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Oct 6, 2021 | 7 minute read

eCommerce Marketplaces 101: How Can I Leverage Them?

written by Shaneil Lafayette

eComemrc eMarketplaces

Earlier this year Gartner boldly stated in their Predicts 2021 Report: COVID-19 Drives Accelerated Shift to Digital and Commerce Model Evolution that, “By 2023, 30% of enterprise marketplaces will transition into a majority third-party seller model for better profitability.” For many businesses, adding a third-party seller model to their Go-to-Market strategy was already a serious consideration, but it has become more top of mind due to the driving changes of COVID-19 on consumer buying behaviors. According to a consumer survey by emarketer, about half of all searches start on marketplaces. So whether you participate in a marketplace as the owner or simply as a partnering contributor, your business will benefit from more consumer impressions across your products and services, thus leading to a higher chance of conversion.

For those who are still researching the marketplace ecosystem, this article will highlight how marketplaces are used, the benefits you can expect to reap, challenges we see in the market and how Elastic Path supports a variety of marketplace deployments to support your business needs.

What is an online marketplace?

Most are already aware that an online marketplace is a digital platform that facilitates shopping of products and/or services from multiple sources. This evolved definition of marketplaces from the traditional singular seller architecture, has paved the way to now allow a marketplace owner to either function solely as an operator, or sell its own products and services with those of third party sellers. This has been great for offering new strategies for businesses looking to enter the marketplace ecosystem.

As a marketplace owner, your business will be well positioned to increase profitability in a variety of ways which we will discuss later. However, you will have to consider which roles and responsibilities you will be willing to take on; for example: Seller onboarding and management, master catalog and taxonomy, order management, rules and processes, fund collection and distribution etc.

As a marketplace seller on the other hand, you will have to think about your product and pricing within the marketplace, page designs, marketing, promotions and customer service to ensure your products are good competition for other sellers within the marketplace. We strongly suggest evaluating your roles in a marketplace with a technical consultant to get a better understanding of the considerations you should be taking into account to assess the feasibility of your business plan first.

Benefits Of a Marketplace Model

Once you have decided how you want to partake in a marketplace you’ll find that there will be many benefits regardless of whether you chose to be an owner or a third party seller.

As an operator:

  • You get to choose the revenue stream that best fits the market niche you want to address:
  • Commission Model: Where you get to charge a percentage or fixed fee for every transaction to merchants.
  • Membership Fee Model: Where you can charge a monthly or yearly fee to both sellers and buyers.
  • Ads and Features Model: Where you charge providers to run Ads within the platform.
  • Listing Model: Where you can charge a business for each listing offer they upload on the platform.
  • You don’t hold any product inventory and thus don’t have to worry about product capital or investments.
  • You’ll be able to generate trust from shoppers and thus increase the likelihood of customers choosing your site to make their purchase.
  • If you already have a product catalog, you can expand it and create more opportunities to up-sell and cross sell to a larger audience.

As a Seller:

  • You’ll be able to increase your earning potential by introducing your products or services to a larger audience.
  • You’ll be able to save cost on an eCommerce infrastructure as your operator handles most of the operation.
  • You’ll gain an instant level of trust because shoppers tend to have stronger confidence and trust in marketplaces.
  • You’ll have a quick testing site for your products or services, thus de-risking an online launch.

Challenges With a Marketplace Model

However, online marketplaces still have a few challenges that you should consider.

Vendor Integration

With many third party sellers coming together, there will likely be many integrations that will need to work together with the operator’s eCommerce software. When these integrations don’t work in symbiosis, sellers often experience slow inventory updates, difficult price management, and incorrect product matching. Choosing a Composable Commerce solution would be ideal for facilitating a marketplace, as they were built to handle multiple integrations under one solution.

Product Presentation

When many sellers come together with their unique branding, it is difficult to keep a uniformed product presentation. Sellers often have different color schemes, image formats, and image quality, leading to a less uniform user experience across the catalog. By choosing a strong Content Management System(CSM) or Digital Experience Platform (DXP), you can ensure that you can offer templates with strict guidelines to unify the experience.

Customer Service

With a large catalog of products, it is difficult managing customer service requests. The marketplace owner is expected to assist customers regarding their products, even though they may not have immediate ties or access to each product. We’ve seen marketplace owners relieve this pressure by ensuring as much product information is provided on the site as possible, and minimizing overall customer-to-customer service agent interactions.

This is obviously not an exhaustive list of challenges, and once again, we would definitely recommend working with an agency to assess the cost-benefit ratio of your strategy. So how does Elastic Path support your future marketplace business?

How Does Elastic Path Support Your Marketplace Needs?

Elastic Path supports customers with marketplace needs whether they want to sell their products and services on an existing marketplace like Alibaba and Amazon, or establish their own marketplace within their industry. To support these needs, Elastic Path offers EP Product Experience Manager (PXM) to support all of your complex catalog needs, as well as our marketplace technology partner integration in the Composable Commerce Hub, to create seamless and engaging experiences across multiple touchpoints.

Many customers have expressed their fear around venturing into a marketplace model because of the perceived complexity and risk. However, due to the open and flexible architecture that Composable Commerce provides, customers are able to deploy a marketplace by either leveraging their existing eCommerce solution or by building a Composable Commerce solution from scratch with Elastic Path. In addition, for those businesses who want more help with launching quickly, you’ll also be able to leverage one of our Pre-Composed Marketplace Solutions, which is a complete business-ready solution, that eliminates the need to take on the complexity of stitching together everything on their own. We have had customer launches in weeks rather than months with Pre-Composed Solutions.

So which marketplace model is right for you?

With Elastic Path Commerce Cloud there are three main marketplace operating models that you can choose from. You can choose to:

  • Sell Into An Existing Marketplace: In this model you will be able to sell into an existing marketplace like Amazon and Alibaba by setting up an automated function to push your products to their marketplace and market your products and services in a way to ensure your goods can be sold.
  • Establish a services-only marketplace: In this model you will be to facilitate the sale of services as the operator of the marketplace. As services based marketplaces are less concerned with “shipping and fulfillment,” you can choose to accept payments through the platform or send buyers to the individual sellers and instead put in measures to manage and collect surcharges for facilitating the interactions. Elastic Path works closely with larger marketplace vendors such as Jetti and Mirakl to create seamless integrations to make this process quick and simple.
  • Sell and facilitate transactions on your personal marketplace: In this model you can either choose to sell your branded products alongside other third party sellers or operate solely as the owner. In this model, you will be able to deploy your marketplace on multiple channels, as well as provide a reliable and engaging user experience to ensure customer retention. Elastic Path works closely with our marketplace partners in the Composable Commerce Hub to ensure real time syncing and seamless cohesion of complex integrations.

Of course if you have a simpler or more complex need we can always jump on a call to discuss your options. We hope this was helpful, but if you want to know more you can visit our eCommerce Marketplaces page or shoot us a chat on our website. We’d be happy to help!