How Does E-commerce Marketplace Model Work? How Can It Benefit My Business?

Written by Team EMB

November 24, 2022

E-Commerce
How Does E-commerce Marketplace Model Work

Online marketplace can be seen as a bridge between sellers and consumers. They can function without any inventory of their own and work as a facilitator between the two parties for transacting products, services, or payments. If you are worried about not knowing much about the e-commerce marketplace, you should remind yourself of platforms like Airbnb, Amazon, Uber, eBay, or Etsy. Along with a pool of products to choose from, the marketplaces make shopping convenient for you. 

Uber makes transport available to you, and the services are provided as per your convenience. These platforms and many more like them have become some of the world’s most successful and renowned businesses. And all of them have one thing in common, among many other similarities: they work towards making the consumer’s life easier.

Types of E-commerce Marketplaces

Marketplaces benefit sellers by enabling them to improve their services and provide consumers with appropriate, high-quality goods and services. They are often divided into four categories: horizontal marketplaces, vertical marketplaces, global marketplaces, and hybrid marketplaces.

  • Horizontal marketplaces present a wide range of products with nearly identical service characteristics. For example, Myntra can offer consumers products ranging from clothes and accessories to electronics.
  • Vertical marketplaces narrow their focus to one type of product category, offering several services concerning it. For example, the sneaker marketplace StockX looks after various aspects like authenticity and quality checks of the product, handles the payment process, and manages transportation. They eventually become a trusted source for interested customers.
  • Global marketplaces have zero limitations. They offer a variety of products and services from varied suppliers. Even LinkedIn is a global marketplace because the platform connects contractors and employers with companies globally.
  • Hybrid marketplaces have their own products. They also trade in products belonging to other companies. The New York Stock Exchange (NYSE) is an example of a hybrid market.

How Would an E-commerce Marketplace Benefit Your Business?

E-commerce Marketplaces have always been thought of as a suitable future prospect. And they are becoming more relevant than ever today. The number of visitors is growing every day. For example, Amazon India attracts approximately 295.8 million visitors every month. 

And, since COVID-19, people have become more used to home deliveries. People have grown comfortable ordering online rather than going to physical stores. Even groceries, something that is always demanded as “fresh,” can be bought on Flipkart and many other platforms. Amazon and Flipkart are outstanding examples of how e-commerce transforms the shopping space.

1. E-commerce marketplaces function at lower costs.

E-commerce marketplaces are online stores, and launching them is less costly than opening a physical store. There are no costs for furnishing your outlet, rent charges, or hiring a major workforce. And online medium has also made marketing and advertising very inexpensive and more efficient. Creating social media posts is cheaper than producing advertising banners. Even the online portal is automated, which saves money and eliminates the need for constant paperwork. And the last one: it saves you the cost of a middleman because the marketplace establishes a direct connection between buyer and seller.

2. They offer flexibility.

It does not take months or years to open an e-commerce store. A business can open in a matter of days. You do not have to find a physical space or engage in conversations about the lease and construction of the property. And it provides you with enough flexibility to customise the display of the product or add and subtract from its range quite easily. When it comes to speed, it outperforms retail or wholesale stores quite easily. It is one of the key features of e-commerce.

3. They make the purchasing process much faster.

If a customer had to visit a physical store to buy something, they would have to plan a schedule and free their time to do it. Even if that much effort was for just one item, an e-commerce marketplace offers them a store-like experience on their mobiles, laptops, and other electronic devices. It saves them money on travel and allows them to buy things with a single tap from the comfort of their own home or office. And this service is available to them 24/7. As a seller, you do not have to worry about losing sales due to your store’s closing time, and a seller does not have to worry about their needs being unmet due to the stores being closed.

4. They promise you an increased profit margin.

As previously stated, it is very inexpensive to set up and manage an e-commerce store, especially when you compare it with the cost of setting up a traditional store. If you have an e-commerce store, you would be provided with a dashboard that would provide you with invoices and reports about profits and losses. And it saves you money on any extra labour or marketing campaigns. If your target audience is online, e-commerce marketplaces can help you reach them by providing a large number of impressive products and a detailed product catalogue. 

The dashboard also helps you manage your finances and records them for future reference. Another reason for increased profit margin is the elimination of any closing time for your store. Because they are available to the consumer 24/7, your sales happen at every point in the day, and you don’t lose out on someone just because of a lock on your physical store. And the best part? You could sleep all night and still make a sale at your store.

5. They provide the customer with a detailed product catalogue.

An e-commerce platform provides consumers with a detailed overview of the products of their choice by maintaining complete transparency and listing all relevant details. There are reviews of other people made available to the customers, along with similar items matching their interests. The product catalogue also comes with data sheets and other crucial details of the company’s products and services.

The specifications, utility, and characteristics of the product are comprehensive. When purchasing food items, you learn about what is edible, the details of the ingredients, and other extra details otherwise missing in retail stores. So many details and reviews help build the customers’ trust and promote your business further.

6. They create a wider customer base for you.

Having a physical store limits your customer base because of its limited accessibility due to its location. And only the residents living in the neighbouring areas visit. But an e-commerce store is open to people from all areas and is not limited geographically or linguistically. Amazon is accessible to people in India as much as it is to USA or UK residents. Your business can reach a diverse group of people through the internet, especially social media. And your online presence can act as your portfolio for the consumer, inculcating trust and authenticity in your brand.

7. They make it easier for you to collect consumer data insights.

Your business can easily record the customer data online and analyse it to determine the improvements that could be made to achieve more profit. Customer data is crucial if you wish to keep tabs on your customers’ experiences. Having it handy is a continuous feedback mechanism where you have suggestions and insights to act upon with the strongest marketing strategies. It is an excellent way to reinvent or improve your customer’s experience. It can provide you with information like how often a buyer purchases your products or views items on your portal.

Customer preferences are critical, and an e-commerce store can monitor and evaluate how often a buyer purchases products or views other items in his portal. Such extensive studies of your customers are hard to find in a physical store.

8. E-commerce stores are easily expandable.

With popularity comes responsibility. If a physical store experiences a customer boost and needs expansion, the overhead cost of extra floors, decorations, and property can become a roadblock. Moreover, insufficient staff can be a problem while scaling up as well. All you need to expand your online marketplace is digital tweaks based on customer data, technological advancements, additional inventory, and storage space, depending on your business. And storage space is less expensive than storefront space. Doing business online also eliminates the cost of opening multiple brand chains and connects you globally to everyone.

9. E-commerce platforms function through targeted marketing.

When doing business online, you do not have to pay to sell to everybody. It is highly expensive, and sometimes the sale might even fall through. Based on your business, you need to decide what kind of audience you are catering to. The marketing budget would be customised according to the specific customers interested in your products and services. The advertisements would reach out to the ones you choose to sell based on demographic details, hobbies, and keywords. This process promises a better ROI when compared with the profits made by a physical store.

The Last Word

Businesses and customers both look for consistency. And e-commerce marketplaces are built to provide that convenience. With a few cautions that the online world requires, you can cater to a niche audience with niche products and services and increase your chances at greater profit margins. It is growing so fast that it is definitely worth a try.

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