What is a Marketplace?

Definition of a marketplace

The marketplace is now defined as a website on which independent sellers, professionals or individuals, have the possibility of selling their products or services online for the most well-known cases, a commission deducted by the site from each sale. . There are other business models based on fixed fees on sales, subscriptions, insertion fees, price per lead or seller services.

Thus, services such as Amazon, Rueducommerce, Ebay or Cdiscount provide sales areas for thousands of sellers and allow them to benefit from the functionalities of their platform and the hundreds of thousands of visitors they attract each month. Some marketplaces also offer product storage and shipping support to provide an excellent user experience for both seller and buyer.

The marketplace has many advantages for both parties . For buyers, it allows them to benefit from a large choice of products. For professionals, it offers access to millions of potential customers and payment guarantees.

Marketplace versus e-commerce: what are the differences?

It's no coincidence that most major e-commerce sites are marketplaces, it's THE e-commerce model of tomorrow. However, while a marketplace can be an e-commerce site, not all e-commerce sites are marketplaces. Indeed, these models have the same objective, namely the sale of goods and services online, but operate in very different ways.

The e-commerce model: what is it?

The e-commerce model is based on direct sales between the seller, usually the site owner, and the buyer. The latter, by browsing the platform, can choose from the products that are made available to him by a specific seller. Thus, in the e-commerce model, only two parties are involved in the buying process: the seller and the buyers. Similar to the online version of a retail store, the e-commerce site caters to multiple buyers, whom it aims to build loyalty on the offer of a single brand or company. The customer of an e-commerce site is therefore the end buyer.

The marketplace model: what is it?

Unlike a single-vendor e-commerce site, a marketplace is a connection platform between several buyers and several sellers . Three actors are therefore involved in the purchasing process: the marketplace, the seller and the buyer. Comparable to the online version of a shopping center, it is aimed at a multitude of sellers who can take advantage of the services provided by the platform and thus reach a maximum number of buyers. The customer of a marketplace is therefore the seller, the one who presents his products and services on the platform.

The main differences between a marketplace and an e-commerce site

The marketplace and the e-commerce site are therefore two distinct models of online sales . Operators will not be equal in terms of compensation opportunities, logistics, or growth prospects. Finally, the technologies used do not have the same requirements.

The method of remuneration: multiple possibilities for the marketplace

An e-commerce site operator buys and manages its own stock. He then pays himself directly by generating a margin on the sale of his products. For the marketplace, the remuneration is more complex, it is generally made up of the commissions applied on the sales of the sellers. But there are other ways marketplace operators can put in place to monetize their platform and their audience. Subscription systems, sponsored advertisements, freemium or premium offers, listing fees… for B2B marketplaces, the methods of remuneration are numerous and can sometimes be combined.

Substantial savings on logistics for marketplace operators

The owner and the seller of an e-commerce site are generally one and the same entity. Therefore, he must organize himself. From the creation of the platform to delivery, including orders and inventory management, he manages all logistics. A substantial but necessary investment to be able to offer sales and fulfill orders. For its part, the marketplace is simply the intermediary of the sales phase and is therefore not involved in the aspects relating to the delivery of the goods or services purchased. The marketplace operator therefore has no logistical aspect to manage.

Growth prospects: almost unlimited possibilities for the marketplace

If success is there, the e-merchant will have to change its offer to adapt to demand. Offering more references to its catalog, managing more substantial stocks, always ensuring more deliveries, providing after-sales service… so many major investments that require time and resources. The growth of an e-commerce site can therefore quickly be limited by a lack of financial and logistical resources. The whole advantage of the marketplace model is that its growth can take place simply, by expanding the number of sellers. Without heavy investments, inventories or inventory management issues, the marketplace operator can enrich its catalog with an almost infinite number of references.. In addition, the competition for certain products will allow it to offer a competitive offer and therefore increase its sales.

Technology: more developed solutions on the marketplace side

If it is quite simple to create an e-commerce site by contacting a web agency or using open source solutions, these solutions are not adapted to the marketplace model . Too simple, they do not offer the functions needed to manage a marketplace.

Appropriate technology will have many features, including :

  • payment
  • Commission management
  • Billing
  • Synchronization of data flows with external systems
  • Logistics management.

The chosen solution will have to offer short implementation times, powerful applications, have a scalable database designed for multi-market use, support omnichannel, simplify the addition of product sheets…

How does a marketplace work?

Three actors are involved in the functioning of a marketplace: the marketplace operator, the seller and the buyer. They form a trio where each plays, in turn, the leading role. In direct communication with each other, their coordination allows the proper functioning of the platform.

1st player: the marketplace operator

Inspiring trust is the first responsibility of the marketplace operator. Often at the initiative of the project, he is the actor responsible for managing the platform . Its main role is to set up a regulated and secure site, offering tools and services that promote contact between sellers and buyers, and simplify transactions. As a regulator, it ensures that the balance between supply and demand is maintained. He also ensures the quality and correct referencing of the products sold, by highlighting the catalogs of the sellers. Finally, he is in charge of offering an attractive site and an optimal customer experience.
By offering technological tools combining all the necessary functionalities,the operator guarantees the proper functioning of the marketplace . For example, it will offer sellers merchant tools allowing them to set up promotions, manage orders and stocks, monitor their activity, etc.

2nd player in a marketplace: the seller

The seller is the actor who offers his catalog of products on the marketplace. Its objective is to reach new customers by benefiting from the traffic of the platform, and thus increase its turnover. For sellers who do not have an e-commerce site, the marketplace represents an opportunity to sell a new product online, without any investment. For sellers who are already e-merchants, the marketplace model makes it possible to significantly reduce expenses. It is not only a solution to sell more, but also to sell stocks more quickly.

3rd player in a marketplace: the buyer

Thanks to the work provided by the operator and the seller, the buyer can find a large catalog of products on a marketplace, while benefiting from an optimal customer experience. Rather than browsing different sites to make their purchases, the buyer can have access to a very large offer, quickly compare the products of hundreds of sellers and make all their purchases on a single site . Features, prices, promotions, reviews… in just a few clicks they make their choice and the purchasing process is optimized.

 

The different types of marketplace

The B2C Marketplace

The B2C (Business to Consumer) marketplace is intended for transactions or connections between professional sellers and private buyers . It is today the best known form of the marketplace with players such as Amazon, La Redoute, Cdiscount or Spartoo. One of the key success factors of the B2C marketplace is based on the volumes it has been able to attract: Amazon is the largest bookstore in the world, Uber has brought together the largest number of drivers, Spartoo offers the largest mode of transport offer. 'Europe…

The B2B Marketplace

The B2B (Business to Business) marketplace is intended solely for transactions or connections between professional sellers and professional buyers .

One of the best-known B2B marketplaces is Alibaba.com. Via its marketplace, the Chinese e-commerce giant connects Asian wholesalers with companies located all over the world. The marketplace is therefore not intended for end consumers.

Amazon also launched a B2B offer with Amazon Business in 2016, which replaced the Amazon Supply offer created in 2012. In one year, the platform has accumulated more than a billion dollars in turnover (when its European competitor Manutan had taken 50 years to reach 700 million) and was able to transpose the user experience of its B2C solution to a professional audience by taking into account the specificities of this new segment: prices displayed excluding VAT, wider choice, multi-user account or still delivery in less than 48 hours beyond a certain amount.

If the marketplace is a way to sell, it can also be used as a digitalization tool for companies. BtoB marketplaces can thus take the form of a purchasing management platform, a tool for referencing the training offered to employees, and much more.

The C2C Marketplace

The C2C (Consumer to Consumer) marketplace is a solution on which private sellers are authorized to sell or rent their products to end customers. It is therefore only transactions between individuals . One of the best-known C2C marketplaces is Airbnb, but we can also mention Bedycasa, e-loue or the new Facebook Marketplace service.

Classified ad sites like LeBonCoin are also considered C2C marketplaces even if they do not deal with the transaction. Finally, some marketplaces are a mix of B2C and C2C sales, we then speak of hybrid marketplaces . Platforms like Ebay or Priceminister which were originally only intended for sale between individuals then evolved by offering products from professional sellers. The Fnac marketplace is another example of a hybrid marketplace.

The horizontal marketplace

Horizontal marketplaces bring together sellers of products from a large number of categories . We will mention Amazon, which is the most famous of the horizontal e-commerce companies. On this marketplace, there are books, furniture, food, clothing, toys, software, music, gadgets, but also cloud hosting services or dematerialized music. In the case of a horizontal marketplace, the objective is to offer the widest possible offer.

In the case of the B2B marketplaces presented above, we will speak of a horizontal marketplace for marketplaces that address companies from various sectors of activity that have the same needs. As such, the marketplace will sell different types of products such as office equipment or computer equipment. It is about selling products of several types but which all share the same characteristic.

To illustrate horizontal marketplaces, we can cite: Ebay, Amazon, Cdiscount, Auchan, etc.

The vertical marketplace

Unlike horizontal marketplaces, vertical marketplaces process trades for a particular industry . They specialize in one type of product or market. We thus speak of a vertical marketplace when the good or service offered belongs to a specific sector and is integrated into a production process. Sellers in vertical marketplaces are also called specialty retailers.

Since the vertical marketplace is specialized, it generally brings greater depth of range and expertise than generalists in this area. They also ensure that the information relating to the products and services offered is very detailed, such as, for example, the marketplaces for pharmaceutical products which specify the conditions of use and the side effects.

We can cite as an example ManoMano for the online purchase of DIY and gardening products (which offers many guides and tutorials for DIY enthusiasts), or Doctolib, a platform for making appointments with health professionals. Another example of a vertical marketplace is TrueFacet.com, which specializes in selling jewelry and designer watches.

Product marketplaces

Product marketplaces are platforms that offer the sale of physical products (books, DVDs, clothes, etc.), new or used (such as Vide Dressing) but also dematerialized products such as e-books, music, films or even video tutorials (openclassroom for example).

Service marketplaces

If there are a large number of marketplaces offering to buy products, others are intended for the sale of services. This type of marketplace markets services offered by third-party service providersand manages contacting and generally transactions. They also include many features to facilitate contact: price management, availability management, geolocation, presentations, portfolio, connection to social networks, rating and opinion of service providers and billing services. We naturally think of Uber and the development of uberization that followed, but also of AirBnb, consulting platforms (Comatch, Toptal, etc.) or service providers (Malt, TextMaster) or even for interior work ( Hubstairs, Travauxlib…).

With the success of Amazon or eBay, and the opportunities offered by this model, marketplaces are multiplying on the Internet. The model is evolving and new types of marketplaces are beginning to emerge: "on demand marketplaces", of which Uber is currently the best representative, which instantly provide services using the resources available at a given time or even collaborative platforms that often offer more affordable and flexible solutions than those in force on a given market, for example, BirdOffice and its rental of unoccupied workspaces between professionals or Blablacar.

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