What is E-Marketplace?
An e-marketplace, also known as an electronic marketplace, is a type of online marketplace that facilitates transactions between buyers and sellers. The e-marketplace is an online platform that connects buyers and sellers, allowing third-party sellers to market and sell their products on the platform and invoice the customer for purchases directly. It is a segment of e-commerce in which the marketplace owner does not own the inventory or invoice the customer for a purchase. Rather, the e-marketplace serves to present other sellers' inventory to a consumer and facilitate a transaction.
The most common types of e-commerce marketplaces are product and service marketplaces. Product marketplaces allow buyers to purchase physical goods from sellers, while service marketplaces allow buyers to purchase services from providers. Other types of e-marketplaces include digital content marketplaces, which allow buyers to purchase digital content such as ebooks, music, and software; and subscription marketplaces, which allow buyers to purchase subscriptions to online services.
In order to build an electronic marketplace, businesses need to define their target audience and determine what type of marketplace will best suit their needs. Once these decisions have been made, businesses can then start building their e-commerce platforms and recruiting sellers.
Types of electronic marketplace
- Business-to-business marketplaces: Business-to-business (B2B) marketplaces are online platforms that enable e-commerce between businesses. These marketplaces offer a range of features that enable the efficient and secure completion of complex transactions such as requests for quotations (RFQs), requests for information (RFIs), and requests for proposals (RFPs). Features of B2B marketplaces include:
- Vendor Selection: B2B marketplaces enable buyers to easily compare and select from a range of vendors based on performance, quality, and price.
- Transparency: The pricing and availability of products and services are displayed openly on the platform for all parties to view.
- Trading Relationships: B2B marketplaces create opportunities for buyers and sellers to establish new trading relationships within or across their supply chain.
- Revenue Generation: Platform operators can charge a cut on the products that vendors sell, allowing for increased revenue opportunities.
- Secure Transactions: B2B marketplaces facilitate secure transactions with built-in payment gateways and other security tools.
- Customer Experiences: Vendors can focus on providing excellent customer experiences to buyers in order to increase sales.
- Multi-Vendor Marketplace: B2B marketplaces also offer multi-vendor marketplaces, where businesses can buy and sell a variety of products and services.
- Consumer marketplaces: Some examples of consumer marketplaces are Amazon, eBay, Walmart, and Etsy. Amazon is a hybrid electronic marketplace that provides its own products, as well as products from third-party sellers. It offers a wide variety of products, from books to electronics and home goods. eBay allows auction-style sales and buyers to purchase items from sellers around the world. It has a wide range of products from antiques to fashion and even tickets. Walmart is a hybrid electronic marketplace that provides consumers with both its own products, as well as products from third-party sellers. Consumers can purchase items from Walmart in-store, as well as online. Etsy is an online marketplace that offers handmade items and vintage goods. It is a great place to find unique gifts and collectibles, as well as art, supplies, and more.
- Multi-vendor marketplaces: Examples of multi-vendor marketplaces include Amazon, Flipkart, eBay, and Walmart. These marketplaces allow third-party sellers to list and sell products alongside the marketplace owner's regular offerings. This type of marketplace is known for its "one-stop shop" convenience, offering shoppers the ability to search, browse, compare, and purchase a wide variety of products from different brands and categories. Consumers are drawn to the convenience of such marketplaces, as 89% of respondents agreed that they are more likely to buy products from Amazon than other e-commerce sites, according to Feedvisor's 2019 Amazon Consumer Behavior Report. B2C online marketplaces are not the only type of multi-vendor platform. B2B marketplaces, such as EC21, Elance, and eBay Business, focus on a limited range of specific products or services and are used to facilitate complex transactions, such as requests for quotation (RFQ), requests for information (RFI) and requests for proposal (RFP). Examples of early B2B online marketplaces include VerticalNet, Commerce One, and Covisint.
- Marketplace business model: The marketplace business model is an online platform that allows third-party sellers to market and sell their products to customers. It streamlines the production process by allowing manufacturers to sell their products directly to customers, eliminating the need for inventory and stock holding. Marketplace owners are responsible for attracting customers, processing transactions, and collecting a percentage of each sale. Examples of e-commerce marketplaces include Amazon, eBay, and Walmart, all of which offer their own products as well as those from other brands and third-party sellers. The goal of the marketplace model is to generate revenue through the platform, by offering services and outsourcing to buyers and sellers from a particular industry.
- E-commerce platforms: Some popular and reliable e-commerce platforms include Shopify, BigCommerce, Magento, WooCommerce, Wix, and Appy Pie. Shopify and Squarespace are ideal for small businesses needing a quick and easy platform to set up their store. BigCommerce and Magento are better suited for larger firms with high order volumes. BigCommerce also offers an app that allows sellers to reach a broader audience. Appy Pie, Wix, and HubSpot provide drag-and-drop functionality for store owners with limited coding experience. Each platform offers different features and benefits, such as inventory management, order processing, customer service infrastructure, and website building. By investing in the right platform, businesses can potentially increase their sales opportunities and expand their customer base.
- Service marketplaces: The types of service marketplaces can be broadly classified into four categories:
- B2B Online Marketplaces: B2B online marketplaces are platforms that allow businesses to list, market, and sell their products and services directly to other businesses. They allow for the formation of secure, efficient, and cost-effective business relationships between buyers and sellers.
- Online Retailing: Online retailing services marketplaces allow businesses to sell products and services directly to consumers through the internet. These services typically require payment processing and order fulfillment solutions, as well as customer support and after-sales services.
- Services and Outsourcing: Services and outsourcing services marketplaces enable businesses to hire freelancers or independent contractors to complete a specific project or task. They provide a platform for professionals, such as graphic designers, web developers, writers, and virtual assistants, to showcase their skills and bid on projects.
- The Sharing Economy: The sharing economy services marketplaces enable consumers to rent, borrow, or purchase physical goods from other consumers. Examples include Airbnb, Uber, and TaskRabbit. These services reduce waste and increase access to resources, allowing consumers to save money and reduce their environmental footprint.
- App marketplaces: App marketplaces are digital marketplaces that allow users to download applications for their devices. They are different from other types of electronic marketplaces because they are specifically designed for selling, buying, and downloading digital applications. App marketplaces are typically used for mobile applications, such as those for smartphones and tablets, but can also be used for desktop applications. Unlike other electronic marketplaces, app marketplaces are focused on creating a user experience that is tailored to finding and downloading applications. They provide users with reviews and ratings of applications to help them make informed decisions on which applications to download and use. Additionally, app marketplaces are often integrated into the device itself, making it much easier to search, purchase, and download applications. App marketplaces also differ from other types of marketplaces in the way applications are sold. In many app marketplaces, developers can offer their applications either as a one-time purchase or subscription, allowing users to pay a monthly fee to access the application. This is different from other types of marketplaces, which typically require all purchases to be made in one transaction. Additionally, some app marketplaces also include in-app purchases, which allow users to access additional features or content within the application. Finally, app marketplaces are becoming increasingly intertwined with the sharing economy. Platforms such as Uber and Airbnb now have their own app stores, with users able to download and use the applications to access their services. These platforms also offer their own payment systems, allowing users to pay for services from within the application. This has provided a new way of selling and buying services, which is different from traditional online marketplaces.
- E-commerce sites: Examples of electronic marketplaces include:
- Retail: This is when a business sells a product directly to a consumer without any intermediary. Examples include websites like Lululemon and Casper, where customers can purchase products without the presence of a third-party seller.
- Wholesale: This is when a business sells products in bulk, often to a retailer, who then sells them directly to consumers.
- Dropshipping: This is when a third-party manufactures and ships the product to the consumer, rather than the business owning and fulfilling the inventory.
- Crowdfunding: This is when money is collected from consumers before the product is available in order to raise capital to bring it to market.
- Subscription: This is when a customer is automatically charged for a product or service on a regular basis.
- Physical products: This includes any tangible good that requires inventory to be replenished and orders to be physically shipped to customers.
- Digital products: This includes downloadable digital goods, templates, or media that must be purchased for consumption.
- Services: This includes any skill provided in exchange for compensation.
- Social marketplaces: Social marketplaces are online marketplaces where users can buy and sell goods, services, or digital content. They differ from electronic marketplaces in that they are more social in nature and focus on forming relationships between buyers and sellers. Social marketplaces often focus on connecting buyers and sellers within a certain local or geographic area, rather than connecting them with people from around the world. This allows for better customer service and quick delivery of goods. Additionally, social marketplaces often offer features such as social media integration and customer reviews, which allow users to better connect with each other and make more informed decisions about their purchases. Finally, social marketplaces typically have a built-in payment processor, allowing for a seamless and secure transaction process. In contrast, electronic marketplaces are often more impersonal, focusing on connecting people from around the world and allowing for anonymous transactions.
- Wholesale Marketplaces: The characteristics of wholesale marketplaces include:
- Connecting buyers and sellers, allowing third-party sellers to market and sell their products on the platform and invoice the customer directly.
- Allowing shoppers to search, browse, compare, and purchase countless products across a wide variety of brands and product categories.
- Building trust and providing an excellent customer experience for all shoppers.
- Offering their own products and products of other brands and third-party sellers.
- Facilitating complex transactions, such as a request for quotation (RFQ), a request for information (RFI), or a request for proposal (RFP).
- Having the seller improve their visibility through different mediums of communication.
- Targeting a large number of potential buyers.
- Providing a platform for the seller to showcase their product.
- Having the marketplace owner responsible for attracting customers and the processed transactions.
- Having third-party vendors deal with manufacturing and shipping.
How to build an electronic marketplace?
Step 1: Determine goal: The goal of building an e-commerce or online marketplace is to facilitate the sale of products to customers. The main key differences between an online marketplace and a platform are that the marketplace is owned and managed by a third party, while a platform is owned and managed by the company itself. In order to maximize sales, it is important for companies to understand the pros and cons of both marketplace and platform models before making a decision. Additionally, if you are planning to sell digital products, you can use the tips provided to increase your sales. If you need more information or help to establish your e-commerce business, you can read our guide, get a demo, or chat with us.
Step 2: Choose a platform: When it comes to building an electronic marketplace, there are many options available. The two main platforms are eCommerce platforms and online marketplaces. Both of these solutions offer different advantages and disadvantages to consider. It's important to understand the differences between them in order to make the right choice for your business. The most popular eCommerce platforms today are Shopify, Squarespace, WooCommerce, Magento, and BigCommerce. These platforms provide end-to-end solutions that include website builders, accounting and inventory management systems, and customer service infrastructure. Shopify and Squarespace are great for small businesses who need to quickly set up a platform, while Magento and BigCommerce are better for large companies with high order volumes. Additionally, some website builders like Appy Pie, Wix, and HubSpot have drag-and-drop functionality for store owners with minimal coding experience. On the other hand, online marketplaces are great for businesses that want to reach a bigger audience. Examples of online marketplaces include Amazon, eBay, and Etsy. These sites allow sellers and buyers to meet and exchange goods and services, usually for a fee. The main advantage of an online marketplace is the ability to access a larger customer base. When making the decision of which platform to use, it's important to consider the balance between investment and benefits. Shop around, compare different options, and make sure that you choose the one that best suits your needs. With the right platform, you can launch a successful electronic marketplace.
Step 3: Create a product page: Creating a product page for an electronic marketplace can seem intimidating, but with the right step-by-step guidance, it can be done with ease. Here is a guide to help you create a product page for an electronic marketplace:
- Research the products you plan to sell. This includes researching the product specifications, pricing, and availability.
- Develop compelling copy and visuals. Create product photos, descriptions, and any other content that will be displayed on the product page.
- Create a product page. Use the marketplace’s platform to create a product page with the information you gathered in step one. Make sure to include all the relevant product details and visuals.
- Set up payment processing. Configure the payment processor to accept payments from customers.
- Test and launch the product page. Test the product page to make sure all the features are working properly and then launch the product.
By following these steps, you can easily create a product page for an electronic marketplace. Additionally, it’s important to stay up-to-date on the latest eCommerce trends and regulations to ensure your product page is compliant.
Step 4: Set up payment procedures: Setting up payment procedures for an electronic marketplace is an important part of running a successful and efficient operation. Fortunately, Marqeta's modern card issuing platform can make this process easier and faster with its virtual cards and seller cards. Here is a step-by-step guide for setting up payments for an electronic marketplace with Marqeta:
- Determine which type of card is best for your marketplace: Virtual cards are best for larger merchants that have the ability to process card payments through a point-of-sale system, while seller cards are best for smaller sellers that may not have a point-of-sale system and are looking for quick access to funds from their sales.
- Set up virtual cards for merchants: When a consumer purchase is initiated, the e-marketplace can instantly issue virtual cards to pay each merchant individually. These cards can be set for one-time use and for the exact amount of a specific transaction to help mitigate potential fraud. Additionally, metadata can be added to each transaction to help with reconciliation.
- Issue physical seller cards: A physical seller card can be issued to each newly onboarded seller. These cards can be used to transfer funds following each sale or on a scheduled basis — daily, weekly, monthly, etc. Funds become available to the seller for near-instant use.
- Leverage MCC codes and spend limits: To further draw interest and adoption, e-marketplaces can leverage specific merchant category codes (MCC) and spend amounts to build a rewards system on these cards for their sellers. This can enhance their payment experience while improving seller retention and mitigating potential fraud.
Step 5: Promote your marketplace
Step 6: Monitor and optimize your marketplace: Monitor your customer’s behavior on-site: Use data-driven search systems to track buyers’ and sellers’ behaviors and preferences, and use the insights to optimize their experience.
- Personalize emails and navigation: Automate personalized emails based on algorithms designed to fit the customers’ preferences and create user-friendly navigation options.
- Implement a feedback system: Establish a review system that allows customers to give feedback on specific third-party sellers and products to build trust.
- Focus on customer experience: Create an interactive and engaging customer experience on any device to keep customers returning.
- Manage price competition: Monitor pricing and use strategies such as bundling, loyalty programs, and offering add-ons to increase profits while competing with rivals.
- Ensure quality assurance: Monitor the quality of products and timeliness of delivery on the marketplace and create strategies such as customer satisfaction surveys, customer reviews, and customer feedback programs to ensure quality.
Benefits of an e-marketplace
The benefits of an e-marketplace are numerous and can provide great advantages to businesses and shoppers alike. For businesses, e-marketplaces offer increased reach, revenue, customer acquisition, and rapid delivery.
- For shoppers, e-marketplaces provide a wide variety of product options, updated information on the price and availability of goods, trusted vendors, and convenient shopping experiences. Additionally, e-marketplaces often provide lower prices than in-store or standalone e-commerce websites, AI-based pricing technologies to optimize product prices in real-time, and customer feedback to curate an assortment that best fits consumers' needs.
- Sellers and buyers both gain many advantages from using an e-marketplace.
- For buyers, e-marketplaces provide a more convenient shopping experience, allowing them to discover and compare a wider variety of products from multiple brands on a single platform. The competition between sellers often results in lower prices than those offered on in-store or standalone e-commerce sites. Furthermore, buyers can benefit from the reviews and feedback that e-marketplaces collect, which helps them to find the best-suited products for their needs.
- For sellers, e-marketplaces offer an additional sales channel to market and sell their products. Smaller sellers who might not have the resources to build their own e-commerce website can align themselves with larger e-marketplaces to expand their reach and increase their revenue. Moreover, sellers can take advantage of international e-marketplaces to reach a wider audience, as well as exchange quotes with other vendors to ensure standardization.