Strategy

Why companies are launching marketplaces to solve today’s business challenges

Kristin Schepici
Kristin Schepici October 12, 2020
Why companies are launching marketplaces to solve today’s business challenges

A revolution of sorts is underway in the world of commerce. It’s the rise of online marketplaces, and it’s a game-changer that has transformed how customers buy products, and compelled companies to re-think their business models and strategies.

Today, online marketplaces are among the most flourishing businesses. You know their names – Amazon, Alibaba, Airbnb, Etsy, eBay, Uber – and the list goes on. Even traditional retailers such as Walmart, Target, and Best Buy have launched marketplaces. 

The rapid emergence of marketplaces has created a gravitational pull that is drawing more and more businesses into the marketplace model. What was once a strategy for a handful of large merchants is now going mainstream. 

According to Digital Commerce 360, 50% of online retail purchases globally are made through marketplaces. Buyers have made it clear that they prefer to shop on marketplaces because they offer obvious benefits: 

  • Convenience, because marketplaces offer one-stop shopping for a large array of products, and products that complement one another. 
  • Lower prices, since marketplaces offer similar products from competing sellers. 
  • Time savings, because customers don’t have to visit other web stores for complementary products. 

Marketplace Defined

A marketplace is an ecommerce site where products and services are offered by multiple third-party sellers. Unlike traditional ecommerce, in which the site owner is the only seller, through a marketplace a business can sell its own products and services, along with products from third parties or create a platform where buyers and sellers find one another. 

The marketplace operator facilitates purchases on the sellers’ behalf, and sellers fulfill the orders. The operator still owns the customer relationship, but is not encumbered by the operational burdens associated with delivery, warehousing, logistics, returns, as well as the cost and risk of owned inventory. These are the responsibilities of the sellers. 

Marketplaces offer other benefits to companies that we don’t typically see in traditional commerce models:

  • Offer products from third-party sellers without the burden of owned inventory, supply chain, fulfillment, and customer care, while maintaining control of the customer relationship and experience.
  • Secure a greater share of wallet by selling complementary products or services that customers would have purchased from a competitor.
  • Establish new sources of revenue through alternative business models, the most common being commission on items sold from third-party sellers.
  • Test and launch new strategies with minimal business risk.

On the B2B side, manufacturers are deploying marketplaces to:

  • Gain inventory and pricing visibility across the network of dealers and distributors. 
  • Understand end customer behavior, preferences and buying patterns. 
  • Solve operational challenges associated with inventory, warehouses, logistics and fulfillment. 
  • Manage suppliers more effectively through a self-service portal. 

The Collaborative Commerce Imperative – A Better Way to Marketplace

Here at VTEX we’ve empowered businesses to take a unique approach to the marketplace business model – we call it the “Collaborative Commerce Initiative”.  Through this approach, we help businesses overcome one of the biggest challenges that organizations run into with most marketplace platforms: The large cost and long time frame associated with integrating these planforms with existing commerce platforms, order management, and fulfillment systems. To drive sufficient revenue to justify the investment, companies must go “all-in” rather than employ a less aggressive test-and-learn marketplace approach. 

In contrast, through the collaborative commerce model, the VTEX platform includes complete marketplace, commerce and order management in one platform. This approach allows organizations to achieve faster time-to-revenue, while employing the marketplace model more gradually, with minimal risk and cost, and adapting their marketplace strategy as they learn.    

To learn more about the marketplace business model and the Collaborative Commerce Imperative, download VTEX’s whitepaper

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