For companies, brands and buyers it has become essential to buy and sell in a digital store. Thanks to the existence of Marketplaces, it is no longer necessary to have your own website or platform to sell a product or be able to buy it.
This business model, which is growing by leaps and bounds, offers many opportunities for companies or individuals who want to sell their products, but it also offers many possibilities for consumers to find much more products and services at more competitive prices.
In this article we are going to talk about the Marketplace business model, how they work, types, advantages, disadvantages and how to know if we are generating profits or not.
What is a Marketplace?
A Marketplace is an online platform, where brands, companies and customers can buy and sell their products and services. The Marketplace acts as an intermediary between the buyers and sellers of the platform.
Marketplaces provide many facilities for users to be able to find different options for the same product or service, without having to consult different web pages. For companies, being in a Marketplace means having a sales channel with a much greater reach, and being able to delegate functions that the Marketplace itself will carry out, among many others.
Therefore, a Marketplace generates an interaction between the customer and the company at the time of purchase, and also between companies and the platform. Which represents a combination of Business to Business and Business to Consumer or B2B2C.
Additionally, having a Marketplace allows the owner of the store and/or brand to focus their efforts on their own business development, since it will allow them not to have to worry about the development and maintenance of an e-commerce platform and its integration. with different payment platforms. So, in short, Marketplaces could be considered large virtual stores where you can find everything and where everyone can buy from anywhere and at any time.
What kind of Marketplaces can we find in the current market?
Being aware of the different types of Marketplaces on the market is key to choosing the one that best suits the needs of the business. According to their specialization we can find the following classification:
According to the degree of specialization:
- Generalists: known as the platform where we can find any type of product, without distinction by category. These types of Marketplaces are interesting, as they accommodate all kinds of products, but at the same time the competition is very high and positioning yourself can be quite a challenge.
What type of Marketplace adheres to this typology? Amazon, eBay, Alibaba, etc
- Niche or vertical: they are those that are focused on the sale of products in a very specific market niche. The good thing about this type of Marketplace is that the user who accesses it has a certain degree of specialization, where the retailers can benefit from more qualified traffic. In addition, unlike the generalists, a specialized Marketplace is capable of offering the consumer a user experience more adapted to a specific need.
What type of Marketplace adheres to this typology? Runnics, Stockx, Etsy, etc.
According to offer:
- Product sales: a large part of the Marketplaces that come to mind are focused on this typology where a sale of products and materials is generated. In this case, the products can be from a single category or from several.
What type of Marketplace adheres to this typology? Amazon, Fnac, Asos, Carrefour, etc.
- Sale of services: although it seems that we are not so “used” to this type in particular, if we realize we already use them on a daily basis. For example? Services like Glovo can be understood as a Marketplace in which different drivers offer services, or the well-known Cabify who offers us transportation in the chosen city from point A to point B.
What type of Marketplace adheres to this typology? Airbnb, Cabify, Glovo, etc.
According to customer:
- Marketplace B2B: how we know the acronyms refer to Business to Business. Here the business model is focused on commercial transactions between companies, those established between a manufacturer and a distributor of a product, or between a distributor and a retailer. The platform is an intermediary that connects the person who provides the merchandise or service to the person who may need it.
What type of Marketplace adheres to this typology? Alibaba,Amazon Business,Solostocks etc.
- Marketplace B2C: Business to Consumer, known as the business model developed by commercial companies to reach the end customer directly. From companies to customers.
What type of Marketplace adheres to this typology? Amazon, eBay, AliExpress, Asos, Etsy, etc.
What are the advantages and disadvantages that Marketplaces offer us?
Taking into account the boom that Marketplaces are having, many companies have decided to bet on this business model, but as in any business, there are advantages and disadvantages. We must be aware that despite all the advantages that are known or understood at first glance, a Marketplace is a highly competitive place, where sellers must pass a selection process, meet certain requirements in their published product content , in addition to being able to attract customers in the presence of many other competitors in the same sector.
What advantages and disadvantages exist for the seller?
It must be said that practically the buyer is usually the most favorable in this situation, but that does not mean that the seller is the loser, since he is also offered quite a few advantages:
- Access a channel where the level of traffic can be much higher than that of a normal e-commerce and therefore an increase in final sales will be generated.
- Selling to other countries can often be an almost impossible task, which is why Marketplaces offer the possibility of more easily accessing both national and international markets.
- The delegation of many aspects of the purchase to the Marketplaces, the payment, the ux, the page, security…etc
- Small and medium-sized companies have the opportunity to take advantage of Marketplaces to project themselves and have greater reach, visibility and reputation.
- Access a more diverse audience.
- Security with payments and deliveries.
- It allows you to generate synergies with products from other sellers.
Despite the advantages that are granted when selling from a Marketplace, we know that like everything in life, not all are advantages. Some of the most important are the following:
- Conflict with traditional channels, many sellers have been involved in conflicts and price wars, because some Marketplaces like Amazon require a lot of competition to position themselves, causing many companies to lower prices to be competitive with other brands. Many physical stores have ended up seeing that it is almost impossible to compete with the prices offered online and have had no choice but to reinvent themselves.
- The monopolistic practices that many Marketplaces are employing on sellers is making them have to adapt to what is imposed on the big platforms.
- Appearance of copies of your products, with more competitive prices that can make it more difficult to differentiate between products.
- Losing control of your consumer’s information, since you have to transfer it to the Marketplace.
- Difficulty creating a brand. Today it is very difficult to highlight your product, since there is hardly any possibility of differentiating the product from the rest of the products in the same sector.
Apart from commenting and detailing what advantages and disadvantages a seller can find, it is equally important to be able to mention what advantages it means for the final buyer to acquire products through the different Marketplaces:
Advantages for the consumer:
- Security. Today we are all used to making payments on online platforms as long as they provide us with a high enough level of security and trust to make the purchase. These Marketplaces such as Amazon, Asos, eBay, Zalando among others, there is no room to consider it due to the prestige they have in our minds and given the certainty that whatever happens with the seller, the platform will answer for us.
- Find a greater variety of products or services, which allows the consumer to better compare prices, products and obtain the products that best suit their needs.
- Convenience and ease of purchase, which ends up benefiting the buyer’s time, because in a couple of clicks we already have the purchase made. In addition, most of the Marketplaces already give you the option to buy prices and opinions of other buyers without the need to leave the web and analyze on other websites, thus saving a lot of time.
What can we do to increase sales on Marketplaces?
As we have been mentioning throughout the article, selling on Marketplaces can be a great opportunity for many companies. Starting to sell through online markets without a defined strategy is like driving without GPS, you will never reach the final destination, so working on a well-defined action strategy for Marketplaces will be essential before starting.
Marketplaces, as we have been saying, have a gigantic reach, are reliable and today are almost one of the first options for consumers.
How to take advantage of Marketplaces to increase sales?
- Optimize content: How we sell the products will be key for it to obtain a good positioning and therefore generate more visits. Optimizing titles, creating short descriptions using a keyword strategy and using reference images are some factors that can help generate more product visibility.
In the case of Amazon, for example, it will be important to take into account two key factors: the first, the Brand Store, which allows the seller to configure and create an online store for their brands, products or services completely free of charge. Why are they so important? The Stores allow you to create Brand Awareness by helping buyers to better understand the history of the brand and, above all, discover the product catalogue. Likewise, the fact of making known the complete portfolio of products or services offered, will favor a repeat purchase and, therefore, end up retaining customers.
The second factor that we can come across is about Amazon A+ content, one of the most effective ways to increase customer trust and increase conversion rates. A+ content provides brand owners with the opportunity to answer a customer’s most frequently asked questions by providing relevant brand and product information, enabling faster purchasing decisions and reducing the likelihood that return the products to you.
- Good Customer Service: Generating and maintaining good customer service is and how in any business, it is absolutely crucial to the success of the business. You will have to make sure of any shipping or refund policy, in addition to always being aware of any questions or queries that customers may have.
In addition to following the rules established by the Marketplace itself, we must be aware that good customer service can lead to a very wide range of positive advantages over the product or service. By this we mean that the fact of offering good service to the final consumer during or after their purchase implies, in most cases, the generation of positive reviews, which ends up being crucial for the visibility of the products or services offered.
- Investment in advertising: due to the immense number of products offered in these online markets, the fact of advertising gives a competitive advantage, as well as the opportunity to increase the visibility of the product or service and therefore increase sales.
- Generation of promotions: this is usually associated with a specific holiday or a special day of celebration, such as Mother’s Day or Father’s Day, etc.
Finally, in addition to these factors that can help you increase sales, it is important to be aware that you should not limit yourself to what the Marketplaces offer you. In online/electronic commerce we must be at the forefront of our customers at all times, so sometimes it may be insufficient to sell there, and we must opt for more options to attract them, creating pages in the RRSS and starting to connect our customers with what we offer and know how to create differential value.
If you are just starting out, a Marketplace may be the ideal place to start your journey. It will allow you to get and generate a lot of traffic at the beginning, it will allow you to easily generate the first sales and even get a quick analysis of what your buyers think of your product.
In this article, we have made a small introduction to the world of Marketplaces, but that is only the beginning! Now is your time to undertake and bet on this business alternative.
At Lifting Group we have the specialization and expertise in Digital Consulting and Marketplace Consulting that can be the key to your start-up in the Marketplace business. Having a Partner like Lifting Group can mean success so that your brand and/or product ends up being profitable and a source of income on which to leverage part of your strategy.