The COVID-19 pandemic, and the subsequent factor immobility, resulted in consumer behavior shifting overnight. More and more customers shifted to ecommerce platforms, ushering in a new era of growth for online marketplaces. In the wake of this mass migration, brick-and-mortar stores were faced with a simple choice; either go gently into that good night or build their own digital marketplace.
Platform-based marketplaces emerged as the most elegant solution to this problem. Retail stores could now use their online marketplaces to amplify their reach manifold and tap into previously unexplored markets; all at a fraction of the upfront cost.
It simplified B2B and B2C interactions, allowing platform-owners to showcase their own products, as well as offerings from third-party sellers and vendors. On paper, it held the key to scaling with customer demand while simultaneously solving any potential inventorying problems.
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Why the sudden need for API-driven digital marketplaces?
The short answer is it was not so sudden, it was a combination of several factors that brought the situation to a tipping point.
Digital marketplaces were founded on the promise of a streamlined customer experience. However, the systemic increase of online marketplaces resulted in an oversaturation of available products, services, and tools. With vendors and sellers trading products in multiple marketplaces for maximum reach, it became increasingly difficult to accommodate everything in one platform and ensure a consistent experience for customers and vendors across different marketplaces.
In a rapidly evolving area such as online marketplaces, simply having one is no longer enough. In order to stand out, platform owners now needed to provide value outside of the traditional transactional model. This value came in the form of data; data on the customer journey, their preferences, needs, behavior and more.
Building business platforms using an API-driven marketplace provided businesses with the functionality needed to record this data and create a unified stream of information that can then be used to improve business decisions.
Key Driver of a Modernized Digital Marketplace
By now, I think it has become clear what drives digital transformation in today’s ecommerce platforms: APIs. They enable communication between multiple discrete systems, applications and databases by validating data externally. It’s what allows ecommerce businesses to expand beyond their own tools, people and processes and pursue alternate revenue streams.
Because modern APIs are open-source and reusable, you can replicate them throughout your organization to implement a single source of truth across all operating systems. Depending on your business model, you’ll have multiple back-end systems that require real-time communication to ensure a smooth customer experience. Your infrastructure also needs to interface with external applications to validate payments, KYC, coordinate shipping, calculate tax, etc.
Validating these queries manually or via legacy data management systems would simply take too long, leading to large wait times, desynchronized data sets and erroneous inputs. An API-driven digital marketplace can automate most of these processes, making sure your digital marketplace is agile and always ready to scale.
How does API-based technology work to improve a digital marketplace?
An out-of-the-box digital marketplace solution provides ecommerce businesses with a complete set of tools and services needed to create and manage an API-driven platform. According to Kristin R. Moyer, vice president and distinguished analyst at Gartner,
“Platforms multiply value creation because they enable business ecosystems inside and outside of the enterprise to consummate matches among users and facilitate the creation and/or exchange of goods, services and social currency so that all participants are able to capture value.”
With an API management solution, you can deploy, expose, and replicate APIs at will, resulting in a scalable and flexible platform that can collect data from connected ecosystems by effortlessly bypassing architectural silos.
For example, let’s assume you own an online marketplace that specializes in selling computer hardware. With a digital integration platform powering your online marketplace, you can leverage APIs to process real-time transaction processing, share continuous tracking information, recommend trending products, use analytics to parallelly update prices, and much more.
For your sellers, you can provide data on customer usage patterns, data visualization on purchasing history, price point analysis, etc. It’s a win-win situation whichever way you look at it. Your customers get a personalized buying experience while your sellers get all the data they need to refine their sales strategy.
And that’s not all. An API management solution allows you to expose your APIs to various businesses and customers with proper documentation about how to consume them. This, in turn, allows you to monetize your APIs and create alternate revenue streams.
Let’s assume there’s a parallel website that allows users to virtually build and benchmark computers against certain parameters. By exposing your APIs to this website, they can then showcase the price of various products on your marketplace in real time. This can generate a steady stream of revenue for your marketplace by leading their users to your domain.
Building business platforms using an API-driven marketplace lays the foundation for digital transformation. It can supercharge your existing marketplace to capitalize on a gold mine of data and unlock new revenue streams. However, digital marketplaces are now dime-a-dozen.
McKinsey and Company expects marketplaces to drive 50 to 60 percent of retail revenue growth over the next three years. In the future, building business platforms using an API-driven Marketplace will be your bulwark against exogenous shock and shifting market trends.
However, to justify the ROI, you can’t adopt a trial-and-error approach for out-of-the-box digital marketplace solutions. A seasoned integration specialist, like Torry Harris Integration Solutions (THIS) can help you avoid common pitfalls and turn your online marketplace into a next generation marketplace platform.