Marketplaces & all you need to know

2019-12-16

Marketplace or an online shop?

Do you need a marketplace or an online shop for your products and services? Let’s look at the different forms of marketplaces, types of online marketplaces and how to make money out of them in several ways. 

What ( online ) marketplace means? 

Marketplace and online shop are both e-Commerce platforms. However, their functionality is different. A marketplace is a website or an app that facilitates shopping from many different sources. For instance, eBay is the ultimate example of an online marketplace as they sell everything to everybody.

How a marketplace works? It functions as a point of contact for a big amount of buyers and sellers where they make deals through one website. Forms can vary from websites such as Amazon, eBay, Airbnb to mobile apps, like Wish, Lyst, and Grabble. So in these cases, the platform is a go-between those who sell and those who buy products or services.

Now, an online store is an e-Commerce platform with a unique domain name, a single storefront for selling products or services of one single seller. Alternative names for the activity are "e-tailing", a shortened form of "electronic retail" or "e-shopping", a shortened form of "electronic shopping". Online shops can be of various sizes, with hundreds of small retailing products of one or two brands only. 


Types of Marketplaces

Marketplace vs e-Commerce 

Well, traditional e-Commerce websites are basically storefronts letting a person sell their goods. On the other hand, marketplaces allow a lot of people to sell their products and services side by side. And so, there are marketplaces for sell, marketplaces for rent, etc., Online marketplaces are dominating the 21st century because of the many benefits they offer - reduction of the value cost creation, consumption and quality control. They serve business to customer and business to business markets, while powering rapid growing. 

Let’s check out the possible types of marketplaces and their definitions. Here’s the list:

  • B2B – a platform for the distribution of products or services between businesses.

  • B2C – a platform for the distribution of products or services from business to customers.

  • C2C – a platform for the distribution of products or services between customers.

  • e-Commerce – a platform for only two parties, e.g. seller-buyer

  • m-Commerce – a platform for buying or selling products and services through wireless handheld devices such as smartphones and tablets.

  • Crowdfunding – platform lets people post their projects and raise money for their realization through fundraisers.

  • peer-to-peer – a platform that brings together users, who offer products through offline services.

  • auction platforms – a platform where sellers can list an item and choose the listing duration. The bidding opens at a price the seller specifies when it ends the bidder with the highest bid wins. 

How to make money?

 Marketplaces build many features and marketing strategies that will keep their users on the platform. But how to gain from this? The deals that those users make are being closed on the platform, and the money transfer will happen within the platform itself. When having an online marketplace, there are several ways to get revenue.

  • Sign up fee
  • Listing fee
  • Selling fee
  • Lead fee
  • Subscription fee

As listed above, there are several ways to gain money from your marketplace. Of course, each one of these suggestions has to be backed up with a marketing strategy. Otherwise, you risk not getting many users on your marketplace. 

Pros and Cons

The signup fee lets you receive some money at the very beginning. You can use it if you offer your customers exceptional rights if being newly users on your platform. 

A good example of a listing fee is the insertion fee or "upfront" fee that eBay charges a seller to place an item for sale on eBay. What's more, the listing duration and the promotional and other features (also known as listing upgrades) added to the listing by the seller contribute to the insertion fees. I recommend using it if your marketplace is orientated in unique products and objects, such as antiques. 

When it comes to the selling fee, this is a revenue strategy when you can take a fixed interest of each transaction of products and services. You can invoice sellers after they get direct payments from buyers every time while transaction happens. You can also choose to do it monthly or with parallel payments when the fee is deducted manually. This is a rather complicated process but it’s worth it as it uses a very systematic approach to trace your balance.

 Using the lead fee will definitely be most useful if your prime goods are service-orientated. The sellers will pay for seeing a list of potential buyers. They will use the leads to require a particular product or service. Furthermore, the cost per lead model, in a way portions the responsibility for performance between vendors and advertisers. The vendors are responsible for putting their ads in front of their target audience in a way that will generate response while the advertisers are responsible for converting leads into sales. Read more about the most common mistakes of E-commerce on Yclas.com https://yclas.com/blog/most-common-errors-in-e-commerce.html

Clearly, the subscription fee is a signed agreement between a supplier and customer that the customer will receive and provide payment for regular products or services, usually for a monthly or a one-year period. Marketplaces profit from the subscription fee as recurring revenue. For example, a consumer might pay an annual fee to receive all the new discounts first. However, a one-year period subscription is too big of an investment for many sellers and buyers. 

Less effort & more money

Moreover, marketplaces help us search for a number of things with a few clicks, and it reduces the effort for both parties. Immediate access is granted so there are no opening or closing hours with an online marketplace. You can save money from inventory, space, etc., In general, the main purpose of a marketplace is to connect the right service providers with the right people.


Conclusion

This covers the basics about what you need to know of online marketplaces, types of online marketplaces and how to earn money out of them. If you want to build a marketplace there are plenty of different fields you have to cover and tons of information you have to go through. Even things like the right design choice, the team you need to hire, marketing and advertising strategies might be a challenge at the beginning. If you need great ideas for starting a business you should check out our suggestions for creating a website. With Yclas you can have your site ready without worrying about technical or hosting issues, and you don't need any web development knowledge! The platform is designed to be user-friendly and covers all the aspects you need. If you want to build a marketplace or an online shop, there are special themes, specific features, android and iOS apps available, maintenance and support throughout the whole process, free video courses and many more.   

 


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