With newspapers facilitating people to sell their bits and bobs through an advert, the idea of a marketplace of traders is not a new one.
However, thanks to Tim Berners-Lee and the invention of the World Wide Web in 1990, five years from then, the world welcomed a small website called eBay. Since then many more marketplaces have taken a recent route online and the number is still growing. Amazon, soon after eBay, opened its doors to selling a plethora of products from multiple suppliers online setting the standards for ecommerce as we know it today. These two online giants are now amongst the most prominent online marketplaces of the 21st century.
So, what is an online marketplace?
Well most websites began their story as consumer sales driven sites, but slowly popularity drove them to become effective sales channels for other businesses too. An online marketplace provides an online channel for any company to set up their own store in order to sell their products through this communal online space.
You may be asking, then where is the benefit for the marketplace owner? Well, marketplaces such as Amazon and EBay make their money through charging fees for posting products and commissions on sale of products.
How are these marketplaces trending?
EBay now has 14 million active users with a global customer base of 233 million. This has resulted in 178,000 users running a business on eBay as a primary or secondary source of income.
Similarly, Amazon boasts 144 million active customer accounts and over 2 million seller accounts. These are the sorts of numbers that are opening the eyes of businesses everywhere. Amazon’s success has been triggered by allowing sellers to undercut Amazon prices, which although is a risky move, it has allowed them to grow beyond expectations, resulting in 35% of Amazon’s retail sales coming directly from its marketplace.
What are the advantages of selling through these online marketplaces?
Brand and product exposure – With the growth in consumers researching multiple channels before making purchases, the more channels your brand and products appear in, the greater your market penetration and potential for new sales opportunities.
Free advertising – after all, companies such as Amazon, Ebay and ASOS already have a large marketing budget, usually exceeding that of the traders selling on their sites. This means that retailers likewise benefit from the mass marketing undertaken as it results in driving more traffic to the marketplace, and provides more opportunities for your product to be found and purchased.
Unfortunately there can also be disadvantages to selling on a marketplace.
With increased competition comes potential price wars - As popularity for a marketplace grows, competition is naturally increased. In order to win business, many traders feel that being the most competitive on price is the only way to achieve sales. It only takes a few traders with that mind-set to set off price wars that usually only benefit the end consumer. This may put off many traders who care about the profitability from using the marketplace it can also result in a marketplace being known for bargains, which can be damaging for branded businesses.
Frauds and fakes - EBay especially has suffered from many fraudulent sellers and buyers as well as high levels of replica illegal goods being sold. This means that your products could be potentially outdone by fake goods or someone else could copy everything that you sell. Although EBay is taking thorough precautions to try to prevent such events from occurring, some incidents are still slipping through and damaging the reputation of the online marketplace.
What does the future hold for online marketplaces?
In the last couple years Play.com and interestingly the online fashion giant ASOS have established their own online marketplaces and it can be predicted that other retailers will follow the trend in a bid to attract more consumers by providing a vast choice. Furthermore we must not forget that even the Google Play (Android’s App Store) and the Apple App store are in fact variants of an online marketplace.
As the digital world grows, so does its ecommerce capabilities. Online marketplaces are helping to keep small businesses thriving through wider reach to a greater pool of potential new customers, fewer overheads compared to a physical store and establishing a mutually beneficial partnership with the large scale corporations running the sites. The near future will see more and more major brands offering an online marketplace, making them a shopping destination in their own right, providing a simply enormous range of choice for consumers.
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