November 15, 2022

What is marketplace and how does it work?

The era of marketplaces, that began with the emergence of such popular platforms as eBay, Amazon and AliExpress, provided companies with new prospects of selling their goods to many customers. Let us discover what a marketplace is, how it works, what the difference between a marketplace platform and a simple online store, how people make money on marketplaces and what the necessary conditions for launching your own website of this type are.

Let us consider what it is and how it works:

➩Marketplace essence explained in simple words

➩Main tasks of a marketplace

➩Examples of marketplaces

➩How does a marketplace work: principles and rules

➩Differences between an online marketplace and an online store

➩How do marketplaces make money?

➩Types of marketplaces

➩Pros and cons of a marketplace in terms of development

➩Development features

➩When is the best time to create your own marketplace?

➩Conclusion: how to develop your own marketplace solution

Marketplace essence explained in simple words

A marketplace is an e-commerce platform with many sellers offering their goods to multiple clients. Besides, not only goods can be sold on such a platform, but also services.

B2B or B2C marketplace brings together thousands of suppliers and buyers on a single online platform

Contrary to general opinion that a marketplace is a purely multi-vendor website, on which thousands of suppliers work on equal terms, there are also niche solutions with one company acting as a seller.

The owner of the platform often doesn’t sell anything to the customers of the website, but offers services to sellers who open their stores. The owner earns money with commission on the goods sold, as well as other related services, such as credit or PRO subscription. However, there are also models according to which the platform sells the owner’s goods. These can be corporate platforms for large enterprises with the owner offering non-liquid assets and inventory items remaining.

The answer to the most popular question about marketplaces, which is “What is marketplace?”, is the following: it is something between a hypermarket and a shopping center, but it is Internet-based. It includes hundreds of departments, millions of goods and it can even offer individual boutiques and corners for particular sellers. Unlike a real store or mall, it is way easier to choose and compare different items, their prices and characteristics.

One of the areas gaining more attention in this segment is B2B marketplace where only legal entities, i.e. companies that act as sellers and buyers, can interact.

Main tasks of a marketplace

We have already seen the definition, now we will focus on its tasks. What functions does a marketplace platform fulfill?

Examples of marketplaces

You can grasp how a marketplace functions by exploring the most popular platforms. The examples of these solutions, both in wholesale and retail segment, may be industry-specific or offer a wide range of goods to its customers. The best-known examples are the following:

How does a marketplace work: principles and rules

Let us consider how it fulfills its functions, how its system works, and what the business logic of the project is. We will need several steps:

Work scheme of a modern marketplace

Differences between an online marketplace and an online stores

Before you start earning money on marketplaces, you should compare them to regular online stores in order to find out which model will be more profitable for your company. The following features are the most important to consider:

How do marketplaces make money?

Let us consider the sources of income of a marketplace solution. How can the owner of the platform earn an income?

Types of marketplaces

What types of trading platforms exist, depending on the type of interaction between trade participants, the subject matter of the proposal, and the features of the product stock?

The following types are distinguished according to the type of interaction participants:

According to the proposals, the following types can be mentioned:

The types according to the features of the stock:

marketplace statistics

Pros and Cons of a marketplace in terms of development

Creating and launching your own marketplace has both advantages and disadvantages. Here are some reasons why buyers of such solutions look for their own way to start making money on trading platforms:

We can note one more indisputable advantage for modern companies that seek scaling and increasing investments. Implementing your own marketplace will always have a positive impact on your company’s capitalization, as well as related business benefits. For example, when creating an IPO. If you have your own online store, a marketplace will allow you to discover additional potential for optimizing the business model of the company’s e-commerce. Besides, according to experts, a company’s own marketplace is always more valued than an online store.

However, you also have to take into account the problems that may arise during development:

Development features

Having understood what a marketplace is and how to make money on it, you can make a decision whether to launch your own solution of this type to sell your products or attract third-party vendors. Let us also see what difficulties companies face when creating a marketplace platform:

When is the best time to create your own marketplace?

It makes sense to think about creating your own marketplace when access to existing website becomes unprofitable. It can’t lead a company to success if:

Conclusion: how to develop your own marketplace solution

Although a marketplace is a complex project, during the development of which you must consider many factors, you can significantly reduce the time and costs of creating your own B2B, B2C or C2C platform with the AGORA platform, available on SsaS or On-Premise terms.

The development of a marketplace takes place according to the constructor principle by linking the desired modules with the use of low-code. There are more than 200 modules to choose from. It enables you to quickly change the business model of the project by testing various hypotheses. The development of an MVP takes at least two months, and you will be able to implement the project in a week.

The AGORA e-commerce platform withstands high loads and is adapted to the requirements of complex e-commerce projects. It offers:

The AGORA team will provide the full range of development and implementation services of the project, offer staff onboarding, further technical support, timely updating and modification of the complex website system according to the marketplace model.

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