Marketplaces: all you need to know

E-commerce continues its rapid development on the Internet. According to statistics at the beginning of 2022 eCommerce projects account for more than 15% of the global market. 

Consumers prefer to buy products online, thus giving impetus to further growth of e-commerce. One type of eCommerce business is the marketplace. Many consumers search for products and place orders solely on such online marketplaces. 

What is a marketplace?

A marketplace is an online place for selling products via the Internet. Translated from the English, marketplace means “place for the market,” that is, a platform on which you can sell and buy. There is no need to confuse the notion of a marketplace with an online store. 

Unlike commercial sites, which offer products from one seller, this is truly a marketplace (market + place = marketplace) with different proposals from many brands, companies, and traders. You can compare marketplaces with a simple market, where everyone can explore the range of this or another seller, choosing the best option for themselves. Or, as in a supermarket, you are not limited to one brand of juice. Dozens of brands are on display to decide from.

History of Marketplaces

The first marketplace appeared back in 1995. Now we know it as the world's flagship e-commerce site, eBay. The creator of the marketplace Pierre Omidyar had the goal to unite all collectors on one site so that buyers have access to the antiques of dozens and later hundreds of sellers. 

Today, it's possible to find almost anything on eBay, with more than 164 million buyers from around the world looking for fixtures, household chemicals, clothing, and other products. This leading marketplace was later joined by other global eCommerce giants:

• Amazon;
• AliExpress;
• Alibaba;
• Etsy.

Each such marketplace has its own sales algorithms and organizational policy, which sellers must comply with. Both flagships and marketplaces with medium or even small traffic have fixed commissions and content requirements for commercial projects that are posted on the online platform.

How does the marketplace work?

The marketplace is operated by a single organization or holding company. This company develops policies for commercial relationships within the marketplace. For example, some marketplaces provide access to vendor contacts, while others prohibit the exchange of personal information to prevent the purchase and sale of products outside the online platform. 

It's the same with advertising. Some marketplaces allow off-site marketing campaigns, while others insist on internal promotion only. There are also hybrid systems, which online store owners should familiarize themselves with in advance. Of the common characteristics that are present in each marketplace, the main seven points should be highlighted:

1. Catalogs: it is possible to filter all product items according to price, theme, and other parameters. For example, when searching for a dress on many sites you can specify the size, brand, color, length, and material, then choose from the proposals of found models from different sellers. 
2. Registration form: sellers and buyers will have a different questionnaire. The questionnaire must be passed to use the marketplace according to the organization's policy. 
3. Personal accounts: both users who are buy and entrepreneurs who sell have accounts with information on orders and payments. Buyers can add the items they like to their favorites or go straight to the cart. Sellers, in turn, keep track of orders, reservations, etc. in their personal accounts.
4. Statistics: metrics are available for sellers to track views, sales, and other parameters for a certain period of time. 
5. Payment and delivery: online stores can specify all available methods of payment (cash, cashless, cash on delivery, payment to an account, etc.) and delivery (post, courier, pickup, etc.). 
6. Dispute Resolution: arbitration service which helps to resolve disputes between the seller and the buyer. Many marketplaces offer secure transactions in which a refund is guaranteed to the customer in the event of an order discrepancy, defect, or other negative experience. 
7. Reviews: customers have the right to leave a review about the store to share their impressions of the order (fast/long delivery, poor/good quality, polite communication, etc.). For example, the Ukrainian marketplace Prom.ua offers response templates to save time for users. 

In general, the operating principle of marketplaces is the same. The site brings together numerous online stores and consumers. The seller places product cards, which are displayed along with other offers by product category to potential customers. However, it is worth bearing in mind that there are several types of marketplaces. They differ in the scope of the target audience and business models. 

What is a vertical, horizontal, and global marketplace?

If we are talking about the target audience, all marketplaces can be divided into three types – horizontal, vertical and global. The latter is in particular demand. Global marketplaces have no restrictions on niches and categories. Buyers can find practically anything at these web resources. Global Ukrainian marketplaces are Prom.ua and Rozetka.

The vertical ones, in turn, offer products from different Internet manufacturers, but of the same category (clothing, perfumes, electronics). For example, ALLO offers gadgets and accessories from other sellers. But it is impossible to place here if your online store sells underwear.

Horizontal marketplaces work in one direction, but with several niches at once. For example, IPOPOKIDS is a Ukrainian platform, which is not limited to the sale of children's toys from various vendors. It can accommodate online stores that sell clothing, utensils, and transport for children. 

Marketplace types according to a business model

There are three business models according to which not only online marketplaces, but all commercial projects work. eCommerce sites can be B2B (business offers something to the business, for example applications, programs, wholesale purchases, etc.), B2C (business to consumer, that is the most common model for marketplace), C2C (consumer offer their goods for sale or barter to consumer).

What is the difference between a marketplace and an online store?

If the online store is a commercial project of a single company, then the marketplace is a trading platform with many offers from different brands and sellers. So, you shouldn’t confuse these two concepts. One business on a site or hundreds on one web resource is not the same thing. 

An online store is just your brainchild. You have competitors on other similar niche sites, but if a user comes to your web resource, you need to do everything you can to ensure that the person leaves with only a purchase. The logic of marketplaces is similar, but the competition happens right inside the marketplace. You have to have different marketing strategies to successfully promote products here and there.

Pros and Cons

Everyone involved in the buying and selling process can benefit from marketplaces. Buyers find it convenient to search for something specific, counting on a wide assortment and not limiting themselves to one online store. All items in a category that interests the consumer can be sorted by price, color and other characteristics.

If we discuss the advantages of the marketplace for brands and commercial project owners, it is safe to highlight the following pluses:

• Growth in reach. Growing traffic means more sales, a larger customer base, more recommendations, etc. Marketplaces are usually at the top of search results, which means that your commercial project will be in the sight of millions of people.
• Brand Promotion: online store becomes better known through a new external channel for conversion.
• Promotion of online stores from scratch: even if you do not have a ready-made customer base, sales from the marketplace can start from the first day of the seller's posting on the site.
• Entering new markets: local stores have a limited target audience if they are not placed online and do not have their web resource for online sales. You can conquer not only domestic markets, but also try to sell products worldwide on global marketplaces.

Of the disadvantages, you can highlight the high competition by category. There is always the risk that another brand will offer a similar product item at a reduced cost. To achieve this, a system of discounts should be developed, the catalog should be constantly updated, and the descriptions in the product cards should be kept up to date.

Marketplace: Examples of Ukrainian trading platforms

If you already know about Amazon, Ozon, eBay, perhaps the examples of Ukrainian marketplace web resources will be a kind of discovery. At present, the Ukrainian flagships in e-commerce are trying to scale by transforming themselves into marketplaces. For example, ALLO and Comfy already sell goods from other sellers on their sites.

The well-known Rozetka marketplace, which previously offered products only from its own company, is also doing the same. Ukrainians are also well aware of Prom.ua, OLX, Bigl, IZI. These sites have B2C and C2C business models. Let's consider more examples of marketplaces in Ukraine with different traffic. 

Marketplace Epicenter

A leading chain of building materials has launched its marketplace, where all interested sellers can place their products and increase online sales. The reach of the Marketplace is impressive, it’s about 17 million users visit the web resource every day and make purchases.

The convenience for online stores is there is no subscription fee. Sellers only pay a fixed rate for orders, which is stated in the contract. The marketplace also provides a call-center service for timely processing of orders.

Facebook Marketplace

Many people consider the new Facebook option as an analogue of OLX. But that's not quite true because it has audience settings and ad promotion. The seller chooses a package of services and pays for them in the marketplace. Additionally, online retailers can improve their listings with:

• Auto-add photos;
• Optimization of content (hashtags, etc.);
• Searching for audiences by location;
• Automatic customization of headlines, price, and design.

Moreover, this marketplace is distinguished by advanced statistics for commercial projects. Sellers can monitor user activity almost every minute using the service's tools.

Mriyars Auto Parts Marketplace 

This is a Ukrainian niche marketplace with a large choice of spare parts for various car brands from hundreds of sellers. The marketplace sells items of Mriyar brand as well as the ones from the online stores of auto parts from all over Ukraine. A contract is made with the sellers who want to be placed on the trading floor, according to the company's offer.

The platform contains all the tools for the design of product cards, including templates for specifying methods of payment, delivery, discount offers and more. Users can sort auto parts according to price, brand, car brand and other parameters.

What is the difference between most popular marketplaces?

Do not limit yourself to the e-commerce giants Amazon, Aliexpress and other platforms. For example, European marketplaces are usually niche and with less coverage. Despite the global reach of many foreign marketplaces, they are often hampered by the language barrier and difficulties with the delivery of goods.

As a rule, Ukrainian online stores prefer to be located on Amazon and eBay. Because here there is a lot of traffic and there is a chance to get customers abroad. However, many European and American sellers will always be favored by consumers from abroad, if the products are almost the same.

The best way for the Ukrainian commercial projects is promoted through marketplaces in America and Europe if there are unique commodity items (handmade, antiques, collectibles, etc.). But without a brand and without an online store with a certain reputation won’t be easy to untwist. Therefore, it is important to begin with the positioning of the Ukrainian market before storming overseas.

How to make money in the Marketplace? The step-by-step instruction

First, register your business. Also pay attention to branding because the name, logo, and design of the online store with an attractive “stuffing” (assortment, company history, values) are significant. It should be understood that a commercially distinctive project derives additional value from the marketplace. It's like a way to get even more customers, sales, and profits.

There are cases where a marketplace becomes the startup for a store. But this is more the exception to the rule. Most likely, the products were unique or high-priced at a low price. It is better to be guided by a standard algorithm of actions:

1. Business registration
2. Development of the brand
3. Creation of an online store
4. Development of the product line, filling the online store
5. Launch online trade through the store
6. Recruitment of the customer base
7. Accommodation in the marketplace

First, you will already have a clear idea of the product cards, and articles, work with suppliers. You'll be able to integrate your business into the marketplace much faster with the experience you have. Plus, listing on marketplaces will require time and money resources. 

Be prepared to invest in the promotion of your online store when it comes to the marketplace in Ukraine. There are few places where you can get free authorization or access to the key options of the service. To start working with marketplaces, an online store needs to:

• Register on the chosen platform. Study the company's policy and choose a package of services for promoting products within the site.
• Draw up product cards. Add descriptions, photos, and headings. Optimize content for search engines and for the search line on the trading platform (what people search for most often, for example, “black pumps shoes").
• Organize the shipment of goods to the warehouse complexes of the marketplace or place products in their own local warehouses.
• Expect orders from customers. Work with requisitions. Carry out communication with potential customers.

Next, take care of a flexible system of discounts, multiple delivery options by region for the convenience of buyers, and methods of payment for the order. After the online store sends the product to the customer and waits for feedback. It is also important to work with feedback in a timely manner – to respond to positive feedback with gratitude, and to smooth out negative ones and prevent similar situations in the future.

Final thoughts

Clearly, marketplaces for online commerce are powerful weapons. Merchants can increase their reach many times over thanks to marketplaces. But it's also essential to understand that marketplaces are more of an add-on to your business to generate revenue from additional channels. 

You should not start by placing ads on a marketplace without an online store and brand. Many Ukrainian and foreign marketplaces have restrictions regarding sellers, where having a website, a ready-made product catalog and a registered business are the main points.