Last updated: November 9, 2021 Digital marketplaces: Examples, benefits, strategies

Digital marketplaces: Examples, benefits, strategies


From time immemorial, marketplaces have been the lifeblood for commerce. Today, as the world rapidly turns digital, the growth of digital marketplaces is skyrocketing.

According to Statista, e-commerce will account for more than $6 US billion dollars in sales by 2024, up from $4.2 billion last year. The singular driver for this extraordinary growth in digital commerce is marketplaces.

Even before the pandemic sped up online shopping, marketplaces made up half of global online sales amounting to $2 trillion for the top 100 sites, according to a McKinsey & Company report.

What are digital marketplaces?

Digital marketplaces are online platforms for both sellers and buyers. They match buyers seeking a service or product with sellers or providers of those products or services.

Examples of digital marketplaces everywhere you look

With the massive e-commerce growth expected over the next decade, let’s take a look at the different types of marketplaces and the markets they serve. The marketplace business is vast and complex with room to take more on, serving customer-centric goals.

  1. Business-to-consumer (B2C) marketplaces – One of the most saturated categories with tons of players, including global giants such as Amazon and local leaders like TMALL and in China and Mercado Livre in Brazil and Latin America. Add niche B2C marketplaces (focused on specific categories like electronics, apparel, and home improvement) to this mix and voila! You’ve got competition galore.
  2. Business-to-business (B2B) marketplaces – Growth in sheer monetary potential can be found among B2B marketplaces. Notable examples include Alibaba and Amazon Business. B2B marketplaces are more niche and vertical industry focused.
  3. Peer-to-peer (P2P) or consumer-to-consumer (C2C) marketplaces – Notable examples include eBay, TaoBao, Mercari, Etsy, and even Airbnb. This is a marketplace where consumers are both sellers and buyers. P2P and C2C marketplaces are not an insignificant contributor to the marketplace juggernaut.
  4. Consumer-to-manufacturer (C2M) or consumer-to-business (C2B) marketplaces – The biggest and most noteworthy example of this type of marketplace is PinDuoDuo. In a few short years, this model has gained a 4% share of the global e-commerce business and is ripe to expand beyond China to be other parts of the world.
  5. Service-to-consumer (Se2C) marketplaces – This is a made-up label, but it’s a growth category with numerous local examples. Think HomeAdvisor and TaskRabbit in the United States, or UrbanClap in India, hipages in Australia, and so on. Power to the gig economy!

Making it easy to do business: Marketplace benefits

Digital marketplaces help businesses sell their products, grow, and be profitable. Operators of digital marketplaces have streamlined the process of selling and servicing, so it’s seamless and painless for everyone involved.

All the seemingly too-good-to-be-true benefits apply equally to digital marketplaces serving all types of consumers and businesses.

Easy. Amazon, just like all other marketplaces, has removed barriers for sellers to easily start selling on Amazon marketplace. Amazon provides a step-by-step guide to attract sellers to its platform. Quick onboarding, product uploads, pricing, promotions, and PoC trial balloons or propel-growth strategies are all key strategies for attracting sellers.

Access to a ready customer base. Sellers want marketplaces that provide a one-stop shopping experience to a massive, loyal customer base. This means that sellers and manufacturers can start and grow their business on marketplaces before branching out to other channels. Take the example of Anker Innovations, which started on Amazon Marketplace and today generates more than 90% of its online revenue on Amazon.

Fulfillment, payment, and logistics. Sellers can gain major advantages and save lots of money when the marketplace operator manages operational complexity. Sellers are relieved of the responsibility of warehousing, shipping, and payment collection – tasks all perfected by the marketplaces themselves.

Special events. Marketplace operators are masters at creating 365-day opportunities. For instance, Singles Day, an unofficial alternative to Valentine’s Day in China, accounts for $74.1 billion and is growing at a rate of nearly 50% year-over-year. Meanwhile, Prime Day on Amazon nets $6 billion globally and is growing at 60% year-over-year.

Innovation. Marketplaces are continuously innovating, making them the bleeding-edge innovators in e-commerce. For example, with the advent of smart speakers, voice-enabled search was quickly transformed into a tremendous e-commerce opportunity.

Special offers. Marketplaces also entice consumers and bind them to their platforms, with indirect services such as free shipping, video and audio streaming services, free books, and more. Some marketplaces offer annual memberships. These intangible benefits attract and ensure a more captive consumer base.

Marketing, analytics, and personalization. Successful marketplaces offer an array of marketing and personalization opportunities. Many use a customer data platform to hyper-personalize customer experience through complex, AI-based technologies. Most marketplaces enable one-on-one relationships with their buyers. The ability to use sophisticated analytics to gauge the competition and adjust pricing, promotions, and offers is priceless. Using data to drive certain product lines, ramp up manufacturing, and optimize operations to meet demand is crucial.

Post-sales support. Marketplaces are laser-focused on overall customer experience, which includes post sales. This ability make customers lifelong fans is managed by the marketplace operator.

Global reach. “Think globally, act locally.” In a global economy, businesses can have global reach with marketplaces that have international breadth. Local marketplaces serve as a launching pad, but any seller with growth ambitions can appreciate the opportunity to cater to consumers on a global scale and boost revenue.

All these advantages don’t apply equally to all the different types of marketplaces, but are an important consideration for any seller. For example, B2B marketplaces have their own unique challenges, such as payment, financing, logistics, and fulfillment needs that must be catered to differently. Successful ones such as Rekki and Faire understand these challenges and provide targeted solutions.

Digital marketplace strategies and mantras to live by 

Encourage healthy debate to really gauge the work, cost, benefits, customer expectations, and competition to narrow your marketplace strategy. Go all in, test the waters with organic participation, or participate only in distress marketplaces for unused inventory.

At the same time, pay heed to an increasingly popular strategy among premium businesses that don’t sell on marketplaces. Nike, for example, stopped selling on Amazon in November of 2019 to protect the integrity of its brand. Today, the company sells only on its own Nike-direct channels, which has enhanced the consumer experience.

Or perhaps take the old adage and flip it – if you can’t join them, beat them! That is, start your own marketplace.

As Jay-Z once wrote, “I’m not a businessman/I’m a business, man.” Today, this mantra applies equally to marketplace operators.

Marketplaces don’t just operate a business; the marketplaces are the business. This needs to be a conscious and tacit underlying thought for any business considering becoming marketplace operators.

Here are some reasons you may want to build your own marketplace:

  1. As a retailer, you already have a brick-and-mortar presence that sells third-party products, and now you want to expand to a digital platform.
  2. As a commerce operator, you’d like to grow your customer base by expanding the assortment with products from third parties and in turn push your own brand and product lines.
  3. As a B2B commerce operator with a wide first-party dealer distributor network, you want to build a marketplace to gain tighter control over the network, the products and services offered, and the overall customer experience.
  4. As a commerce operator, you have a big OEM supplier base that you need to manage to ensure quality.

Marketplaces will fight to acquire control and exclusivity of the top sellers. Winners get the prize, and that prize is more sellers.

Marketplaces need this influx of businesses since their primary source of revenue is based on commissions. More sellers mean a better the assortment of products, better brands, and more consumers.

Digital marketplaces take years to build their reputation, but if a business has the strategy, vision, and talent to become a marketplace operator and sell third-party products, then the opportunities are endless.

All e-commerce SaaS cloud platform providers provide either built-in marketplace management capabilities or strong partnerships with SaaS marketplace platform providers to enable setup.

Gaze into the e-commerce crystal ball

Digital marketplaces will become more fragmented. Sellers will be more and more discriminating in which marketplaces they will compete. At the same time, watch out for consolidation, as smaller, local, niche, and disruptive marketplaces get acquired by larger players.

Commissions and value-added services will become the new battleground for attracting business to marketplaces. Delightful and new consumer experiences will play an even bigger role in attracting businesses and consumers.

In turn, brands will reserve their best assortments and experiences for their own direct e-commerce stores. They may even use marketplaces as affiliate marketing networks.

And finally, social networking companies could become marketplace operators in their own right. Imagine LinkedIn as the top marketplace operator for B2Bs. (It totally could happen!)

If you want to be a contender in the marketplaces of the future, now is the time to start thinking.

Take the time that you spend browsing your favorite B2C marketplace and apply it to your organization’s marketplace strategy. After all, the fact that you’re spending any time at all on Amazon or others like it speaks volumes about the enduring importance of marketplaces and their growing promise in the digital era.

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Amish Shah

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