How are E-commerce Marketplaces Structured? — Complete Guide

For ecommerce, the most important thing is trust.” says Jack Ma, the founder of the globally renowned marketplace, Alibaba.

Building trust in the online market is indeed much more challenging than the traditional business. When the customers are shopping online, they share their personal details, right from their name, address, and contact number to their banking details. Though they are not sharing these details directly with you, they are shopping on the web, and they are trusting your website to make those transactions. So, indirectly you are responsible for the safe and secure shopping experience of each of your customers.

A report of Business Standards says that 68% of customers prefer to shop their favorite products from the marketplaces than those businesses’ websites. We all know that most of the marketplaces don’t have their products, and it’s the registered brands and merchants selling those products, but the thing is about trust. The customers-centric policies of marketplaces make them the first choice of buyers. Moreover, a greater count of sales and enhanced customer experience, and word-of-mouth publicity add the cherry on the cake.

What is the Ecommerce Marketplace?

The literal meaning of the marketplace is where several sellers gather to sell their products, and buyers come to buy them. When its the digital space, it should be referred to as an online market space; however, the industry adapted term is the marketplace, so be it. The e-commerce marketplace is the business model where the sellers sell the products or services online, and customers can shop in the digital mode. In the case of products-based businesses, the physical product will be delivered at the customer’s doorstep. The mode of payment and business conduction will happen on the web.

The renowned ecommerce marketplaces are Amazon, eBay, Alibaba, Flipkart, Rakuten, etc. Most, if not all the ecommerce marketplaces work on commission based sales model. It’s really tricky for startups to build trust in the market, and the marketplace can help you gain sales by the time you establish your brand. You can register anytime to get started. However, an understanding of the marketplace structure can help you select the right marketplace model that can work for your business.

What are the types of ecommerce marketplace?

A decade ago, there were a handful of marketplaces, but now we have a huge distribution of ecommerce marketplaces for businesses out there. If you are hunting for an online marketplace, first think about your offerings. Based on your offerings, you can count on:

Product marketplace

The product marketplace deals with the products only. All the registered sellers in this marketplace will be manufacturers, wholesalers, or retailers dealing with products. Their end customers can be customers as well as businesses. Some of the marketplaces handle the order

Well, known product marketplaces are Amazon, Alibaba, Rakuten, eBay, Etsy, etc.

Service marketplace

The service-based businesses can register themselves on the service marketplace to promote their services. On such marketplaces, the companies and individuals both can register and sell their offerings. The payment model is mostly fixed commission based. Further, marketplaces allow businesses to do paid promotion and thrive the competition with the content and rating based on customer experiences. Popular service marketplaces are Freelancer, Upwork, Fiverr, etc.

Project marketplace

If you have a short term or long term goal of fundraising, support of any cause, or any other project; you can list them on project marketplace. Service marketplaces can also be used to promote projects. They are created to create the community of the providers and acceptors.

Hybrid marketplace

The marketplaces that allow you to sell products, as well as services across the same platform, are the hybrid marketplaces. They may or may not offer an option to make payment through their portal, but you can leverage the platform for both of your offerings. Some of the existing hybrid model marketplaces are Olx, Craigslist etc.

How are the ecommerce marketplaces structured?

In the marketplace structure, we talk about the business conduction pattern and how they make earning. The static pattern of marketplaces is that of a commission-based model. In addition to this commission, some of the marketplaces enable paid promotion on their platform to let registered businesses enhance their market reach. Some of the marketplaces do offer services to the registered sellers directly or with the help of third-party alliances. This will again help them make a fair share of earnings.

  • Monthly fees + Fixed Commission: Irrespective of the type of marketplace, some of the marketplaces charge a fixed monthly fee to use their platform. The registered merchants will be charged with the commission fees on every order they will receive in addition to that fees.
  • Monthly fees + Variable Commission: The fixed monthly fees will be charged by the marketplace and variable fees for different products/service categories.
  • Free + Fixed/variable commission: Another marketplace model is when there are no listing fees. As long as you won’t make sales, usage of the marketplace will be free for you. You will be charged with the fixed or variable fees on each of your orders, depending upon the marketplace’s preference.
  • Subscription-based marketplace: Some of the marketplaces offer a subscription-based model where you can list your products and keep selling for the tenure you are subscribed to with the plan. When subscription gets over, you won’t be able to use the marketplace unless you upgrade your plan.

This is all about ecommerce marketplaces that are getting benefited with your products and services. Considering the sales model ecommerce marketplaces can allow different types of selling options for customers. You can count on:

  1. Auction listings: In the auction-based listings, be it of the product or service, there is an initial price listed above that bidders will place the bid. Whosoever will place the higher bid by the last date can claim that deal. The auction-based product listing works mostly in terms of tenders or when selling the antiques. Service marketplaces often enable this model in the reverse cycle. Any bidder who bids the lowest rates and happens to be in a budget range of employer gets the project for which the bid is placed.
  2. Fixed listings: Typically, marketplaces and online stores offer a fixed pricing option. The product’s fixed price is the final price that the customer will be paying on the checkout. The merchants can offer catalog or cart level discounts to the customers for a particular time range; however, it will also be fixed in nature.
  3. Hybrid pricing: Some of the marketplaces enable both types of listing options. Now, it’s the merchant’s choice whether to list the product with auction-style pricing or in the fixed price style. Either of the two options can be implemented at once.

Those of you own a product or service-based business, and selling offline can register on the marketplace and start selling. You can also register your business at Builderfly and build your store to sell directly to the customers. If you are planning to establish a marketplace of yours, explore more about marketplace models and the security norms. Think about the product niche and build your brand identity around that niche.

Read more: https://www.builderfly.com/how-are-e-commerce-marketplaces-structured-complete-guide

Builderfly is the best Ecommerce platform to build an online store for web and mobile. I work as Business Development Executive at www.builderfly.com

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store