How to choose the right marketplace model?

Summary

A marketplace is a platform that brings together buyers and sellers on the Internet. In exchange, these marketplaces get a commission on the sales they have made. Several types of marketplaces exist, the most widespread are those of products like Vinted. Other forms, a bit hybrid, like Amazon, sell their products and make their platform available to other sellers. Finally, service marketplaces are also in vogue like Uber which offers a transportation service.

The different types of Marketplace

The marketplace model can be applied to B2C, B2B and C2C markets. 

B2C marketplaces are the most present on the e-commerce market. They are platforms designed for transactions between professional sellers and private buyers. There are two distinct functions in B2C marketplaces, they can be vertical or horizontal.

The vertical B2C marketplace is characterized by what it offers, which is a single product or service. For example Helpling is a vertical B2B marketplace specialized in finding a cleaner online. On the contrary, a horizontal B2C marketplace offers several products or services, like Amazon or Alibaba.

B2B (business to business) marketplaces model are a booming market! Over the last 5 years, B2B purchases made online have grown by 94% (Xerfi study). This trend is expected to grow even more: Gartner Predicts estimates that 75% of purchases will be made through a marketplace in 2022. Alibaba.com and Amazon Business are the world leaders in business-to-business e-commerce. Other smaller marketplaces, such as Upwork – connecting companies and technical freelancers – or Procsea – selling seafood to restaurants, wholesalers and supermarkets – present interesting and more specialized models. The success of these marketplaces reflects an evolution in the behavior of professional buyers. They are modelling their personal experience on their professional practices by adding the specific requirements of B2B.

C2C (Consumer to Consumer) marketplaces model are a solution where individual sellers are allowed to sell or rent their products to end customers. It is therefore only about transactions between private individuals. One of the best known C2C marketplaces is Airbnb, but we can also mention Bedycasa, Vinted which connects individuals who want to sell their second-hand clothes.

Specialize or remain a generalist? 

It is very important to answer this question. This will allow you to set up the right strategy and positioning for your marketplace. Today, there are many generalist marketplaces on the market, so specializing your business is more interesting. Choosing this axis will allow you to reach a niche market which is more and more promising in the marketplaces sector. Of course, it is possible to reach a niche market by opening a generalist marketplace. For example, by launching a generalist marketplace model, specialized in organic and eco-responsible products.

Choose your business model 

Choosing the right business model is a matter of a precise market study. In fact, there are several economic models, the main ones being :

  • The commission, the most widespread model. It consists in taking a percentage of the sale, either from the seller or from the buyer.
  • Subscription, this model can be found on music streaming platforms such as Deezer or Spotify that connect artists and content consumers. This business model is applicable to both buyers and sellers.
  • The free trial allows to offer a time-limited access to the marketplace’s features. This model is specific to SAAS type platforms.
  • Freemium, as its name suggests, allows you to offer buyers or sellers access to the marketplace but on a limited basis. It allows to attract the prospect, with the goal of purchasing. This model is obviously compatible with other business models such as advertising.

Technical and legal aspects

Technical aspects

The functionalities that your marketplace offers must meet the needs of its users. First the sellers, then the buyers. 

You need to take a pen and paper and list all the features and technologies that will be useful to your users (sellers and buyers).

For example, here is a list of features if you want to launch a C2C marketplace: 

  • a multi-offer catalog
  • multi-currency
  • a “two side” market and responsive interface
  • billing, after-sales service and returns management
  • data security

The point you should not neglect is the type of delivery you will set up. Do you impose yourself or do you leave the choice to the sellers? Do you want to homogenize the transport offer or not? Point relay, home delivery, click & collect? So many points that will have to be taken into account for the construction of your marketplace.

The legal aspects

You also have to pay attention to the legal aspects of your marketplace model. Indeed, marketplaces must respect a complex legal framework. Whether it is about the legal framework of the relationship between sellers and buyers, legal notices, GTCs and T&Cs, RGPD and data protection, payment regulations on marketplaces or even contracts with service providers, such as delivery services and their conditions in case of loss or damage to the goods. You should also not neglect the part of disputes, whether they are between the marketplace and the seller, the marketplace and the buyer or the buyer and the seller.

Set up a communication strategy 

For a marketplace, it is essential to attract sellers first. As you can imagine, if there is no product on your marketplace, there will be no buyers. You can read more about this in our article: Marketplaces creation, who attract first ?

The second most important point is to communicate about the sellers by giving them visibility. If they have visibility your marketplace will have visibility. This will also send a positive message. For sellers who want to sell on your platform, it will help show the quality of the marketplace’s services. For the sellers already present, it will reinforce the trust they have in your platform and therefore increase the chances that they will stay longer on the platform. 

As you have seen, there are several parameters to take into account in order to choose the right marketplace model and build your project. You may be in a panic about this but this list will help you build your project.

If you are not an expert in the field, don’t panic, Medialem also offers support to properly launch your marketplace. 

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