Right about 22 years ago, eBay was the first company to use the marketplace model. After all these years, the marketplace model is a bit adjusted and modernized. A larger number of companies have started operating similarly, giving others an opportunity to earn some money by selling their products and unique experiences. Well as spotless as the marketplace model seems, it cuts both ways, pros and cons.
Marketplace Makes Grow Faster
Marketplaces possess the capacity for rapid growth as they pave the way for a transaction. Their labor force is not involved in the manufacturing, production, packaging process. Hence, they are loaded with a number of professionals who are on and about keeping the platform rolling. Hence, faster growth is assured in comparison to regular businesses.
It’s cheaper
Marketplace users comprise both buyers as well as sellers. Hence, the business should satisfy the needs of both parties equally. In a traditional eCommerce business, you have to spend most of your income on ads and marketing your business through several mediums. In a marketplace, you have direct access to customers. For example, take a look at the successful Facebook Marketplace, which is a hit with sellers both large and small.
Reduced Risk
Well, your job is to look after the manufacturing process, not the order fulfillment process. So, luckily you don’t have to worry about delivery, warehousing, or return policies as a seller. The business happened by itself, while you focus your time and resources in areas of your business that require it.
Now that you’ve read about the good bits of a marketplace model, take a look at the cons too.
Lower Margins
In comparison to a regular traditional business, there are lower margins in marketplaces. It obviously depends on your monetization policy. Generally, it isn’t you who decides the price. You just host and you can only charge for that.
Difficult to Achieve Loyalty
The key to owning a marketplace is that you attract your clients and keep them there. It is made up of multiple sellers. Customers can decide to choose to buy from your website or shop directly as the seller’s site, Hence, there’s no assurance that they are going to be loyal to you.
Marketplace Helps Control Transactions
As a marketplace, you are solely the facilitator. You are the link between the seller and the buyer. You cannot directly influence the product or quality of service. Any flawed offers will build a negative image of your marketplace and one negative opinion can cause more damage to you. Therefore, even while picking sellers for your marketplace, you should implement technologies, filtering systems for seller’s acquisition.
Well, every business model has its cons and pros. You need to weigh them out evenly and decide if it inclines with your ideas. Like any other business, a marketplace model also has hidden agendas. You’ve taken a look at the advantages that you can reap as well as the possible downsides. If you can find solutions to the disadvantages, then an online marketplace can be a successful option for you.
