Say you’re looking to buy a new pair of sneakers, and you decide to go online and visit your favorite ecommerce site. You choose a pair that you like – pay using your preferred online payment method – enter your delivery address, and voilà! Your shoes arrive at your doorstep within the stipulated time. Sounds familiar, doesn’t it? This is primarily the ecommerce buying cycle that most (if not all) of us have gotten all too familiar with. It’s simple, convenient, saves a ton of time, and, lest we forget, it’s addictive!
Ecommerce businesses have been “ruling the roost” when it comes to shopping online. It’s become second nature to consumer interactions, so much so that retailers not adopting the online marketplace model are falling behind significantly. Research conducted by Statista found that a whopping 2.14 billion people purchased goods online in 2022.
Another important statistic found in the same study stated that 63 percent of shopping occasions begin online. This is a significant change in consumer trends by any stretch of the imagination.
So, what’s new?
While ecommerce has been making it big over the last two decades, there has been a shift in trends in the recent past. Digital marketplace has emerged as a dominant trend that is reshaping ecommerce. Also known as enterprise marketplaces or business-as-a-platform; this marketplace model gives businesses the ability to integrate third-party retailers (businesses) onto their platform.
This marketplace strategy allows businesses to widen their perspective reach and offer consumers a more wholesome experience on a single platform. Since its launch, the platform business model has taken the industry by storm.
Retail giant Amazon generated $390 billion in gross sales through third-party transactions; as opposed to $220 through its direct sales channels.
Take a step back
Before we get too ahead of ourselves, let’s take a step back to really understand what digital marketplaces are all about. Digital marketplaces are often confused with ecommerce platforms. The technical nuances of the two are so similar that it often requires a magnifying lens to read the fine print to tell them apart.
But digital marketplaces are by no means a new phenomenon. Most of us, at some point, would have transacted on a platform without realizing it. Amazon and eBay are among the two largest digital marketplace platforms that have been around for over a decade.
So, what is a digital marketplace?
One of the key defining features of a digital marketplace is that it allows third-party vendors/partners or merchants to buy and sell on the platform; thus making it a B2B-B2C commercial model. As opposed to an ecommerce model that caters directly to consumers (B2C).
A digital marketplace can be open, like in the case of eBay, where anyone can join and create their own online store to show-off their wares; or it can be customized like HomeJini, where partners are screened beforehand, and the marketplace admin can control how the partners/vendors function.
Digital marketplace is not limited to retail
Another crucial feature of the digital marketplace is that it is open to brands selling to other businesses through their individual channels. This is done through driving a frictionless omnichannel customer buying experience. A good example could be a travel website selling airline tickets on its marketplace platform and bundling travel insurance through a third-party provider.
Customers can optionally decide to buy the insurance without having to visit the third-party provider’s website, thereby simplifying the buying experience. This allows businesses to potentially generate more growth while making the customers’ experience seamless.
Why businesses are moving to a digital marketplace?
One of the reasons behind this transition is that while an ecommerce site allows a business to display limited product assortment, a digital marketplace can give unlimited product access through third-party sellers. This allows a business to increase its product catalog from a few to a few hundred.
Recent successful marketplace ventures include prominent US retailer Macy’s which showcases product catalogues going into the thousands. Having a broad catalogue of items also eliminates the risk of inventory outages. If any product sells out on the platform, the marketplace admin can simply initiate another vendor to sell in its place.
What’s on the horizon?
For today’s ecommerce businesses, the online marketplace model offers the fastest and most cost-effective growth opportunities. However, your organization’s infrastructure must be equipped to handle the increased demand and market reach. It’s important to balance your brand’s exposure and its reach in order to maintain visibility and value in a fast-growing and competitive industry.
Sometimes, in order to preserve your organization’s unique experience, position yourself as a niche brand and leverage business data effectively, it might be advisable to build your own marketplace. With Torry Harris’s digital marketplace solution, you can leverage tailored marketplace strategies to build a vibrant digital ecosystem.
Also read: 8 Essential Things To Know for Starting E-Commerce Store