Nearly every internet user has come across an online marketplace before. It’s not a stretch of the imagination to suggest that a majority of us have even made purchases from one. What is an online marketplace? Well, let’s see if we can break it down for you.

An online marketplace is a website that falls under the ecommerce umbrella as a site that aggregates curated goods or services from numerous third-party suppliers. The marketplace operator, the entity which controls the site, is then responsible for facilitating the transactions that occur through the online marketplace, including making mass payments to the supplier, as well as providing services through the marketplace. Sites like eBay or Amazon are excellent examples of popular online marketplaces.

Sites like eBay or Amazon are excellent examples of popular online marketplaces. Or in our modern sharing economy era, Uber and AirBnB are also examples of multi-sided platform marketplaces. In the business-to-business world, services such as ScribbleLive and Upwork provide a marketplace for on-demand professional help to get projects done.

Why Do People Like Online Marketplaces?

Online marketplaces provide a wide range of products or services for visitors to choose from. This is usually going to be the case because of the fact that online marketplaces pull together the inventories and capabilities of a large number of providers. In terms of the service-based marketplaces, the conveniences of vetted providers that are available on short notice is incredibly attractive to those who are too busy to do their own research and vetting for help.

The industries that an online marketplace may focus on can vary widely. Some online marketplaces are for general shopping while others are specifically catered towards antiques, electronics, or even more specific niche markets. While sites like Upwork have been used since the dot-com days, there are an increasing number of services that specialize in certain aspects, which affords it greater variety and depth of offering. On a side note, due to the fact that a marketplace often has suppliers in so many different geographies, a marketplace operator should consider using a mass payouts automation system in order to make their payment processes smoother and more reliable, while reducing the manual time spent by their team on this activity.

Since online marketplaces support and feature products from a wide array of suppliers, inventory is usually available for their customers and prices are typically competitive. This contributes to the customer experience as customers can typically purchase what they see online without a hitch. This is exactly why online marketplaces tend to be some of the most frequently visited and fastest growing sites in the world. When it comes to ecommerce, an online marketplace can act as a one-stop shop for online consumers who are looking to save time, money, and effort when shopping for a service.

Online Marketplace Responsibilities

It is the marketplace operator’s duty to oversee and enable all transactions and to ensure that the funds are being sent effectively to the right suppliers. When a customer places an order, the marketplace operator is responsible for capturing the legitimate payments and informing the supplier that the corresponding items have been ordered and paid for so that the supplier can then fulfill the order and deliver it to the customer in a timely fashion. Furthermore, the marketplace operator will then pay the supplier for their inventory as per the agreement between the two entities.

Online marketplaces do not only act as an aggregator of products and services. They also provide customer service (and other services) to the people ordering from their website. When it comes to addressing transactional, delivery, or customer satisfaction disputes, the marketplace operator is often the responsible party.

Challenges for Online Marketplaces

Online marketplaces face some unique challenges as a business model. Because of their heavy reliance on third-parties, the relationship with suppliers or providers is critical. They have the same challenges as managing employees, but loyalty and control are considerably more difficult because they are not fully managed human resources. Online marketplaces can also have thinner margins because they must compete with traditional providers, yet they must still pay a competitive rate to their network. Because of this, they need to operate their business as lean as possible. In order to succeed, the ability to scale operations is also critical.