Arvind Sharma leads Retail & CPG Vertical, and Digital Commerce at Ciklum and has more than 19 years of cross-industry experience. Since 2009, he has been working with clients on digital business transformation programs, primarily in the Retail, Consumer Goods and Manufacturing sector.
Since the early days of the Internet, online marketplaces have made it easy for consumers and companies to exchange goods throughout the world. In 2019, online shopping overtook brick-and-mortar retail sales for the very first time, signifying that the online marketplace isn’t just a fad — it’s the reality of how people shop today.
Even though some of today’s most well-known online marketplaces date back to the early 1990s, significant opportunity remains available for companies seeking to provide their goods and services to customers over the internet. In particular, vertical B2B marketplaces have emerged as a highly-specialised sector for growth with significant venture capital attention.
Here’s a look at how today’s online marketplaces operate, what makes them successful, and where tomorrow’s opportunity lies:
What Are the Different Kinds of Online Marketplaces?
Online marketplaces facilitate shopping opportunities from several different sources, offering new opportunities and standards to wholesalers, retailers, and innovative entrepreneurs. Marketplace operators do not own inventory; rather, their business facilitates the sale of merchandise offered by independent vendors.
Unlike retailers, which follow a one-to-many model and face consistent competition that can drive down prices, the many-to-many model embraced by the online marketplace can tilt towards a single winner and enable better margins. And because marketplaces simply facilitate the sale of goods, marketplace owners can even make money without selling a single product or service.
While each may function in a similar manner and facilitate the same types of transactions, the types of products they offer can vary greatly:
- Vertical marketplaces offer similar types of products and services from a variety of different sources. Uber, Airbnb, TaskRabbit, METRO Market, and Rover are all examples of vertical marketplaces providing specialised offerings from multiple vendors: Airbnb, for instance, focuses on renting out properties all over the world from a wide pool of landlords and homeowners.
- Horizontal marketplaces offer a large selection of products across many different categories. Amazon.com stands out as the clearest example of a horizontal marketplace, existing as a one-stop-shop for sellers to provide everything from diamond necklaces to diapers.
- Auction-based marketplaces facilitate person-to-person transactions in a virtual auction setting. eBay, the most well-known online auction marketplace, allows virtually anything to be sold between independent buyers and merchants.
Within each type of marketplace, several different types of online marketplaces have emerged to provide highly-specialised services for different client groups:
No matter the type of product or service, online marketplaces can be built to accommodate needs that are as broad or specific as necessary.
How Are Online Marketplaces Built?
Companies seeking to create an online marketplace tend to follow one of two models: using an existing marketplace solution or building a custom solution. While each model provides an opportunity for companies to connect with customers, the structure of each model provides different levels of flexibility and customisation:
- Existing eCommerce platforms, such as WooCommerce or Magento, allow companies to create online marketplaces using established and flexible software frameworks. With a wide variety of plugins and capabilities, marketplace platforms are fast and affordable ways for companies to create or enhance e-commerce marketplaces.
- Custom solutions can be built and tailored to meet specific marketplace needs. METRO Markets, for instance, built an end-to-end B2B marketplace platform in nine months in order to reach a new audience i.e., hotel, restaurant, and catering business. While custom solutions can take more time and money than an off-the-shelf solution, working with a trusted developer can ensure that a carefully-built marketplace meets any company’s long-term and specific marketplace needs.
Where Is Today’s Marketplace Opportunity?
Vertical B2B marketplaces present one of the largest areas of opportunity. Compared to vertical online marketplaces, horizontal retail platforms require a complex approach and encounter tougher competition. While highly-specialised vertical markets for manufacturers and retailers have long remained siloed, renewed interest in B2B marketplaces is driving new attention and innovation.
Brick-and-mortar companies seeking to expand commerce capabilities can find additional opportunities through B2B vertical markets. Organisations seeking to diversify, de-risk, and solve fragmented multi-country models can also benefit from a highly-specialised marketplace that provides services locally and worldwide.
Building a vertical online marketplace requires careful research and decision-making:
Building the Next Leading Marketplace
Ciklum, a global digital solutions company for Fortune 500 and fast-growing companies around the world, offers complete end-to-end marketplace design and delivery capabilities. From development to deployment, Ciklum’s award-winning software architects, e-commerce experts, and support teams can help brands, businesses, and organisations of any size assemble world-class online marketplace experiences in C2C, B2C, and B2B markets.
To build a vertical B2B marketplace or get more information about Ciklum’s wide range of digital services, contact Ciklum today.