If 2020 has shown us one thing, it is that e-commerce still has a lot of untapped potential and that there is still a lot of growth possible. This year alone, the US market has grown more than 30%, exceeding by far any projections initially made for 2020. So, you might stop and think: If I want to accelerate growth then what is the smartest, fastest and easiest way to grow and scale my business? Our answer is using a Marketplace.
One of the biggest reasons why Marketplaces allow for fast scaling is that unlike traditional e-commerce platforms, a Marketplace has an additional player using the platform apart from the Marketplace Operator, who is running the platform: the Merchant.
So what are the differences between a Marketplace Operator and a Merchant you may ask?
What is a Marketplace Operator?
The term Marketplace Operator refers to the company that owns and runs the Marketplace – think of Amazon or Alibaba. Depending on the chosen business model the Operator can just manage the Marketplace or sell products as well. Amazon is doing his by selling everyday items and gadgets under their private label Amazon Basic. Operators are owning and running the entire Marketplace. They are responsible for the technical setup – from hosting and implementing technology partners to the design and SEO optimization. Marketplace operators invite and onboard Merchants but always have the option to keep the control over what product is being sold and to which price. You can say they always have the last say. They make money by taking commissions or fees from merchants.
What is a Merchant?
In the context of a marketplace model, a Merchant is a third-party vendor operating on the platform selling products and making offers on products. Typically, there are multiple Merchants selling on a Marketplace, giving the customer either multiple price options for the same product or offering exclusive products that can only be purchased by a specific Merchant. Merchants are often D2C sellers and use Marketplaces as additional sales channels – Did you know Adidas is also selling their shoes on eBay? Another typical Merchant is a private person offering DIY products, like all the Merchants offering handmade crafts on Etsy.
The motivation for running and selling on a Marketplace is very different depending if you are an Operator or Merchant, but each party benefits from their participation on the Marketplace.
We’ve broken it all down and identified our top reasons why Operators and Merchants should consider a Marketplace model:
|Scale your business effortlessly
You can cut out the tedious steps of investing in and sourcing inventory yourself and onboard Merchants that enrich your product portfolio instead.
|Increase your customer base instantly
Every Merchant has immediate access to all the customers once they operate on the Marketplace. There is no need for extensive Marketing activities – new audiences can be reached by simply onboarding on the Marketplace.
|Reduce your risks
Onboard new merchants quickly and risk-free to grow your business and test out new products. Reduce your financial risk by keeping operational and inventory costs low.
|Benefit from trust in the Marketplace
Being a Merchant and selling your products on the Marketplace platform gives you the same credibility as the Marketplace. The marketing, branding and trust-building of the Marketplace operator will benefit you.
|Increase your profit margin
Implementing a Marketplace introduces new revenue streams to your business. Adding Merchants to your existing platform requires less resources and investments. Redistributing the financial risks while receiving commissions on successful sales increases your profit margin.
|Start from a Marketplace and grow from there
If running your own shop seems a bit too much in the beginning you can always start your business on a Marketplace. Don’t worry about building an entire platform or significant investments in the setup.
|Differentiate your offerings
Growing the number of merchants on your platform gives you the unique opportunity to diversify your product offerings, and introduce and test new, niche products without any risk or stock commitments. Seize the opportunity to become the central focal point for your customers by meeting every need.
|Use resources for operational excellence
The marketplace is doing the heavy lifting to expand the customer base. This allows you to focus your resources and efforts on operational excellence, great performance and internal rankings within the Marketplace.
|Ownership of the entire platform
Merchants take over a variety of operational tasks, thus freeing up resources for the Marketplace Operator. However, the Operator is always keeping full ownership of the platform all the time.
|Test out your products and business ideas as a Merchant
Make sure to use the Marketplace as an environment that allows you to test new products or business ideas. The variety of customers helps you to find out which target group responds to your products and what they are willing to spend.
|The Marketplace as a marketing opportunity
Merchants can use their presence on the Marketplace as an additional marketing opportunity. Merchants can customize their own presence in the Marketplace and gain more visibility on the internet.