Online marketplaces are platforms where third parties can offer their products and services. Meanwhile the transactions are processed by the marketplace owner. After the sale is finalized the marketplace receives the payment of which it takes a fee. Then the seller sends the product to the customer (drop-shipping).
The online marketplaces have already existed for some time. Recently they have seen an exponential increase in revenue, as is evident by the growth in turnover of both Amazon and Alibaba (Source: Statista).
What types of marketplaces exist?
There are a variety of different marketplaces. Probably the first marketplaces that come to mind are Amazon and Alibaba. There are however less traditional marketplaces entering the market. Facebook for example offers the opportunity to sell products through their platform, as does Instagram since recently. The latter can be classified as social marketplaces.
Other marketplace types include:
- Search engines with buying option (Google, Bing)
- Auctions (Groupon)
Benefits & disadvantages
When you decide to sell products on a marketplace there are certain benefits and disadvantages you will encounter.
For example you will reach more customers, receive the opportunity to trade cross-border and may benefit from a fulfillment partner.
Contrariwise there are also disadvantages to be found. You will have to pay fees to the marketplace operator. There is increased price transparency because of the amount of competition. Furthermore, you will not be the owner of customer data in certain cases.
These examples are not exhaustive but provide an idea of what you can expect from selling on such platforms (Source: nibusinessinfo.co.uk).
Figure 1, Source: Quora
Which marketplace should you choose?
After carefully weighing the benefits and disadvantages and making the decision to sell through marketplaces you need to find answers for a couple of different questions. Is the platform suited for your brand? Can you reach the right audience through that marketplace? In which countries does the marketplace operate? These and other questions needs to be answered to determine if the proposed marketplace is the right one for you.