The Growth of Online Marketplaces

Online marketplaces are the perfect way for potential customers to find everything from a plumber to a new pair of shoes. And it looks like consumers agree – ecommerce sales for products and services reached $4.921 trillion in 2021.

Online marketplaces connect customers to service providers faster and quicker than any other method. All it takes is a query on their favorite search engine, then they can find a marketplace that caters to what they’re looking for.

Users can then search that marketplace based on their requirements. These could be anything from location to the type of service provided to the type of product they need, right through to specific details like the color of a garment or the type of gardening someone specializes in. Some marketplaces focus on one particular area, such as Uber, which focuses on providing a taxi service for its users. Others, such as eBay, provide users with a variety of products and/or services. Each type of marketplace has its own benefits for the product owner, vendor, and user.

Why have online marketplaces grown so fast?

Online marketplaces are easier for everyone involved. Vendors get to attract customers for less than they would using other methods such as newspaper adverts (which are costly and increasingly less effective), or branding on the side of a van. Online marketplaces are a great way for them to advertise their services, providing much more detail about what they can do than any other method beyond their own website. However, running a website is a time-consuming investment, and many businesses simply don’t have the time to do it. With online marketplaces, they can share evidence of their work and updates with customers without worrying about maintaining a website. Online marketplaces operate using two payment models: the first is a flat monthly or annual fee, and the second is via commission. Depending on how much business a vendor generates will depend on which method is more useful to them. The more money they make, the more they will lose through commission. However, smaller service providers may lose money if upfront fees are too expensive. Online marketplaces allow vendors to include as much information as possible so that customers can make an informed decision. The more information vendors include, the more they and their customers can benefit. An ad in a newspaper or magazine, on the other hand, is limited to the amount of information it can contain. This then means that anyone who does reach out to a service provider will be less qualified, and even if they ask for a quote they may be less likely to convert. Customers get much more in-depth, tailored search results in marketplaces than they would using any other method. This means they’re more qualified before they reach the vendor’s page. Customers can also see ratings and reviews from previous customers, which provides social proof, further helping them to make informed decisions. The more positive the reviews are, the more likely someone is to convert. Any negative reviews that vendors receive they can use to improve the products and/or services that they offer. Compare all of this to doing things the offline way: customers have to find recommendations from friends or relatives. If they’re new to the area, they have to look in local newspapers or magazines. There's no guarantee of the service provider's quality of work without recommendations, though. They could end up paying for a service or product and receiving a sub-par end result. When it comes to products, visiting stores can often be better, as customers get to try on shoes and outfits, which ensures a better fit. However, many online marketplaces such as Etsy or eBay allow vendors to sell custom-made garments that fit proportions more precisely than clothing that’s bought off the rack. Customers benefit from a tailored approach like no other, providing them with one-of-a-kind garments that they wouldn’t find anywhere else.

Who do online marketplaces benefit?

In short, everyone. Customers who work full-time can find what they need regardless of what time of day it is. They don’t have to find time during the workday to make a phone call, or take time out of their lunch to contact someone. They can do their research at their own convenience, and, if the marketplace also offers online booking, they can book when they’re ready, too. A couple of decades ago, this wasn’t an option. If you needed something, you had to take time out of your day to find and purchase what you needed. This meant spending lunch breaks on the phone or having to travel if what you needed wasn’t located nearby. It was an arduous way of finding products. Vendors, meanwhile, were limited to spending money on print advertising, where they couldn’t accurately track the ROI. This meant that they risked wasting money on advertising methods that we're guaranteed to reach the right audience. With online marketplaces, vendors can track the ROI they receive from using it, helping them to determine if it’s a valuable tool for them. When they make changes to their profile, add updates, or receive a review, it’s easy for them to track the impact this has on their business. Whatever their business model, they have the power to be more reactive than ever.

To find out more about adding booking and scheduling features to your online marketplace, check out our use cases.