Online Marketplace

Online marketplace definition

An online marketplace is a type of ecommerce store where products are listed and sold by a selection of third-party vendors. Examples of online marketplaces include Amazon, eBay, and Etsy.

The online marketplace model has been around since the early days of the internet. The format first rose to popularity because it offered consumers a wide range of products that were easily accessible in one place. But the online marketplace model has seen a resurgence in recent years. Specialist sites no offer online marketplaces for all sorts of niche products and interests.

Online marketplace characteristics

Most online marketplaces share common characteristics that distinguish them from other ecommerce shops. These characteristics include:

  • Products from many different third-party sellers
  • Easily accessible product reviews from other users
  • User accounts with a variety of features, and often social functionality

These features generally make the shopping experience more interactive. They also help instill trust that the customer will get what they're paying for, which can sometimes be a concern with online marketplaces. This is because buying from third-parties is riskier and less reliable when it comes to product quality and customer service.

Online marketplace formats

Generally, you can split online marketplaces into three different models - vertical, horizontal, and global online marketplaces. They can be distinguished from one another in the following ways:

Vertical online marketplaces

Vertical online marketplaces sell multiple products from multiple sellers. But these products all fall under the same category/type. An example may be an online marketplace for clothing or an online marketplace for cars.

Horizontal online marketplaces

Horizontal online marketplaces sell products from multiple different categories. However, these products are all linked by another common factor. Take Etsy for example. Etsy sells many different types of products, but they’re all handmade.

Global online marketplaces

By contrast, global online marketplaces sell an almost unlimited selection of products. They don’t limit the selection of products by category or product type. As a result, they tend to be much bigger, with a higher volume of shoppers/users. Sites like eBay and Amazon are prime examples of global online marketplaces.

Benefits for buyer/sellers

The online marketplace format has risen to popularity because it offers a variety of benefits to sellers and shoppers alike.

Firstly, Shoppers get a huge selection of products on one, easy-to-use platform. It’s much easier to find what they’re looking for, even if it’s a specialist product. You'll often find that online marketplaces are able to offer products at cheaper prices too.

Meanwhile, customers benefit from various buyer protections. And, they often benefit from more efficient logistical infrastructure, which provides quicker, cheaper delivery.

On the other hand, online marketplaces allow sellers to reach a large potential customer base without having to spend lots of money to set up their own online sales infrastructure. They do have to pay a fee for selling through the online marketplace, but that’s offset by increased sales.

It’s also lot easier to sell via an online marketplace. After a simple application and verification process, sellers can sell their goods and services via the marketplace's platform. Listing products, changing pricing, and all sorts of other functions are managed via a seller account/backend software.

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