Online E commerce Marketplace : What it is, Advantages and Disadvantages

Marketplace, market place or marketing place is a space for buying and selling products. In e commerce, this concept applies to websites of large retail chains that allow the sale of products by partner retailers, in exchange for the payment of a commission.

Online Marketplace (or as some prefer, market place) is a topic that has gained considerable relevance in recent years. You may have heard or read this topic somewhere, or even purchased a product or visited one of these sites recently. In addition, many people come to us to find out what is needed and how to advertise and sell on the various marketplaces sites .

Check out content topics:

1) What does marketplace mean?

2) The basics of online marketplaces

3) Differences between marketplaces and e-commerce

4) What are the largest online marketplaces ?

5) What are the main marketplaces abroad (international)?

6) Do you want to know more about marketplaces?

Questions like “How do I be on other marketplaces sites” or “How can I invest in several marketplace sites at the same time?” are quite frequent. But do you really know what it is and what are the main e-commerce in Brazil and the world that operate with this modality?

What does marketplace mean?

The word “marketplace” comes from the English language, resulting from the combination of the words  market (market) and place (local). This was the place where people traded, bought and sold products, as well as where markets were located in certain cities.

With the evolution of the internet and the expansion of the network’s capillarity, more and more people and businesses started to connect and use this channel to distribute their products. An Online Marketplace is nothing more than a community or a place where people and / or companies meet to do business, buy and sell something.

So the standard nature of any marketplace is to have 2 sides. There will always be someone to sell or offer something on one side and, on the other, someone demanding or buying something.

The basics of online marketplaces

Before going into more detail, I would like to share some basic concepts used in marketplaces. Now, next time during that conversation with the expert friend, you won’t look like a landscape 😉

• Commission:is the fee charged by the marketplace, in general, on the volume of sales made. This fee may vary according to the product or service profile offered by the marketplace, as well as the degree of openness or curation of the channel. In general, this commission can range from a mere 3.5% (Etsy – marketplace for handmade products in the USA) to up to 30% (Uber – marketplace for US drivers).
• Financial Intermediary:is the payment institution responsible for intermediating financial transactions between buyers and sellers, ensuring security for both sides.
  • Examples: Paypal
• Payment Term:in general, most marketplaces work with a payment term that can vary from 2 days to up to 45 days after the order is posted or delivered. This is because, it is necessary to guarantee the security that the delivery will be made and the payment will only be released after this procedure is successfully closed.
• Product Liquidity:this rate considers the total number of products sold in a marketplace, and divides them by the total total products in the marketplace. This indicator shows the degree of maturity of the marketplace and the probability of a sale being made. A marketplace with an excellent liquidity rate can vary between 25% and 60%. It is common for new marketplaces to present rates between 10% and 15%.
• Vendor liquidity: as well as product liquidity, this indicator considers the total number of stores with sales and divides this number by the total general stores in the marketplace.
• Long Tail: concept created by the author Chris Anderson and that presents one of the main advantages of the marketplace model by allowing access to products and services that were previously unreachable and / or simply never known.

Differences between marketplaces and e-commerce

Marketplaces differ from the traditional e-Commerce model in several points such as revenue format, legal format, inventory management, variety and depth of products or services, degree of opening or curation of new stores and products, among other aspects.

Perhaps one of the great differentials is the decentralization of the stock and the possibility of expanding the variety of products almost infinitely. The so-called Long Tail of products becomes more and more real, allowing the Sales Channel to present a pool of products increasingly segmented and directed to each consumer profile.

While the e-commerce model suffers from the use of intensive cash flow to finance its growth (inventory, logistics infrastructure, staff, etc.), marketplaces scale their operations quickly with the entry of new sellers from multiple regions. Another interesting point about the business model is that a retailer can invest in more than one marketplace website at the same time, something much more difficult to happen to those who invest only in their own e-commerce

What are the biggest online marketplaces ?

we already have some marketplaces focused on product sales, such as the Free Market itself, and also new entrants in this segment.

• Mercado Livre: the most traditional marketplace in Latin America, it carries out millions of transactions every year and processes billions of dollars from millions of sellers to millions of buyers. Many millions, yes.
• B2W: largest e-commerce group in Latin America, recently opened its doors to products from multiple suppliers through the Marketplace model. B2W includes the Submarino, Americanas and Shoptime channels . If you are interested in selling on these channels, check out Olist’s solution .
• Via Varejo: Founded in 2010, the Via Varejo group is part of the e-commerces Extra, Casas Bahia and Ponto Frio . Like everyone else, Via Varejo also invested in the marketplaces model to take advantage of its high user traffic to expand its range of items.
• Magazine Luiza: soon, the chain that has more than 700 stores in Brazil (data from May 2015) will launch its marketplace model.
• Elo7: largest marketplace for handmade products in Brazil with over 4 million views / month. It has high liquidity and a large volume and product options.

What are the main marketplaces abroad (international)?

Outside Brazil, there are hundreds of consolidated marketplaces that move billions of dollars every year. Recently, a large volume of niche marketplaces have emerged with the objective of serving significant portions of users and with greater interactivity and quality.

• Ebay
• Amazon
• Etsy
• Airbnb
• Uber
• Upwork
• Alibaba

Want to know more about marketplaces?

There is a lot of content being created daily by different communication channels on the Marketplace theme. I have separated some interesting articles and content on the topic below:

• How to structure a marketplace
• Tip on how to increase the Liquidity rate of a marketplace
• Essential principles for any marketplaceIf you know another marketplace or other content references on the subject, take the time to leave your recommendation in our comments, so this article will continue to be updated!