What is a marketplace ?
According to a Xerfi survey, in 2021 around a third of online purchases will be done through marketplaces. Given that the e-commerce market represents almost 2000 billion US dollars, it is clear that online marketplaces will play an important role in the years to come. With the current health crisis, activities will move towards digitalization and marketplaces will get even stronger.
The concept of online marketplace
Uber and Amazon, among many others, have changed our purchase and consumption habits. Although the concept of online marketplace seems quite recent, its idea goes back to almost 30 years ago and in the current era of the digital economy, marketplace creations are constantly evolving to fit the needs of multiple industries. The slowdown of certain platforms like Ebay has not discouraged marketplace users and numbers will continue to rise. As you probably already know, the connection between different parties can take many forms and it can lead to fulfill personal needs through C2C or B2C service marketplaces (e.g. walk your pet, find a hairdresser, etc.), as well as professional needs in B2B service marketplaces (e.g. rent offices, find consultants, etc.).
“It is not so far from a directory”: yes and no. It is true that a simplified marketplace model can resemble a directory in the sense that it allows users to go through a list of providers and then contact them. However, the greatest added value of online marketplaces is the ease of use and efficiency with which you can find and assess options to finally buy the one that fits your needs in the best possible way. Saving users time and money will lead a marketplace’s success.
The spectrum of marketplaces
If you are reading this article it is because you have also noticed the rise of marketplaces or, even more, you understand their relevance and key role in today’s economy. The first ones to be developed were mainly ecommerce product marketplaces and they were quickly followed by service marketplaces and community platforms. Business models therefore vary considerably among projects but in general they all include clear transaction flows that encourage user purchases, as well as an integrated monetization solution to collect commissions from providers, customers or both each time a transaction is completed.
Being able to adapt to the target industry is a must for all successful marketplaces and verticalization can be a useful way of moving forward. Focusing on a specific industry and its type of users makes it possible to tailor service marketplace functionalities to ensure that they fully answer to their needs. For instance, rental marketplaces could benefit from setting seasonal prices so a yield management system could be a great asset. Yet, marketplaces based on professional services such as consultancy will not have much use for it but they will need more versatility in how their services are provided, such as face-to-face or through videoconference. Similarly, some marketplaces need to set their prices based on a specific time unit, such as per hour or per night, whereas others will need to set a price per service regardless of its duration. These needs have to be taken into account when defining the online marketplace’s operational framework to make sure the best service is being provided to users. Keep in mind that verticalization might not always be the best solution and some marketplaces will benefit from offering a wide range of services, but it is still something worth considering.
How do marketplaces improve UX and interaction between users?
To understand the success of this new approach to commercializing services and products, it is important to analyze an online marketplace in itself.
What does a marketplace rely on to provide a good experience to its users while also developing customer-provider relationships? Enabling the digitalization of activities stands out as one of the keys to success. This is even more apparent when thinking about small local businesses who would otherwise not be able to acquire as much visibility and reach. Once an online marketplace is up and running, both the platform owner and all users will benefit from the platform’s notoriety, as rise in traffic will increase business volume too. Multi currency and multi language marketplaces which operate internationally and manage time zones natively will also lead these businesses to internationalize their activity. Additionally, this type of model not only reduces business costs, but the simplification and automation of transactions allows service marketplace owners and providers alike to focus on other crucial activities that are specific to their role. For example, providers will not have to focus on marketplace strategies such as SEO optimization or UX experience, as the marketplace administrators will deal with that. Yet, administrators will not have to worry about providing the actual services or making sure the offering is attractive, as providers will be the ones responsible for it.
It is worth noting that not all modern marketplaces focus on monetary transactions. Solutions have progressively been including functionalities that allow for management models without financial flows. Whatever the business and industry, an online marketplace can be the best approach if you are able to tailor it to your needs.
Lastly, a non-negligible benefit of online marketplaces comes down to transparency and user knowledge. In the past it was quite complex to know the provider’s qualifications and have all details of the offering before placing a booking. For some services this might not seem so relevant but imagine you are booking a doctor or hiring the architect that will redo your entire home… Would you trust everyone with that responsibility? Even if you have not met the provider face-to-face, you need to have full confidence in your choice and trust the provider‘s ability to deliver the service you need and expect.
At the same time, how can a newly graduated professional without significant experience or strong client portfolio build a reputation and prove his worth over more mature counterparts? Marketplaces tackle exactly this problem as they create an environment of trust not only in regards to the information presented in the listings and the public peer reviews, but also in regards to the marketplace itself, which is responsible for user interaction and which will get involved in any disputes or issues arise. Even if you have questions or need further information, users always have the chance to contact both the marketplace operator or the provider before booking.
So, what are you waiting for to launch your online marketplace?
Ideas come and go but unfortunately most of the time they do not become a reality. Do not let that happen to you. The rise of marketplace creations opens up so many new opportunities that need to be seized. If you have doubts about your project’s soundness or if you wish to learn more about service marketplaces, reach out to us! The Hatch team will help you build strong foundations for your big takeoff.
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