Marketplaces such as Amazon and eBay have been popular for years. But more and more new marketplaces are emerging that provide additional channels for retailers and consumer packaged goods (CPG) firms to sell their products.
Now more than ever, CPG firms and retailers are looking for APIs to support the selling of their goods and services on marketplaces. While EDI (electronic data interchange) technology has replaced paper for exchanging order information with suppliers, today’s marketplaces require frequent, near real time data exchange.
That is why we are seeing more and more requests for application programming interfaces, or APIs, which is a way for one type of software to connect seamlessly to another without human interaction.
Let’s explore the transformation of the marketplace concept, the trends that drive marketplace integration, and the benefits of using an existing marketplace to sell goods and services — now in the midst of COVID-19 and the future.
What is a Marketplace?
A marketplace refers to a type of ecommerce platform where companies sell their products or services to customers. When it comes to fulfilling online orders, there are three main type of transactions:
- The customer purchases a product directly from the company, and no third-party platform (such as Amazon or Walmart) is involved.
- The customer purchases a product through a third-party platform, the order is fulfilled by the merchant. For example, you find an Under Armour backpack on Amazon, order it through Amazon, but the order is fulfilled by Under Armour.
- The customer purchases a product through a third-party platform, and the third party fulfills the order. If we work with the same scenario as previously mentioned, in this case the order would be filled by Amazon, not Under Armour.
It’s important to remember that a defining characteristic of a marketplace is the fact that buyers and sellers need to be on the same website, and the buyer must be able to purchase goods directly from the website.
The popularity of these platforms has been growing, with 46% of American companies and 59% of European companies now turning to marketplaces for their online sales.
Companies and businesses must also pay to use marketplaces, though the prices and fees will depend on the specific platform. For example, Amazon’s professional selling plan has a flat fee of $39.99 per month and no per-item fee, though there are also selling fees, shipping fees and fulfillment by Amazon fees.
Top Marketplaces Today
It’s no surprise that Amazon is the top ecommerce platform in the country with more than 197 million people visiting the company’s website each month. It’s the largest global marketplace out there with visitors frequenting the site not only to buy products, but also to check and compare prices.
Fulfillment by Amazon provides sellers with a 30-50% increase in sales and more than 50% of Amazon sales come from third-party sellers, according to Big Commerce.
Oberlo estimates there are approximately 25,000 sellers on Amazon with more than $1 million in sales, and 200,000 with more than $100,000 in sales.
The second largest global marketplace is Japan-based PayPay Mall, the largest marketplace in the Asia-Pacific area. eBay, which was one of the first online marketplaces, is the second-leading marketplace in the United States behind Amazon. The business is known for its “auction platform and shopping website through which people and businesses can buy and sell a variety of products and services worldwide,” according to Statistia.
Other popular online marketplaces include:
- Google Express
The biggest marketplace is a general once such as Amazon or Walmart, that offers a variety of products — everything from appliances and books to sporting goods and jewelry.
But there are plenty of other niche options that offer specialized products. For example, fashion is the second-largest type of marketplace that includes sub-categories, such as vintage clothing. There are also marketplaces that specialize in electronics, home wares, books, arts and crafts, toys, musical instruments, collectibles, and antiques.
A few examples you may be familiar with:
- Etsy specializes in handmade items, goods, and craft supplies.
- Wayfair sells home goods and furniture.
Emerging marketplaces that cater to a specific location are also on the rise. Mobile platforms are dominant in emerging markets namely due to the fact that many people in those locations do not have computer access.
Top Marketplace Trends
The marketplace has certainly evolved from the early days of eBay. Here are some top trends we’re seeing:
- More B2B products and services. Marketplaces have historically served B2C, but now more platforms are specifically targeting other businesses.
- More options in terms of credit and payments. Businesses are seeing more access to credit and payment options. For example, Walmart recently partnered with Goldman Sachs and announced that eligible marketplace sellers will be invited to apply for lines of credit.
- Mobile checkout on the rise. It’s estimated that mobile commerce, which refers to shopping through a mobile device such as a smartphone, will reach $284 billion by the end of 2020 (or 45% of the U.S. ecommerce market.)
- Specialized electronics marketplaces. The gaming industry is huge: A Reuters article estimates that the global gaming market will create $159.3 billion in revenue in 2020 and exceed $200 billion in 2023. So it’s no surprise that this industry has produced many specialized marketplaces, such as G2G, which not only sells gaming products, but also its expertise and services.
- Home improvement marketplaces. Platforms such as Houzz are a one-stop shop for home renovation and design. This website is more than just a place to find new design ideas; it’s now “connecting homeowners and home professionals with the best tools, resources and vendors.”
- Augmented reality (AR) and voice/image search for products. AR and voice/image search capabilities have become increasingly popular, offering new, exciting, and sometimes easier ways for consumers to experience and search for products. According to Invesp, 61% of online shoppers prefer to buy on sites that offer augmented reality.
- Rebranding/acquisitions. Marketplaces are very much a business, which means they must also evolve and may undergo their own rebranding or acquisitions as needed.
5 Benefits of Doing Business Through an Online Marketplace
- Faster time to market. A marketplace can offer a merchant almost immediate access to customers/buyers.
- Established platform. Most marketplaces have programs that you can take advantage of for marketing, selling, and fulfillment. These types of established platforms also provide a built-in level of trust for buyers.
- Large, pre-existing customer bases. If shoppers are likely to use a marketplace for one purchase, they may often turn to the same platform for another type of purchase — especially if they’ve had a positive customer experience. Plus, marketplaces have customers who regularly shop their sites. Amazon, eBay, and Walmart see almost 500 million active visitors combined each month.
- The marketplace fulfills the orders. This comes at a price, but it eliminates the need for stocking inventory, managing, and shipping.
- Reduce marketing costs. It’s important to remember that a marketplace is an important strategy — but it shouldn’t be your only marketing strategy. It’s a good way to expand your footprint.
Disadvantages of an Online Marketplace
While an online marketplace is a beneficial tool, there are also some pitfalls. These include:
- You are a tenant. At the end of the day, you need to abide by the rules and guidelines of the marketplace, which could impact your business model and your bottom line.
- Possible complicated fee structure. You should carefully examine the marketplace’s fee structure in order to avoid unexpected costs.
- Reduced (or complete lack of) visibility. There is often a reduced (or in some cases a complete loss of) visibility to the seller.
- How you’re treated. If you aren’t as high-profile of a seller, you may not receive the same kind of treatment as other businesses or organizations.
- Data access. The marketplace won’t provide you every piece of data you may need.
- Selecting the wrong marketplace. You have to decide which marketplace is right for you. Just because Walmart is a high-traffic platform doesn’t mean it’s the best platform for your business. A specialized marketplace with fewer customers, but ones who are especially interested in your products, may be more suitable for your needs.
- Fees and costs. As previously mentioned, marketplaces are not free, and many require subscription services and additional fees for fulfillment and shipping.
The Importance of Integration in the Marketplace
Marketplaces will typically provide multiple ways to connect with businesses and companies whose products and services they are selling. The exchange of information is crucial, and the kinds of data and information we’re talking about is illustrated below.
Data You Expect to Receive from a Marketplace
Data You Need to Send to a Marketplace
- Product information
- Inventory status
- Shipment updates
If you are Microsoft Dynamics 365 user, you need to determine how to communicate that information in a way that can easily integrate with one of the Dynamics ERP products. Traditionally, that’s where APIs come in.
APIs allow systems to interact through the cloud and provide real-time product information; they are often the preferred method for the marketplace, but they may not be your method of choice if you don’t have the appropriate solution to support that type of integration.
Adding an API is another security exposure, but the information and data can be transmitted within seconds (as opposed to an EDI, which is transmitted within minutes). APIs have become a dominant player in the marketplace, though EDI is still often used because it’s typically a more secure solution that can handle a lot of information.
Innovate Your Retail Marketplace with Hitachi Solutions
Hitachi Solutions works with retailers around the world to transform their business to fuel growth and profitability, drive retention, and better meet customer demands. We work with partners, including Data Masons, who are capable of delivering holistic, value-driven solutions across the entire Microsoft stack and across all Microsoft workloads.
Data Masons specializes in EDI Made Simple for Microsoft Dynamics customers by offering advanced, turnkey API, EDI and XML solutions. The Data Masons EDI Cloud Solution includes everything you need to connect to your specific supply chain, whether that is a marketplace, customers, third-party logistics provider, or more. Contact our team of specialists today for more information.