The online marketplace has completely transformed the shopping experience for many customers in the United States and abroad. Price, convenience, and selection have driven these marketplaces, giving them significant advantages over brick-and-mortar shopping experiences. While Amazon and eBay may come first to mind, they are by no means the only players in this category. Jennifer Terrell, a former vice president at LivingSocial, examines the changes in the online marketplace and offers tips for success in this growing area of commerce.
Marketplace revenues are projected to exceed 200 percent growth over the next several years. The forecast is that online marketplaces will grow from $18.7 billion in 2017 to a staggering height of $40.1 billion in 2022. This presents a unique opportunity for startup companies to find their niche in the online marketplace.
The Prevalence of Online Shopping
Online shopping has become an everyday part of most shoppers’ lives. Using their computers and smartphones, consumers can reach online marketplaces at any place and time of their choosing. The online marketplace goes beyond the simple standalone store. Online marketplaces provide an aggregation of stores and platforms, combining the best of several different stores into one.
eBay first popularized this model, bringing millions of individual sellers in touch with interested buyers. Amazon fine-tuned it with its Marketplace program, where individual stores are responsible for their own merchandise. Many of these stores are fully integrated into Amazon’s model, with Amazon providing distribution and shipping of their materials around the world. Amazon Prime customers are the backbone of this model, and companies which are able to provide Prime delivery of their items have a huge advantage over others.
As corporations continue to grow their e-commerce capabilities, more brick-and-mortar companies are expected to join the world of the online marketplace. Walmart has been acquiring the rights to various brands, including Lord and Taylor, to diversify its discount offerings.
Etsy is another popular marketplace, connecting crafters and home businesses of all kinds with interested buyers around the world. Groupon also connects businesses with customers, selling access to coupons and special deals.
Expansion into Services
Online marketplaces are not only the province of retail sales. They have also expanded into services. Airbnb, Uber, and Lyft are three of the most popular. They connect service providers with customers and facilitate person-to-person transactions. Customers can easily search or request services online.
How it Works
These marketplaces often work on a commission basis. Individual companies are charged a commission fee, often around 15 percent, to list their items on retail sites. Service marketplaces work on a similar model, with a cut of revenues going to the website. Companies and individuals are willing to spend the money on commissions because they have a greatly expanded reach due to the exposure they receive from the website.
How Startups Can Benefit
Startups of all sizes can sell items on these marketplaces. They can enjoy greater access to customers as well as enhanced search visibility. Starting an online marketplace is also a viable option, as startups may partner with smaller retail businesses to create an aggregate search and delivery system.
As these companies become more successful, they may have the potential to be bought out by larger corporations. Being the “middleman” has significant advantages since online marketplaces do not have to deal with the day-to-day business of producing and shipping merchandise.
Making Marketplaces Work for You
Jennifer Terrell encourages all companies to look into the advantages of using or starting an online marketplace. This business model may be a great opportunity for startup companies, and it is fully scalable. While the competition is stiff in this category, the rewards may outweigh the risks.