Multi-channel marketplaces have opened up many new ways for businesses and individuals to transact capital, goods and services.
Markets have helped solve economic needs and problems and have been a cornerstone of our way of life with digital platforms enabling any new marketplaces and opportunities for generating value for participants. This article presents an introduction to marketplaces and the wide variety of business models that have emerged.
Glomodus is experienced and active in many types of marketplaces, providing consultants who work directly with Corporates to develop new digital market strategies and capabilities, or mentoring teams to grow their idea into funded startups. We also actively seek marketplace partnerships to develop businesses and create new benefits for our clients.
There are many marketplace categories, based on the main customer types they address:
- B2B: Wholesalers and businesses interact with each other offering specialist services or products in bulk. The key value they provide is the ability to automate simple and complex sales processes such as RFI and RFQ while improving transparency and transaction safety.
- B2C: Customers can find, compare and purchase directly from businesses online. Features and methods support a wide variety of simple or complex products and services.
- C2B: The public or an end-user provides a product or service to companies and organisations.
- P2P/C2C: Peer to peer also known sometimes as Consumer to Consumer. They provide a means of exchanging products and services with others, relying heavily on reviews to establish credibility.
- Hybrid: Platforms have combined all the above though it creates new challenges. A good example is Amazon with a successful B2C platform but also caters for B2B with Amazon Business. EBay is similar starting as a P2P/C2C platform and emerging as a B2C with diverse sellers.
Let’s explore the diverse marketplace business models:
|Business to Business (B2B)||Commission based|
Directory listing fee
Lead Generation fee
|Business to Consumer (B2C)||eCommerce products|
|Consumer to Business (C2B)||Advertising model|
Pay per project/hour
|Peer to Peer or |
Consumer to Consumer (P2P/C2C)
Vertical or Horizontal
A vertical marketplace specialises in one sector. For example, OpenDoors provides a high-quality real estate purchasing experience, with features totally focused around simplifying the real estate market. In contrast a horizontal. Often, marketplaces start-off vertical and then move progressively horizontally once their brands develop awareness and credibility. For example, Uber now provides a food delivery service, as well as its original car-sharing service. A lot depends on the chosen brand, for example, OpenDoor may struggle to move into other sectors other than real estate.
A successful marketplace opens new economic and community benefits, but it faces multiple quite unique challenges, which it must overcome to survive.
|Doesn’t solve a real problem||A common problem for many startups, it’s particularly challenging for marketplaces. A great idea may not gain traction in practice or generate other unforeseen problems for participants.|
|The focus is too broad (initially)||Attempting to care for all possible products and services that your sellers or buyers are interested in, risks diluting your expertise and ability to scale. It’s counter-intuitive but a narrow focus initially is often more effective to create liquidity.|
|Strong competition||Expect competition to rise and attempt to knock your platform’s chances of growing, either through traditional broker-type business or simpler use of technology. A clear strategy is needed to capture multiple customer segments.|
|Lack of trust & brand awareness||Establishing first-choice interest and trust to turn your TAM into real customers is a top priority of every marketplace. The problem is how to develop this from a zero base. Networks effects, partnering and relevant marketing around intent and topics (e.g. SEO, Social, Content, Features) can be competitive.|
|Chicken and egg growth||Focusing on just one side of the market is not enough. You need to attend to both buyers and sellers, and potentially more participants in your marketplace. The question arises, how do you attract either side of the market when one is absent?|
|Disintermediation leaks||By bringing buyers and sellers together on one platform, the risk arises they will continue to trade outside of your platform. The incentives and benefits need to remain high enough to discourage such actions.|
|Development plans||The ability to reach critical mass and then scale fast requires careful consideration of technology choices. Open-source tech, custom development, SaaS, and serverless are all available options, but plenty of room to make the wrong choice.|
|Lack of actionable insights||The diverse customer segments, multiple customer service touchpoints, and the multiple channels and different goals for the supply and demand side, can make tracking data and analytics about users very difficult.|
All of these problems will compound fundamentally the user experience, retention rates, growth, revenue and profits. For strategies and plans on how to overcome these challenges, please contact us. We’d like to discuss your ideas and initiatives and invest in understanding your vision and goals before we suggest ways we can collaborate,