not too many types of e-marketplaces are available, it is worth being aware of their nuances to distinguish one from the other. When you are going to either do your business via online marketplaces or launch your own e-marketplace platform, different types of e-commerce marketplaces will require a certain competence from you not to fail afterward.

The best approach to the issue involves professional e-marketplace creators. They can consult on every aspect inherent in the creation, deployment, and running of an online marketplace of any type.

Contact us today to get professional assistance from the e-marketplace experts capable of meeting any business challenge that the marketplace sector may give rise to.

FAQ

The very definition of health insurance implies a certain type of service. Hence, any health insurance e-marketplace offers related services in both B2B and B2C business models (C2C is not relevant to the sector according to common logic). Both private e-marketplaces and state-owned ones (such as healthcare.gov, for instance) are available in the segment. Experts suggest selecting health insurance e-marketplaces through the lenses of your own health insurance plan. Location is important as well.

This is a special healthcare insurance-centric platform that offers various health insurance plans. More than 2 million users of the platform prove the relevance of such a business model for the contemporary health insurance industry. The details about the platform are available on the official website.

Molina Healthcare is one of the largest care management providers in the US. Both Medicaid and Medicare governmental insurance programs are in the scope of the Molina Marketplace (also known as Molina Exchange) that provides various health insurance plans. Customers from different States appreciate the service due to numerous options and advantages. Visit the official website to learn more.

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