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Marketplace eCommerce: A Powerful Business Model

The Potential for Growth

Marketplace eCommerce Implementation

In 2013, Amazon’s net sales amounted to $74.45 billion. In 2016, it was $136 billion, and in just Q4 of 2019, $84 billion. The trailblazing company has been called a “disruptive force” in the retail world by Morningstar Analysts, and its growth potential only increases.

Companies like Amazon, NewEgg, Etsy, and eBay have had massive success while running on a marketplace eCommerce business model. This multichannel model, when well executed, has proven itself to be one of the most profitable and popular in web eCommerce. Marketplaces facilitate sales for third-party vendors by allowing them to sell products in one online marketplace. The entire marketplace runs on the same software infrastructure, enabling all sellers to distribute their distinct goods under the umbrella of one website.

 

There's Power in Numbers

Benefits and Risks of an Online Marketplace

With a quality enterprise software solution in place, marketplace eCommerce can benefit all parties in a number of ways:

  • Business operator
    A marketplace allows the business operator to take a commission on items that vendors sell. This can either be in place of or in addition to the marketplaces's own products, exponentially increasing profit opportunities.
  • Vendor
    Smaller stores without the budget or marketing capability to establish their own eCommerce website and software can also benefit from joining a marketplace. By aligning themselves with a larger, known business, these stores can gain visibility and, in some cases, utilize the marketplace’s fulfillment options.
  • Consumer
    Marketplace customers benefit from seeing aggregated options on a single website and are empowered to find the most reasonably priced or highest quality product.

 

Dealing with Sellers Mistakes

Challenges of Marketplace eCommerce Models

Though marketplaces have their advantages, this model also presents complex challenges. In large marketplaces, price competition can pose a problem. Vendors can choose to compete for the lowest price, which may serve the customer but could lower profits for both the marketplace and the vendor.

Quality assurance can also be an issue. Marketplaces may not always have control over the quality of products or timeliness of delivery. One way to combat this is to establish a review system, allowing consumers to give feedback on specific third-party sellers and products. Some marketplaces like eBay will move a seller down in results or downgrade their account due to negative reviews, while other sites like Amazon leave it up to the consumer to penalize a vendor based on poor reviews. The right enterprise software platform can help you manage these aspects of quality assurance.

 

3rd API Considerations

Marketplace Implementation

Before choosing to implement marketplace eCommerce, your business will need to consider the following:

  • Payment gateway
    How will sellers receive payment, and via what platform?
  • Fee structure
    How will you charge vendors for selling in your marketplace, i.e., how will your company make a profit?
  • Fulfillment options
    Is the marketplace or the vendor responsible for shipment, and how will you incorporate different shipping options?
  • Accountability
    How will you ensure that consumers pay for purchases and that vendors deliver products that meet customer expectations?

After making decisions on these points and more, you'll need an advanced eCommerce software solution to help make your goals a reality.

 

Over 1,300 Sites Launched

Clarity: A Team of Seasoned Experts

Clarity eCommerce™ can develop a customizable marketplace software solution tailored to your business needs. contact us today!

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