An online marketplace is an eCommerce store that sells a wide variety of products from many merchants to customers. While online marketplaces have been around for quite some time, the volume and variety of marketplaces is surging as businesses increasingly rely on their digital strategies to drive business.
Retailer Versus Marketplace
Amazon is a great example since it's arguably one of the most recognized retailers AND marketplaces.
- Retailer: Amazon purchases inventory at discounted wholesale prices, holds the inventory in Amazon fulfillment centers and sells it through their online store. They are not the manufacturer, rather the retailer who carries a horizontally wide set of goods.
- Marketplace: Amazon has a second aspect to their business called Amazon Stores, where any third party seller can create a store inside the Amazon marketplace and sell their products via Seller Central. This is the marketplace model—Amazon provides the traffic and transaction system; sellers manage their inventory and handle fulfillment.
The Appeal of Marketplaces
For manufacturers/brands: The variety and quantity of products you offer can lead to more visitors to your website—this exposure is one of the advantages for brands wanting to sell in an online marketplace. Here are a few things that merchants value about marketplaces:
- Access to customers and traffic
- A new sales channel
- No need to build the technology on their own
- Can start selling online very quickly
- Better margin than selling wholesale
For customers: Customers appreciate that they can shop products from a wide range of merchants within the marketplace and complete a simple checkout process without having to visit individual merchant storefronts. Marketplaces can be built around a vertical, or product line of interest to a group of customers, for example our client Ivyside who built a CBD Marketplace.
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