Concept days: every Tuesday, we explain in our own words a new trendy concept around one of our favorite four themes – start-ups, customer behavior, e-commerce and technology.
Tuesday’s concept #4 : “Online Marketplace vs E-commerce”
Why could you consider installing a marketplace in your E-commerce ?
theme : e-commerce
The online marketplace is basically a place (in our case a website) where you can find products coming from multiple vendors, would they be brands, shops or persons, in the same platform. The marketplace owner is responsible for attracting customer and keeping track of money transactions, whereas the third party vendor is dealing with manufacturing and shipping. This way, the marketplace avoids holding stocks, and the manufacturer sells directly his own products. This kind of supply chain management is usually called drop shipping.
Famous online marketplaces: Etsy, alittleMarket, eBay, VideDressing …
In terms of revenue, the marketplace takes a percentage of sales on any product sold on its platform. There are various types of online marketplaces:
C-to-C (Customer to Customer) marketplaces are focused on building communities on buyers and sellers
B-to-B-to-C (Business to Business to Customer) offer a common selling platform for smaller business to sell their goods
Is it a replacement for e-commerce as we know it?
It does not replace E-commerce but it does augment the offering. Online marketplaces target a different audience, selling different products, hence setting up a market place is very different than setting up a regular e-commerce website. For instance the inventory changes constantly, you may never see the same product twice on a marketplace.
What’s in it for you?
First of all, a marketplace offers a large choice of products. And because many producers sell on the same platform, there is a broader diversity than in a regular online store with a small set of brands. Also, marketplaces are commonly used by small businesses with second-hand products, so prices are also expected to be lower.
For the marketplace owner: drop shipping allows a zero stock policy.
For the vendors: focus on product development and not at all on the selling platform becomes possible.
For the customer: comparing becomes a breeze.
What you have to be aware of
Extremely high competition between vendors appears in a marketplace. Because all products are sold on the same platform, with the same design, and are usually ranked under categories, the vendors’ brand image is difficult to get through. Moreover, quality proof is lower than in a real brand store. Nothing can guarantee the quality of two different products (especially true for second hand ones).
For the marketplace owners, controlling each product becomes a real issue.
For vendors, the product has to sell itself.
For customers, trust in quality and loyalty is more challenging.
Coming next: trading by community
Take Couchsurfing as an example: we are slowly accepting to exchange houses, and Airbnb’s growth is going through the roof. If you apply this logic to commerce, you see that our consumption model is also changing, we tend to trust people more than brands and C-to-C marketplaces are popping out of everywhere. Hold on, maybe we should keep our thoughts for our next startup…
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See you next Tuesday !
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