Technical progress and the unlimited possibilities of the Internet has led to a lasting change in people’s shopping behaviour. Online marketplaces are particularly important in this context, as they sell products from various manufacturers and can, therefore, offer customers a particularly wide range of products.
The world’s leading online top marketplaces include the market leader Amazon, the online auction house eBay and the Chinese Internet giant Alibaba.
Online marketplaces share the highly competitive market on the Internet primarily with the websites of manufacturers and brands.
The different types of online marketplaces
In the case of online marketplaces, the main distinction is made between the horizontal, vertical and hybrid versions of the marketplace.
The horizontal online marketplace
Horizontal online marketplaces cover a broad spectrum of product classes and provide customers with a cross-industry shopping experience. Online shoppers are able to find all the products they want in one and the same marketplace, from food, electronics and fashion to furniture. A prominent example of a horizontal online marketplace is Amazon.
The vertical online marketplace
In contrast to the horizontal, a vertical marketplace concentrates on a very specific industry or product class. This strategy convinces the customer to buy on the platform through a clear differentiation and a unique selling point. These marketplaces often offer a special, product-related service that differentiates them from horizontal marketplaces. This makes customers feel at ease with this merchant and they trust in his expertise.
The hybrid online marketplace
The hybrid marketplace offers its own products as well as products from other manufacturers. By expanding the own product range, the reach is increased and customer interest is raised. A typical example of the hybrid online marketplace is the App Store.
Top online marketplaces
More and more consumers are using the Internet for shopping and increasingly often start their product search directly at Amazon. Only a few years ago, this gatekeeper function in e-commerce was reserved for the search engine Google. In addition, Amazon has managed to establish an extremely attractive customer loyalty programme with Prime.
For a fee, its approximately 100 million members worldwide benefit from free and fast delivery, media offers such as Prime Video or Prime Music, exclusive discount campaigns (e.g. Prime Day) and special shops (e.g. Amazon Fresh).
The platform is so deeply anchored in the relevant set of customers that they order on average twice as often from Amazon as non-members. As a target group for acquiring new customers for other webshops, these customers are practically no longer accessible.
Market research shows that suppliers who sold their products via Amazon in 2017 recorded an increase in turnover of more than 20 per cent compared to the previous year, twice as high as the overall growth in online trade in the same period. The processing of shipping, billing and warranty via the marketplace also makes it easier for smaller retailers and manufacturers to enter international markets. This means that every supplier can use the familiarity and trust of customers in the global brand promise of Amazon, eBay or Etsy to its own advantage.
Which products are purchased online or offline?
What factors make customers decide whether to buy a particular product from an online marketplace and have it conveniently shipped to their home or buy it directly from the store? A PwC study done in 2018 came up with interesting results:
Entertainment media are preferably bought online
Books, music, movies and video games are the most popular online product categories by a wide margin: Around 60 per cent of those surveyed prefer to buy entertainment media online. Only 28 per cent of the participants in the study would accept a trip to a bookstore or electronics store. There is a simple reason for this clear weighting: entertainment media are usually available in online marketplaces directly via download and are not first physically sent to the customer by post.
For consumer electronics, personal advice is the key
In the case of consumer electronics products (mobile phone, computer or the latest generation tablet) the proportion of online and offline consumers is almost equal. While 51 per cent of those surveyed prefer to buy directly in the store, 43 per cent tend to prefer the online shopping experience. In contrast to entertainment media, when buying consumer electronics it is important for customers to inform themselves about the product on-site and to obtain competent advice. Though more and more people inform themselves online before placing an order.
Try on clothes and shoes before or after purchase?
Clothes and shoes are also increasingly being bought on the Internet. Already 40 per cent of all fashion fans prefer shopping online than going to their favourite boutique. However, the majority of the study participants still want to try on the clothes in the store – around 51 per cent prefer this option.
A change can be observed in everyday consumer goods
Food and other everyday goods are still purchased preferably in the offline business of trust. Around 70 per cent of all consumers prefer to go to the grocery store and choose food themselves. But there is a clear trend towards online shopping in food retailing, especially during COVID-19 situation.
The four success factors of online marketplaces
The turnover of online marketplaces increases by a double-digit percentage every year – growth rates that other industries can only dream of. But what are the success factors that motivate users to make purchases on the Internet?
1. Product variety
Customers can choose from millions of products – more than offline merchants could ever offer. The overwhelming variety of products is probably the most important success feature of online marketplaces.
2. User ratings
Many buyers appreciate the fact that they can obtain detailed information on the Internet about the positive and negative experiences of other consumers.
3. Independence of time and place
Nothing is impossible in an online age. Many users appreciate the complete independence from shop opening hours and therefore prefer to shop in the online marketplace.
4. Price comparisons
Online marketplaces often offer the same product from many different merchants. The fierce competition among online merchants creates a real price war that customers can use to their advantage.
What does the future of online marketplaces look like?
The many advantages of digital distribution channels have led to the fact that online marketplaces have become an integral part of e-commerce today. But how does the future look like? Are there signs of a replacement or can online marketplaces continue to expand their position?
Have a look at 2 alternative forms of shopping:
Conventional online marketplaces are characterised by a rather distanced relationship between platform and customer – there is little or no interactive exchange. This is exactly the gap where social commerce comes in and actively involves potential customers in the shopping experience. The shop is transformed from a marketplace into an active social community that can exchange information about products and make recommendations.
No-Line Commerce is a new trend in digital commerce. Regardless of the sales channel, the consumer is always the focus of attention. It connects online and offline system worlds and allows a user to return a product purchased online to the store, for example.
Online marketplaces in constant change
In the highly competitive online marketplace, retailers and manufacturers must constantly reinvent themselves to provide a better shopping experience for customers. Even classic online marketplaces like Etsy or Amazon are not spared this development and must not rest on their laurels. Experts expect that the sales of online marketplaces will continue to rise strongly. However, in view of new sales approaches such as social commerce and no-line commerce, it is important to continually review one’s own offering and to break new ground.