Marketplaces have been essential to the ecommerce industry’s bloom over the last several years. Products are more accessible and, in some cases, more affordable than ever, thanks to platforms like Amazon — the world’s largest and most successful example of the marketplace model.
But what are the effects of this business strategy, and what can consumers and retailers expect for the future of marketplaces?
For many consumers, marketplaces have been a haven where all sorts of products are available with just a few simple clicks. But for large retailers and big brands, the transition to this business model is not necessarily easy or even urgent.
“It really depends on who you ask and the type of marketplace we’re talking about,” Brendan begins. “For most consumers, Amazon provides convenience through wider choice, lower prices, and same-day fulfillment.” And for small DTC businesses, the benefits continue: “Many welcome being able to sell through large marketplaces, as it provides them consumer exposure. But that also comes with strong on-site competition and downward price pressure.”
It’s a different story for major established brands, says Brendan. “Major brands have typically steered clear of marketplaces as they don’t provide them a platform to establish and grow their brand value or build that direct customer relationship that underpins brand loyalty.”
But overall, Brendan deems marketplaces as instrumental in establishing and growing ecommerce as a service. This is apparent as more retailers hop aboard and integrate the platform as a core facet of their business model.
In a broad sense, the standard marketplace model has been mainly driven by competitive retail pricing and a wider selection of products. We haven’t seen massive deviations from this norm until now, but a shift has begun. Brendan notes, “There is still a lot of room for growth, and we’ll continue to see that over the next five years.” He explains, “As the sector grows, one of the changes we’ll see is the establishment of more niche marketplaces that play to specific demographics or interested parties.”
This is already happening on platforms like Etsy, which, he says, “has proved essential to many smaller craft-type businesses by offering them digital consumer reach that goes well beyond the local market stall that they might otherwise have been limited to.”
This change plays into the widespread consumer desire for more personalized experiences: “It’s clear that consumers are seeking a more personalized experience, and niche marketplaces go some way to delivering that.”
Huge product selection is both a benefit and a curse for the marketplace model. Brendan explains, “One of the challenges for a retailer on a large marketplace is having consumers find their product amongst millions of others.”
To navigate the challenge of product over-saturation, AI technologies that help consumers find exactly what they’re looking for using visual search capabilities are being implemented.
“Adoption [of visual AI] is growing substantially. It’s a really easy way for consumers to find their desired product. As more consumers use visual search when looking for products, it becomes impactful for retailers because it helps to overcome one of the key challenges associated with text search against extensive catalog databases: results relevancy.”
Visual search functionality helps to provide smaller result sets by presenting products that are more relevant to the consumer — which can lead to higher conversion outcomes.
While well on its way to greater triumph, the marketplace model still has some obstacles to face, as Brendan has established. In the future, he predicts marketplaces as becoming “more specialized to groups of consumers.” He also notes that while “having a large and broad product range is essential, matching those products to groups of consumers will be the next big challenge to solve.”
Platforms that mix the right search, recommendation, and product clustering capabilities will come the closest to achieving marketplace perfection.
“In the future, marketplaces will be more specialized platforms focused on helping customers find the right product rather than just the cheapest product.”
Brendan notes that, in due time, these changes “will herald a new era of personalized ecommerce.”