Online or digital marketplaces have become increasingly commonplace in the last few years, not least because of the impetus provided by changing consumer habits during the Covid pandemic. The model isn’t only the preserve of large players such as Amazon and eBay, but has been adopted by a wide variety of industry sectors.
Indeed, research carried out by Edge by Ascential has predicted that by 2027, third-party sales through marketplaces will account for 38% of all global sales growth. The report also notes that the number of third-party marketplaces operating globally has jumped by over 500% since 2007.
“An online marketplace, whether it’s for business-to-business (B2B) or business-to-consumer (B2C) transactions, serves as a digital hub that links businesses and individual consumers to other enterprises for the purchase and sale of goods and services,” explains Enrico Camerinelli, Strategic Advisor at Datos Insights. “This platform facilitates efficient and streamlined trading between companies and individuals, leading to cost reductions and enhanced opportunities for growth.” As Camerinelli notes, marketplaces for B2B and B2C transactions enable businesses and individual consumers to connect with a broader spectrum of potential vendors and clients. “In the current digital landscape, B2B/B2C marketplaces have become a fundamental component of e-commerce and are the most rapidly expanding channel for digital sales.”
Digital marketplace landscape
Where the landscape for digital marketplaces is concerned, Dr Stephen Whitehouse, Managing Partner, Head of Payments at Oliver Wyman, says that major players like Amazon, eBay and Alibaba dominate general ecommerce, while specialised platforms like Shein and Depop cater to the apparel industry.
“In the food sector, services like Just Eat, Instacart, Deliveroo and Uber Eats lead the way, while the transportation industry has been disrupted by companies such as Uber, Lyft, Turo, Lime and Bolt,” he adds. Other examples include travel and leisure platforms such as Booking.com, Airbnb, Expedia and Trivago, as well as freelance service marketplaces like Fiverr, Upwork and Taskrabbit.
Marketplaces come in many different forms, including horizontal marketplaces that offer a wide range of products and services across different categories, as well as vertical marketplaces that focus on a specific industry, product or service. Whitehouse explains that common sales models include commission models, in which sellers are charged a percentage of each transaction, subscription-based platforms which levy fees for accessing their marketplace, and ‘freemium’ models, which offer basic services for free with premium features available for a fee. Alongside the proliferation of B2C marketplaces, the B2B marketplace environment is also showing growth. Allison Shonerd, Head of Global Digital Disbursements, Global Payments Solutions at Bank of America, notes that B2B marketplaces enable transactions between businesses for everything from equipment purchases to office rentals. “This is a huge market, and it’s one that has existed largely outside of the digital space until recently, so there’s a lot of opportunity for marketplace growth,” she comments.
As the landscape continues to develop, Camerinelli argues that the “imminent evolution” for digital marketplaces lies in the integration of financial products and services, achieved through collaborations with banks and providers of financial services. “This represents the next significant step in their progression,” he observes.
Benefits of the online marketplace
Against this backdrop, there are many reasons why companies are choosing to adopt a marketplace approach. For one thing, says Whitehouse, there is a significant opportunity for revenue and margin, “which is absolutely critical for retailers in particular, which operate with very small margins.” He points out that companies leveraging digital marketplaces enjoy lower entry costs, as digital marketplaces tend to be cost effective distribution channels. For customers, the benefits include an enhanced user experience.
The marketplace model also provides an opportunity to build a trusted relationship with customers. “There are retailers that people visit frequently or infrequently, depending on the nature of the goods,” says Whitehouse. “But the idea of a marketplace is that you’re there, you’re immersed in that brand, on a regular basis.” This gives retailers an opportunity to distil that relationship into insight, and monetise it by enhancing the value proposition they offer customers. As Whitehouse observes, “For the retailer, that’s gold dust.”
On another note, Camerinelli says that leveraging digital marketplaces can enhance a business’ supply chain management. “This is achieved by streamlining the procurement process, overseeing shipping logistics, and cutting down on the time and expense involved in discovering and assessing new suppliers and customers. Furthermore, B2B marketplaces offer advantages to smaller businesses that might lack the means to put money into conventional sales and marketing avenues.”
