Marketplaces are virtual places that act as intermediaries in the sale of goods and services. Find out how they work, the different types, and why you should sell on these platforms.
Marketplace sites, by taking a commission on transactions, quickly facilitate the distribution of goods and services. The definition of a marketplace is clear: a marketplace site is an evolution of common e-commerce, allowing multiple sellers to display their items or services. Once you have defined what a marketplace is, it is a matter of understanding its functioning, management, and the types existing on the market.
What Are Marketplaces: How They Work and Their Advantages
It should be clear what marketplaces are, but what can we say about how they work? Understanding how a marketplace works is straightforward: the goal is to create a close relationship between seller and buyer. First of all, it collects sellers’ registrations, which include their personal data, information on the goods (or services) they intend to sell, photos for evaluation, and detailed descriptions of the products.
At this point, buyers have a rich assortment of products and services available within the digital marketplace and can search for what they need most. The search in the best marketplaces usually occurs by keyword or through filters, which allow for sorting all the products.
Once the search is finished, the potential customer can decide to proceed with the purchase, providing the shipping and payment details. The marketplace administration verifies the payment and confirms the order, which is then shipped by the seller.
Vertical and Horizontal Marketplaces: Meaning and Differences
Within the marketplace category, two types can be distinguished: vertical and horizontal. The former focus on a particular niche. Examples of vertical marketplaces include Airbnb in the tourism sector and Zalando in the fashion world, both highly renowned international marketplaces.
What does vertical marketplace mean, then? It means that the products or services distributed belong to the same sector, allowing the marketplace to have niche coherence. In a vertical marketplace, sellers can focus on manufacturing or providing a particular type of product or service, while buyers can find highly specialized and customized products.
Marketplace in the USA: The Latest Data
The marketplace landscape in the USA is dynamic and continuously evolving. Here’s a look at the latest data on marketplaces, highlighting their growth, trends, and key players.
Growth and Market Size
- E-commerce Penetration: The e-commerce sector in the USA has seen significant growth, with online marketplaces playing a pivotal role. In 2023, e-commerce sales accounted for approximately 15% of total retail sales, up from about 14% in 2022.
- Leading Marketplaces: Amazon remains the dominant player, capturing nearly 40% of the U.S. e-commerce market share. Other major players include eBay, Walmart, and Etsy. These platforms have shown consistent growth in both seller participation and consumer engagement.
Consumer Behavior
- Mobile Commerce: There has been a noticeable shift towards mobile commerce, with more than 50% of online purchases being made through mobile devices. This trend emphasizes the need for mobile-optimized marketplace platforms.
- Product Categories: Electronics, fashion, and home goods continue to be the top-selling categories on online marketplaces. However, there has been a growing interest in health and wellness products, groceries, and sustainable goods.
Seller Dynamics
- Small and Medium-Sized Enterprises (SMEs): Marketplaces are becoming increasingly important for SMEs. Over 60% of small businesses in the USA now sell on online marketplaces, leveraging these platforms to reach a broader audience without the overhead costs of maintaining a standalone e-commerce site.
- Fulfillment Services: Services like Fulfillment by Amazon (FBA) have gained popularity among sellers, offering streamlined logistics and enhanced delivery capabilities. This has allowed sellers to focus more on product development and marketing.
Technological Innovations
- Artificial Intelligence and Machine Learning: These technologies are being extensively used to enhance user experience through personalized recommendations, dynamic pricing, and improved search functionalities.
- Blockchain and Security: To ensure secure transactions and build consumer trust, some marketplaces are exploring blockchain technology for transparent and tamper-proof transaction records.
Regulatory and Compliance
- Tax Regulations: Recent changes in tax regulations, such as the South Dakota v. Wayfair decision, require online marketplaces to collect and remit sales tax on behalf of sellers, impacting the operational processes of these platforms.
- Consumer Protection Laws: Enhanced consumer protection laws are being enforced, requiring marketplaces to be more transparent about seller information and product authenticity.
Future Outlook
- Sustainability: There is a growing trend towards sustainable and ethical shopping. Marketplaces are increasingly featuring eco-friendly products and implementing practices to reduce their carbon footprint.
- Expansion of Niche Marketplaces: While major players dominate the market, there is a rise in niche marketplaces catering to specific industries or consumer groups, providing specialized products and services.
Marketplace environment in the USA is robust, with significant growth fueled by technological advancements and changing consumer behaviors. Businesses leveraging these platforms can tap into a vast and engaged audience, while staying abreast of regulatory changes and emerging trends will be key to sustained success.
Multiple Marketplaces: When Logistics Become a Problem
If you are the head of a business and want to position yourself on multiple marketplaces but haven’t thought about managing the available products/services, this could cause bad publicity for your business.
Imagine having eight items available and selling them simultaneously on multiple marketplaces that are not synchronized. Imagine also having to contact one of the customers and announce that their order cannot be processed due to lack of available items. Will that customer be retained or lost? This is why effective management of multiple marketplaces requires external software that allows you to control your online sales ecosystem on the marketplaces easily and safely.
Horizontal Marketplaces: Broadening Your Reach
Horizontal marketplaces offer a vast range of products and services in different categories, such as Amazon, Alibaba.com, or eBay. The meaning of a horizontal marketplace lies in its covering different product sectors without focusing on a specific target of customers.
Advantages of Managing Multiple Marketplaces with Specific Software
Managing multiple marketplaces simultaneously through specific software can bring several advantages:
- Synchronization of the Order Management Process: This occurs through the integration of all relevant marketplace channels into a single touchpoint.
- More Flexible Product Management: You can import the catalog from multiple sources, adapt it according to individual channels, and customize prices based on needs.
- Returns Integration: This can be synchronized across all systems and channels that support them.
- Shipment Aggregation: Shipments can be created and printed in a single click, without managing various procedures on the courier portal.
Integrated Reporting: This guarantees control over the data through a single dashboard.