Last year, there was a huge surge in online shopping and we witnessed the rise of online marketplaces, which has had a significant impact upon how business takes place, both on and offline. In fact, it's predicted that the e-commerce sales of $1.85 trillion from 2016 will more than double within the next five years.
What's an online marketplace?
An online marketplace is essentially a website or an app that allows a customer to shop from multiple sources at the same time. They resemble their real-life counterparts - a place you can visit where you can buy the goods of multiple sellers. The marketplace owner doesn't own everything they are selling but manages the selling process on behalf of the seller and facilitates the transaction.
They offer the ultimate convenience for customers, so it's not surprising that they've seen huge amounts of growth over recent years, both in the number of marketplaces around and the amount of business that they do. Marketplaces offer a different business model that expand the appeal of an organisations to a wider range of customers.
Changing customer behaviours caused by the radical shift to online has also lead to changing customer preferences, e.g. shopping via mobile. Plus, marketplaces are in a better position to react to market trends and changing buying patterns, so have the ability to be more reactive in their strategic approach.
Marketplaces aren't just for retailers of tangible goods. We're also seeing a significant rise year on year in the number of financial services offered via marketplaces/ For example, some mortgage providers are now using marketplaces to improve the borrower's experience, digitise and shorten the process and reduce paperwork.
By adopting an Amazon-style approach, the lenders are able to create a customer experience that is faster and can accessed via mobile and web. The focus is on the customer journey, rather than the process.
How are marketplaces evolving?
Monzo, Revolut and Starling have all recently launched a marketplace offering, and marketplace banking is set to be a hot topic on UK's banking scene in the foreseeable.
Traditional banking develops products and services based on what they perceive their customers to need, keeping all of the supply chain in house. However, marketplace banking takes the complete opposite approach - and vendors rarely design, create or even own any of the products or services that they are selling. Using Revolut as example, their bread and butter offering is a digital-bank, dripping in convenience, which boasts the latest technology, something the high-street banks can no longer offer. However, in addition to this they also bolt-on external services and place them in front of their customers, such as phone insurance.
Marketplaces offer transparency, choice and lower pricing and on financial products, and have reacted to the fact that customers, whether they be purchasing tangible or commodity goods, feel value is more important than brand.
What does the future hold for marketplaces?
As they are able to respond well to consumer trends and demands, online marketplaces have a bright future. Marketplace platforms offer significant opportunities to businesses, but only to those who promote flexibility and responsive technologies. Businesses that fail to respond to the market place phenomenon are going to miss out on an array of sales, marketing and financing benefits.