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What is an online marketplace? Top benefits for vendors, customers, owner, investors

Arateg
Arateg is a custom software development company based in Minsk, Belarus. We take care of tech, so you can focus on core business.
・3 min read

Online marketplaces have become very popular over the past years, especially during the COVID-19 pandemic. Providing companies with the possibility to reduce start business costs and reach a large audience, they generally require just to create profiles and publish information about products or services.

Although many people believe that this type of platform is only about online retailing, it is widely used across different sectors, for example, healthcare and education. Launching a marketplace is a winning idea for startups that aim to connect vendors with customers and generate revenue through system monetization.

This article describes the primary benefits of a marketplace. We will also consider critical differences between e-commerce stores and marketplaces.

What is an online marketplace?

An online marketplace is a website or application that connects consumers with vendors that offer their products or services and provide related information.

There are four core features that define a marketplace:

1) Customers can purchase from numerous third parties on a single marketplace.

2) Users can make payments and orders via the same platform.
The creator of a marketplace usually doesn’t offer any kind of services and doesn’t have a warehouse to store inventory but is responsible for processing transactions.

3) The owner generally invests in online marketplace development to further generate profit through monetization. For instance, it can charge organizations a fee/percentage of sales for using a marketplace as a convenient source of achieving business objectives.

4) Therefore, a marketplace is not only about online retailing and e-commerce but can comprise various industries such as e-learning, travel, healthcare, insurance, and home rental.

Food and hospitality also comprises a lot of marketplace platforms worldwide. Here at Arateg, we have recently built two marketplaces for organizations operating in this sector: an online table booking system for restaurants and a mobile app for food pre-ordering that refer to marketplaces.

Upwork, Fiverr, Uber Eats, Coursera, and Udemy are examples of popular marketplaces, though they don’t offer physical goods for sale.

Examples of marketplaces by industry:

1) E-commerce — Amazon, Walmart, eBay, Alibaba.com, Wayfair, Newegg, Bonanza, Lamoda
2) Home rental — Airbnb, Booking.com
3) Freelancing, creative services — Upwork, Freelancer, Fiverr
4) Legal services — Avvo
5) Healthcare — Zocdoc
6) E-learning — Coursera, Udemi, Study Academy, One Education

There are many classifications of online marketplace platforms. For instance, they can be divided into business-to-business (B2B) and business-to-consumer (B2C), which is one of the most common categorizations.

What is a B2B marketplace?

A B2B marketplace brings together providers and customers in one place. Vendors deliver products—generally in bulk—and services to other businesses, for instance, retailers, wholesalers, manufacturers, logistics companies. The main advantage of this software solution is the facilitation of the procurement and sales processes, as well as increasing transparency of financial deals.

A B2B trading system, B2B procurement platform, B2B catalog refer to this marketplace type. Amazon Business, Alibaba, eWorldTrade, Made-in-China, Thomas, Global Sources, IndiaMart are examples of B2B marketplaces.

While B2C marketplaces still prevail in the market, B2B platforms are also gaining popularity. Forrester reports that US B2B e-commerce transactions are anticipated to reach $1.8 trillion by 2023, accounting for 17% of total B2B sales in the country (compared to 12% at the end of 2018).

Aiming to capitalize on global trends, many startups are developing B2B marketplaces to assist organizations in automating sales, procurement, and order management operations. To meet B2B needs, giants such as Amazon and eBay have started delivering various goods to businesses.

What is a B2C marketplace?

A B2C marketplace enables vendors to deliver services to individual customers. As this platform enables organizations to reach a large audience while requiring lower upfront investment, today it is one of the most popular business models. Airbnb, Booking.com, AliExpress, and LiquidSpace are examples of B2C marketplace websites.

At Arateg, we created multiple B2C marketplaces. For instance, our team built an online pharmacy marketplace for a healthcare company that now connects over 1,500 pharmacy chains with users who want to purchase medical goods.

The system provides detailed reports on the range and availability of medicines, as well as comprehensive data on sales and user shopping behavior. Thanks to this solution, vendors can easily identify consumer preferences, prepare sales strategies, make demand and supply forecasts.

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Discussion (1)

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Luke Miller

Hi Arateg! Great article.

Similarly to the freelancing services that you mentioned above, AskFora is another platform! I prefer to use AskFora when freelancing because it does a great job with handling the administrative aspect of freelancing that helps avoid overhead that is unnecessary so that I may spend more time with my clients to be focused and innovative.