September 17, 2020 - With internet and smartphone penetration increasing throughout the globe and the massive success of companies such as Uber and Airbnb, the online marketplace industry has become a viable and popular method for e-commerce in today’s world.
An online marketplace is a website or mobile app that facilitates shopping from a variety of sources. A marketplace business does not usually own any inventory; the objective of a marketplace business is to present other people’s inventory to consumers and help facilitate the transaction.
A perfect example of an online marketplace is eBay, as they sell all kinds of products to a global audience, however there are many other types of marketplace businesses. Generally speaking, there are three primary types of marketplace businesses:
· Vertical Marketplace is when a business sells products from a variety of sources, but they are all of one type. The website “Etsy” is a prime example of a vertical marketplace, as they showcase arts & crafts from many suppliers and help facilitate the transactions with consumers.
· Horizontal Marketplace has a broader approach, and is when a website or app acts as a one-stop-shop, providing consumers with an array of different types of products all in one place. A perfect example of this is ‘Amazon’, as many businesses are able to showcase a variety of product types in a single platform.
· Global Marketplace is when a website or app sells all kinds of products, to locations throughout the world. As mentioned earlier, “eBay” is an ideal example of a global marketplace, allowing anyone to sell any kind of product on a global scale.
The marketplace economy has experienced huge growth over recent years, as it offers a major convenience to shoppers looking for a quick and easy experience. The marketplace business model is so appealing because it provides shoppers with access to the inventory of many suppliers and the marketplace business does not need to acquire inventory before offering it to consumers. By operating in this manner, marketplace businesses are able to offer a much wider range of products than could be presented by any typical store. Consumers understand that marketplace companies can offer products from a variety of sources, and that is why the e-commerce experience in a marketplace environment is more appealing than shopping on a website or app from a single retailer. This new method of e-commerce is no longer limited to giants like eBay, Uber and Alibaba; many start-ups have joined in on the trend and developed platforms to support a wide range of industries. RenoRun, for example, is a B2B marketplace platform, delivering construction material to contractors. Netflix is another example, as this B2C platform has changed the way people consume movies and television. With so many examples of the marketplace business method fundamentally changing the way certain industries operate, it has become clear that this is an effective business model and it is here to stay.
Nearly all marketplace businesses share one thing in common: the need to execute mass payments on a global scale. As the industry continues to grow, marketplace businesses require an efficient process for issuing mass payments to vendors and freelance employees throughout the world. This often requires establishing relationships with multiple payment providers, banks, and local payment services. All of this requires multiple complex integrations or manual processing, as well as access to several different currencies. This can be a challenging task, but it is a vital aspect of any marketplace business.