In this report, we review the different types of marketplace platforms.
When one hears online marketplaces, immediately platform giants Amazon, eBay or Alibaba spring to mind. However, online marketplaces are about much more than just selling products. Globally and in the US, we have seen a boom in marketplaces serving specialized demands, focused on niche categories or providing platforms for trading services rather than products.
In one of our earlier reports, Deep Dive: Online Marketplaces Disrupting Retail, we examined the top business-to-business (B2B) and business-to-consumer (B2C) marketplaces in the world. In this quick take, we explore the different types of marketplaces and showcase examples of marketplaces primarily in the US and some emerging platforms from other regions.
Businesses and individuals can sell online, either directly through their own e-commerce website or on a marketplace platform, such as Amazon or eBay. Products as well as services can be marketed online through either of these methods, and revenues from the marketplace model are expected to double between 2017 and 2022. Juniper Research forecasts that global marketplace platform provider revenues will grow from $18.7 billion in 2017 to $40.1 billion in 2022, driven by the sharing economy. The Americas are expected to contribute some 57.2% of that 2022 total.
Below, we show how the marketplace ecosystem can be broken down into segments.
This is not an exhaustive list and innovators are constantly inventing new ways of product and service delivery. Marketplace platforms make money by charging sellers listing fees, membership fees or a commission on transactions. Before we examine the different types of marketplaces, we outline some of the broad trends we have seen in their evolution: vertical marketplaces, local marketplaces and providers of ancillary services.
Vertical marketplaces: Vertical platforms that present curated products and services from sellers within specific categories are seeing growth. More recently, hyper-vertical platforms, which include niche markets within niche markets, are sprouting. For example, Witchsy claims to be “a marketplace for artists created by artists.” The platform allows artists freedom to sell quirky and dark-humored merchandise which may otherwise fall outside selling guidelines of marketplaces such as Etsy or Amazon.
Local marketplaces: Marketplace leaders, such as Amazon, may have a global stronghold, but local marketplaces tend to stay in the lead in many markets, such as Flipkart in India and Alibaba in China.
The evolution of ancillary services to support existing sharing economy marketplaces: The growth in rental marketplaces, such as Airbnb, has prompted an increase in problems faced by buyers and sellers which other startups have seized as an opportunity for a viable business. For example, UK-based Guardhog provides insurance for sharing economy platform members.
Product marketplaces involve the actual exchange of a physical product for money. The product can be either delivered to the buyer or picked up by the buyer from a mutually-agreed-on location. Product marketplaces involve three key types of transactions: 1) the retail of new products; 2) the resale of used products; and 3) the rental of products for a limited time use.
1) Retail Marketplaces
Retail marketplace platforms bring together sellers of products alongside the platforms’ own brands. The platform simply functions as a virtual marketplace for third-party sellers to sell their products. Third-party sellers include large retailers and brands as well as individuals and retailers selling multiple brands through their virtual shopfronts.
Convenience in purchasing, access to a large market of buyers and sellers and the ability to compare prices online are some of the key factors driving the surge in retail marketplace platforms.
2) Resale Marketplaces
Resale marketplace platforms allow sellers to distinguish their used products from conventional retail marketplaces where new and unused goods are sold. Marketplaces focused on resale, or re-commerce as it is also referred to, tend to be specific to the product segment being sold, such as apparel, which we previously covered in our report Deep Dive: Fashion Re-Commerce Evolution, and furniture, which we wrote about in our earlier report Furniture Re-Commerce: A Niche Segment with Significant Potential.
Resale marketplaces have been gaining popularity as an increasing proportion of consumers opt to buy used items to save money or save resources. A Statista survey from June 2017 indicates that around 75% of US consumers have bought a used item at least once in the last year.
Among the various product categories, apparel resale sites have become increasingly popular.
3) Rental Marketplaces
Rental marketplace platforms allow people to list items they own and are willing to rent to others for temporary use. Renting allows people to recover the investment on items they expect to use only rarely, for example expensive items of clothing worn for special occasions or furniture and homewares.
Cars are the most popular items to be rented, according to a Statista survey from December 2017. While 59% of those surveyed indicated that they would not rent anything, 10% or more said that they would consider renting gadgets, vehicles, sports equipment and household appliances. Some 9% stated that they would rent furniture and household goods.
Apart from these products, apparel has grown to be a popular category in the rental space, driven mainly by millennials. We wrote about this trend in our earlier report, Deep Dive: Millennial Lifestyles Drive Growth in Apparel Rental. Some of the key statistics from our report include the following:
Service marketplace platforms allow providers to sell their services online, either for online delivery or delivery at the buyer’s office or home or the service provider’s location.
1) Online Delivery of Services
Online service marketplaces include B2B and B2C programs or software services as well as services that can be remotely delivered by specialists and freelancers.
2) Physical Delivery of Services
Platforms that aggregate providers of physical services include food-service aggregators such as Just Eat, beauty and wellness booking platforms, and maintenance and household service platforms. This category also includes B2B platforms for services such as couriers.
In the B2C segment, in particular, online platforms have consolidated at the front end a number of fragmented industries, such as taxis, beauty services, cleaning and maintenance services, and restaurants. In doing so, marketplaces have removed the barriers that consumers traditionally faced when looking to buy such services.
We expect to continue to see growth and evolution in marketplace platforms across industries. Retail marketplaces allow a larger number of buyers and sellers to engage with each other on a common platform, while resale and rental marketplaces continue to drive growth in the sharing economy.
Service industries, especially those purchased by consumers—such as local restaurants, independent beauty parlors or small cleaning firms—have traditionally been fragmented. Marketplaces aggregate these providers, making it much easier for shoppers to find, compare and book services. Indeed, we think the ease that these platforms bring has been one reason for strong growth in spending on discretionary services in the US in recent years: it is now as easy to buy services as it has long been to buy products.
Marketplaces are gaining share when shoppers buy products online, and they look set to consolidate their positions as destinations when shoppers want to buy services.