What are online marketplaces?
What are online marketplaces?
With more than 300+ online marketplaces now available online, it is important to understand what marketplaces are and the different types available for brands:
What are marketplaces?
An online marketplace is ‘an eCommerce site where product or service is provided by multiple third parties. Consumer transactions are processed by the marketplace operator and then delivered and fulfilled by the retailers or wholesalers’ (1). Or, in the case of Amazon, by the marketplace themselves via their own 'Fulfillment by Amazon' service (FBA).
What do they mean for consumers and brands?
For consumers, marketplaces offer an increasingly broad and rich product offering, where availability is often greater than on an average retailers website. In some instances, customers view marketplaces as product search engines in their own right.
For brands, marketplaces represent the new online concession. Online retailers with high volumes of unique, and often highly loyal, visitors can quickly extend their range by offering brands an opportunity to sell on their site for a percentage commission. The percentage can vary by marketplace and by category, but is typically between 10 - 20% of the total value of the transaction.
Ever growing in number, there are now over 300+ retail marketplaces that fall into typically four types:
These marketplaces offer the broadest selection of categories and brands, and position themselves as a place where people can find pretty much anything they may want to buy online. From electronics, books, sports equipment, home and garden, through to clothes, jewellery, beauty, health and grocery. Amazon is a great example of this approach alongside others such as Zalando and Allegro.
The niche marketplace:
Niche marketplaces focus on a specific segment or category, such as home and garden or fashion, with a few even looking to crack the luxury watch and jewellery space. Examples of these include chrono24.com who are ‘the global marketplace for luxury watches, Farfetch, who specialise in luxury fashion and Spartoo, who originally specialised in footwear.
The social marketplace:
Social marketplaces are on the rise, where vendor and consumer communication is at the heart of the platform, with social content and search driving the demand for products. Whilst Pinterest could be considered to be one of the founding platforms, it has been slow to monetise it’s shopping potential. Houzz however, is a great example where the shopability has been core to it’s offering, providing visitors interior design inspiration from real homes linked to the buy home and garden category items.
C2C or peer-to-peer marketplaces:
Consumer to consumer, or peer-to-peer marketplaces were some of the first online marketplaces. Typified by the likes of eBay, Gumtree, craigslist, and Etsy, peer-to-peer marketplaces are where individuals can sell goods or services directly to other individuals. In more recent years, wholesale stockists have seen these as a prime route to expand their retail footprint and appeal to people outside of their region or specialism.
There are also two types of access to marketplaces for retailers, these are ‘open’ and ‘closed’ marketplaces.
Typically, broader marketplaces offer open access, meaning any brand or retailer can sign up to sell their products and try their luck on the platform.
Niche marketplaces tend to be more selective. Brands and retailers need to apply to list their products, and this allows the marketplace to vet the vendor and ensure their product offering is in alignment with the other brands and demands of its visitors.
To find out more about online marketplaces and what they mean for your brand, download our free eBook: