Types of online marketplace and their business models

Online marketplace platforms have slowly taken over the bricks-and-mortar shops, literally brick by brick through the years. According to studies, Revenue in the e-commerce market is projected to reach above US$400,000 million by 2020. We have been witnessing this steady and tremendous growth in the online marketplace industry since the 90s.

A perfect ecommerce platform depends on choosing the right multi-vendor marketplace software that starts by defining the ecommerce objectives and long term goal of your business Let’s dive right in, to understand further about the various types of marketplaces which will give us an insight as to how it grew to become a giant business in your niche.

Types of Marketplace:

Online Marketplaces are categorized into three basic groups depending on the below aspects of ecommerce that the platform focuses on

  1. Marketplace by target audience
  2. Marketplace by focus on particular niche
  3. Marketplace by management approach

Studies have shown that an increased consumer trust on online transactions has been one among the foremost factors in the astronomical growth of eCommerce. In the eCommerce market, the number of users is expected to rise to 270 million by 2024.

So, in the following section we will take a plunge into the classifications under the category that focuses on the target audience.

  • Business-to-Business(B2B):

As the name suggests, this type of marketplaces platform facilitates transaction between two businesses, i.e between manufacturer and wholesaler or retailer. B2B models are basically used to both purchase products and services in bulk and then sell it using other e-commerce models or to use it to procure raw material for a supply-chain management system. Suitable for bulk sales and purchases, B2B marketplace acts as a catalyst between individual consumers and businesses.

  • Advantages of B2B Marketplace:
  1. Bulk inflow of money
  2. Encourages online business
  3. Easy import and export of products
  4. Less price sensitive
  • The Best Examples for B2B Marketplace:

Alibaba, Made-in-China, Target etc

  1. Business-to-Customer (B2C):

B2C marketplace platforms allow the businesses to get connected with the customers and sell their products and services directly to them.

The software of B2C marketplace is built in such a way that it provides the customers with an ocean of options to choose from, and the purchased goods will then be delivered right to their doorstep, at their convenience.

In other words, the B2C model is like an online shopping mall that is a one-stop-shop for everything you might need, with a single-point check-out counter.

  • Advantages of B2C marketplace:
  1. Personalized contact with customers and business
  2. Cost effective goods and services
  3. Opportunities to expand globally
  4. Clear targeted market
  • The best examples for B2C Model:

Amazon, Hotels.com, Aliexpress etc

  1. Customer-to-Customer (C2C):

One of the initially developed marketplace platforms, C2C marketplace is built to support transactions directly between customers. It is also called as Peer to Peer marketplace model (P2P) as the transactions are made between two parties with similar needs and services/products.

One of the striking features of the C2C/P2P marketplace platform is that a customer who will be a buyer in one transaction can become a seller in another transaction and vice versa.

  • Advantages of C2C Business Model::
  1. Direct transactions
  2. Wide reach
  3. Negotiable market
  4. Less transaction cost
  5. Simple process
  • Best examples for C2C Model:

Quikr, Airbnb, EBay etc

  • Customer-to-Business(C2B):

A unique marketplace platform where the customers are the ones who sell their products and services to businesses. This variety of online platform is extremely suitable for freelancers and upcoming entrepreneurs. Here the consumers create value and prices for their goods and services.

Majorly seen in Crowd funding Projects, the only thing to be vary of is the legal formalities that have to be adhered to, given customers will be providing services to businesses.

  • Advantages of C2B Marketplace:
  1. Consumers provide market to the businesses
  2. Negotiable prices
  3. Direct consumers profit
  4. Flexible transactions
  • Best examples for C2C Model:

Online blog surveying, online influencing, photo stock websites etc

Business Models for Marketplace Platforms:

  1. Commission Model:

Commission model is designed to charge the vendor/seller, a certain fixed percentage amount as commission for every successful transaction they have  made.

Example: B2B Marketplace and B2C Marketplace

However, there is one major customization that has been made to execute this model for the C2C/P2P and C2B marketplace platforms.

  1. The commission will be charged to the parties, the sellers/vendors and the buyers. Thus making more profit on every transaction that occurs on these marketplace platforms.
  1. Subscription Model:

Both the parties (seller and buyer) are charged monthly or yearly (depending on what is chosen), a nominal fee while registering to that particular marketplace platform.

Example: B2B Marketplace and B2C Marketplace

  1. Listing Fee Model:

Not only is the registration and the sales chargeable, but even putting up the products on the marketplace platform is also chargeable. This charge is nothing but the Listing fee which the seller/vendor owes to the third party marketplace where they have listed their products and services on their platform.

Example: B2B Marketplace and B2C Marketplace

  1. Paid promotion model:

Once the customers are registered, they can also avail services of promoting their products on those marketplaces platforms for a nominal fee. Well suited for the marketplace platforms that provide focus mainly on the goods rather than the vendors/sellers.

Paid promotion model further has to kinds,

  1. Feature promotion category
  2. Sponsor promotion category

Example: C2C Marketplace and C2B Marketplace

  1. Advertising model:

Registered users can promote their products and services through advertising on the online platforms by paying a price for every product they promote.

This model is further divided into three types based on the parameters on how the charges are to be applied for their goods and services

  1. Cost per impression (CPI)
  2. Cost per click or pay per click (CPC/PPC)
  3. Cost per period (daily, weekly, monthly)

Example: C2C Marketplace and C2B Marketplace

These are the types of marketplaces and their Business models that will help you in making an informed decision with respect to building your own Online Marketplace Business.

Choose Wisely and Get Started!