10 things to know about marketplaces

10 things to know about marketplaces

Are marketplaces the future of e-commerce? At least that’s what some studies suggest.

The role of the operator, stock management, catalogue management, customer relations, pricing policy, challenges… Here is a list of the 10 key points to know about marketplaces.

1. Definition

A marketplace is an online virtual space where buyers and sellers meet to carry out transactions of goods and/or services. It can be, for example, a space reserved for other independent sellers on a large merchant site to which it allows them to complete their offer and income.

Amazon, Rakuten, CDiscount, but also Etsy and MyLittleMarket offer to host sales spaces for several thousand small merchants. Or even individuals by letting them benefit from the functionalities of their ecommerce platform and their traffic potential. These websites are generally hosted subject to the payment of a commission on their sales.

A marketplace thus brings together three types of players: buyers, sellers and the operator who provides the technical and marketing tools.

Find out more by reading this article.

2. The importance of the trust framework

What is the difference between a marketplace and a classifieds site? The two concepts are similar on one point: they bring together sellers and buyers on a virtual space. However, on a real marketplace, the operator must provide “a trustworthy, transparent and secure framework for the various parties by making available tools and services that make exchanges more fluid: online payment system, catalogue and stock management and various guarantees.”. For example, the French site LeBoncoin is not considered a marketplace but a classifieds site.

It should be noted, however, that the marketplaces are free to set their own pricing policy. And that each year the rates are re-evaluated. An increase that can go from 2 to 3 percentage points.

3. For whom are the marketplaces specifically designed?

The marketplaces are aimed at a very wide public ranging from private sellers to professionals. Whether distributors, wholesalers, brands or manufacturers. This can also include major off-line players who have not yet embarked on e-commerce.

The operator, who takes care of the technical and marketing part, thus makes it possible to erase the differences between all the sellers present on a market place and thus puts them on an equal footing.

4. What advantages does a marketplace offer?

For salespeople, the interest of a marketplace lies in the access to an important traffic to increase sales and reach new customers. In addition, the marketplace helps to lower marketing and technical costs. Generally speaking, marketplaces therefore allow salespeople to concentrate on their own business. This means selling the right product at the right price and at the right time.

On the buyer’s side, marketplaces save time in their research. But also savings thanks to the possibility to compare the price of different products more easily. For professional buyers, marketplaces enable centralized, grouped purchases and thus reduce costs.

Find the list of advantages and disadvantages of a marketplace here.

5. Is it necessary to increase its presence on different marketplaces?

According to Philippe Corrot, co-founder of Mirakl, a publisher of marketplaces solutions. It is in the interest of sellers to multiply their presence on all suitable marketplaces. Indeed, there is no interest for a fashion specialist to be present on the Artfinder marketplace for example.

Sellers must also be very vigilant about the quality of service offered by the marketplace operator. If this is not optimal, it quickly becomes expensive to be present on a marketplace.

6. Which part of the catalogue to entrust to them?

Some e-merchants prefer to entrust only part of their catalogue to the marketplaces and reserve part of their products exclusively on their own merchant site.

To avoid the phenomenon of cannibalization in particular. Find all the information on this subject here.

Others, on the other hand, choose to make all their products available on the various marketplaces. Once again, the important thing is to offer the right product at the right price and to be able to provide a quality service.

7. How to manage your stocks?

Good stock management is therefore a key point, especially if a player multiplies its presence on different platforms. Indeed, a stock problem can quickly tarnish the reputation of a seller and thus indirectly that of the marketplace.

The use of flow aggregators is therefore strongly recommended. These tools are often directly integrated into the solutions proposed by the operators.

8. What about customer relations?

Customer relations are essential in a marketplace. It must therefore be infallible. Amazon, whose revenues from the marketplace account for nearly 40% of its turnover, is known to be obsessed with quality. Operators must provide a relevant customer relationship solution to ensure this quality of service and at the same time an excellent image with Internet users. It is thanks to customer relations that marketplaces can build loyalty among Internet users.

But there is another point to bear in mind: it is in the interest of marketplaces to lock up customer information to avoid a loss of traffic on the seller’s site.

9. What pricing policy should be adopted?

Marketplaces offer several sales mechanisms: fixed price, auction or reverse auction.

As for the pricing policy itself, sellers are relatively free and it is above all the law of competition that takes precedence.

Each seller therefore has the choice of lowering his prices in line with those of other sellers. It is then up to them to set a minimum price, beyond which it will no longer be in their interest to sell.

The flip side of the coin: the race for low prices… and by extension the drop in margins for the sellers.

10. What future for marketplaces?

For us marketplaces are the future of e-commerce. They are one of the ways to make e-commerce profitable. Amazon’s profitability would come from the activity of the sales partners present on its marketplace, which would account for 70% of its profitability.

Furthermore, the marketplaces allow a return to the fundamentals of commerce by relying on the fundamental triptych: price-product-service. The marketplaces would thus favour the automatic establishment of healthy competition. It is in the interest of all players to have as many people as possible on a market place. Buyers to benefit from attractive prices but also sellers who, thanks to sufficient size, will be able to take advantage of the traffic drained by the market place.

Powerlab is a major player in European e-commerce and is well aware of the issues related to marketplaces. Since it is connected with more than thirty of them. We could talk to you about this subject for hours and write tons of articles. But it’s much more pleasant to exchange ideas, so don’t hesitate to contact us or leave a comment.

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