The Rise of the Marketplace Business Model

“Marketplace” is a bit of a buzzword in the e-commerce space at the moment, and it’s not hard to see why. One-third of all U.S. business now flows through e-commerce, and 63 percent of that is through marketplaces.

Marketplaces aren't necessarily replacing traditional commerce channels like brick-and-mortar stores, or even websites. Instead, they’ve expanded how retailers connect with customers, increase revenue, and deliver data-driven omnichannel experiences.

The rapid uptake of e-commerce marketplaces is being driven by low-cost expansion, multichannel marketing that's data-driven, and consumers that prioritize digital purchases. The marketplace model enables businesses to expedite production processes while providing a wider selection of goods, including those from both a retailer's own items and third-party merchants.

Let’s explore this further.

Low-Cost Expansion

The marketplace business model enables established merchants to enter new markets for a fraction of the usual cost of customer acquisition.

It gives access to shoppers who are prepared to make purchases, increases product visibility, and supports logistics. By doing this, retailers can avoid spending the time and money necessary to launch their brand's presence and operations in those markets.

Omnichannel Marketing That's Data-Driven

Many retailers still lack the time and resources to follow customer activity across numerous channels, despite the fact that 56 percent of e-commerce professionals have budgeted money for data and analytics.

The marketplace business model enables organizations to gather in-app data while users interact with their platforms. These datasets can then be compiled and analyzed to produce valuable insights that can be used to better understand customers' behavior and what motivates them to make purchases.

Traditional retailers can use this information to improve their omnichannel strategies and better satisfy the changing needs of customers while driving repeat sales.

Digital-First Consumer Culture

Since the start of COVID, more shoppers are using marketplaces to find the most recent information on products before placing an order. For instance, according to a 2020 Catalyst and Kantar survey, 63 percent of U.S. consumers do preliminary product research on Amazon.com or compare products and prices on Walmart.com before making a purchase.

Retailers are increasing their presence on the major online shopping sites where their target demographic is more likely to browse and make purchases in order to keep up with this trend. The fact that Amazon alone accounts for around 3 percent of all consumer spending highlights the enormous possibilities such marketplaces present for boosting sales.

Marketplace Model Challenges

A system that quickly and widely distributes content is necessary for the marketplace model to be implemented successfully. However, most conventional e-commerce sites rely on antiquated content management systems (CMS) that are both too slow, complex and inflexible to support the agility needed.

Legacy CMSs were developed to distribute content to one channel at a time, typically a website. As a result, they're unable to properly support the marketplace business model or the expansion of a retailer’s e-commerce strategy to deliver content over numerous channels and platforms. A different CMS is required if a merchant wishes to run its own website and set up a store on a marketplace.

However, doing this makes things very complicated when it comes to content management processes. Relying on separate legacy CMSs makes it extremely challenging to deliver the same content experience across all channels. Updates to products and content take a long time to complete because of the different systems’ complicated, monolithic structures, which prevents retailers from responding quickly to customer and market demands. Additionally, they will pay more for system upkeep, which raises business operations costs.

What’s Needed for Success?

In order to successfully deploy the marketplace business model as part of their e-commerce expansion strategy, retailers need a CMS that can quickly incorporate new channels into their omnichannel workflow and deliver content at scale via a single platform. This will enable them to connect with customers at every stage of their purchasing journey, bolster customer acquisition, and increase conversions.

David Rich is chief marketing officer at Amplience, a dynamic commerce experience platform built for today’s (and tomorrow’s) customer journeys.