Marketplaces what are they?is it worth it to sell on the marketplaces?

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Nowadays, due to all the changes and phenomena we have gone through, adapting to new market demands and trends is important, but we do not always have the tools or resources to achieve this easily, quickly and economically.

For brands and companies it has become essential to be able to sell in a digital store, the problem is that not all of them have their own website or platform to do so, that is why there is an alternative, to resort to a Marketplace.

But maybe you are wondering what is a Marketplace and how does it work, well, don't worry, here we are going to explain in more detail what Marketplaces are and their characteristics so that you can get to know this alternative.

A Marketplace refers to a broader concept of online sales, in this platform different stores can advertise and sell their products and services, thus offering a range of options to the customer. In other words, it is a kind of online shopping mall. 

You should know that in reality this business model is not new, nor is the concept itself, since a Marketplace is, in short, an intermediary between sellers and customers. For a brand or company, having a Marketplace means having an online sales channel with which it can reach customers anywhere in the world.

Currently, the popularity of these platforms has been increasing, since in the same website the user is able to find and compare different options for the same product or service without having to travel or consult different web pages. 

Types of Marketplace

Considering what a Marketplace is, you can currently find up to three types:

  • Product marketplace: The platform is used to sell and buy any type of material good (e.g. Amazon).
  • Marketplace of services: This type of Marketplace offers services such as hotel reservations or ticket purchases, among others (e.g. AirBnB).
  • Labor marketplace: When the platform is used to connect companies with professionals or vice versa (e.g. Freelancer).

And within the previous groups, two others can be distinguished:

  • Generalist marketplace: Products from different categories can be found. Only market leaders can stand out in this type of market.
  • Vertical or niche marketplace: They specialize in a specific category. They are easier to position at the cost of having a smaller market.

What are the advantages of a Marketplace?

For users: 

  • It represents more practicality because they can see on the same website numerous offers and promotions from various vendors. Thus, it is possible to compare and choose the best features and the best price easily.
  • You can shop at several different stores and make only one payment, instead of going through multiple checkout processes at several sites.
  • You have information about product availability and stock in real time, allowing you to make better purchasing decisions.
  • Due to the volume of sales that Marketplaces have, they usually have very competitive agreements with parcel delivery companies, which lowers the cost of shipping, which in many cases is free.
  • There are more comments on the products purchased on the platform, and this information is very useful and valued for the future buyer.
  • Products available 24 hours a day.

For retailers:

  • You don't need to have your own online store since you can sell your products or services in a Marketplace without investing in the creation of your own ecommerce.
  • It is synonymous with collaboration. By advertising their products, companies (large or small) gain more visibility and increase sales.
  • It is cheaper, since in most of them the investment is zero, you only have to pay a percentage of what you sell to the marketplace.
  • You generate more trust, especially in the early stages of your business, when no one knows it and do not know if you are reliable or not, and as soon as they know your brand, you will have more chances to directly search for your own ecommerce.
  • You reach more people, since a good Marketplace will be positioned in the main search engines, which means that your products and services will also be positioned, since they invest a lot of resources in it and in advertising. 
  • You should consider that by being on the same platform as a multitude of brands that offer complementary products to yours, if a user searches for something complementary to what you offer, your brand will appear as a related product, which gives you more chances of being seen and having sales.
  • Who said that if you already had your own online store you could not take advantage of the benefits of the Marketplace? In this case you can make use of these platforms to enter other markets minimizing the risks and it is even a great option as a complementary sales channel, where you can exhaust your stock or sell those products that, for some reason you are not interested in selling in your own channel.
  • Payment, shipping and stock management can sometimes be outsourced to marketplaces. Each one is different and offers different options, but it can be a significant saving of resources to be able to derive these aspects.
  • The Marketplace can be an export channel for those companies that want to sell abroad, eliminating the barriers of technical and legislative preparation, language or difficulties in finding a local partner.

Disadvantages of a Marketplace.

Of course, like everything we always have advantages and disadvantages so using a Marketplace to sell also has a downside.

  • Someone else decides the rules of the game and if you don't follow them, they can make you disappear at any time.
  • You also choose the order in which you display the articles, so appearing above your competition is not up to you.
  • Your competition is also present. So it's up to you to develop strategies that allow you to differentiate yourself from the rest. 
  • The fact of being among a multitude of products does not allow you to customize those of your own brand, because they are all offered under the same pattern, so that your brand will go completely unnoticed among the rest.
  • The profit margin is reduced by the price war with direct competitors and because the portal keeps a percentage of each sale you make.
  • Your customers are not your customers because, even if someone buys your items, they are actually customers of the Marketplace, and it is he who manages the whole process, he is also the one who has their email address, who knows how they behave within the portal, etc.
  • The purchasing centers of this type reserve the right to accept or not accept certain vendors or products at the convenience or inconvenience of the marketplace.
  • The fixed costs will increase if you outsource the storage of goods, delivery times and returns.
  • The Marketplace receives the income from the price of the product at the moment the customer makes the payment, but does not pay the amount to the seller until weeks or even months later.
  • With all the user behavior analytics, if you see that a product is a big hit with the public, you are likely to explore suppliers to be able to sell it under your own brand.
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