Online marketplace

An online marketplace (or online e-commerce marketplace) is a type of e-commerce website where product or service information is provided by multiple third parties. Online marketplaces are the primary type of multichannel ecommerce and can be a way to streamline the production process.

In an online marketplace, consumer transactions are processed by the marketplace operator and then delivered and fulfilled by the participating retailers or wholesalers. These type of websites allow users to register and sell single items to many items for a "post-selling" fee.

Because marketplaces aggregate products from a wide array of providers, the selection is wider, and availability is higher than in vendor-specific online retail stores. Some online marketplaces have a wide variety of general interest products that cater to almost all the needs of the consumers, others are consumer specific and cater to a particular segment. Online marketplaces became abundant in 2014.

B2B online marketplaces

Business-to-business (B2B) online marketplaces are platforms that allow companies to buy and sell products or services to other businesses. These marketplaces typically focus on a specific product or service category and are used by businesses to find suppliers, negotiate prices, and manage logistics.

Some examples of B2B online marketplaces include VerticalNet, Commerce One, and Covisint, which were some of the earliest B2B marketplaces to emerge in the early days of e-commerce. More contemporary B2B marketplaces include EC21, Elance, and eBay Business, which focus on specific product or service categories and facilitate complex transactions such as requests for quotations (RFQs), requests for information (RFIs), and requests for proposals (RFPs).^[1]

Online retailing

A Lazada warehouse in Cabuyao, Laguna, Philippines in 2018. Third-parties can ship inventory to customers from Lazada's warehouses and sell their products through Lazada's online marketplace.

Online marketplaces are information technology companies that act as intermediaries by connecting buyers and sellers. Examples of prevalent online marketplaces for retailing consumer goods and services are Amazon, Taobao and eBay. On the website of the online marketplace sellers can publish their product offering with a price and information about the product's features and qualities. Marketplace sellers often utilize a marketplace integrator or channel integration software^[2] to efficiently list and sell products across multiple online marketplaces. Potential customers can search and browse goods, compare price and quality, and then purchase the goods directly from the seller. The inventory is held by the sellers, not the company running the online marketplace. Online marketplaces are characterized by a low setup cost for sellers, because they do not have to run a retail store.^[3] While in the past Amazon Marketplace has served as a role model for online marketplaces, the expansion of the Alibaba Group into related business such as logistics, e-commerce payment systems and mobile commerce is now trailed by other marketplace operators such as Flipkart.^[4]

For consumers, online marketplaces reduce the search cost, but insufficient information on the quality of goods and an overloaded goods offering can make it more difficult for consumers to make purchasing decisions. Consumers' ability to make a purchasing decision is also hampered by the fact that an online marketplace only allows them to examine the quality of a product based on its description, a picture and customer reviews.^[5] Another characteristic of online marketplaces is that the same product can be offered by several merchants. In this case, consumers can often make the selection of a merchant with the support of reviews of that merchant, for example. Despite many conceivable factors influencing merchant selection, such as convenience, seller ratings, delivery options and a wider selection of goods,^[6][7] customers choose primarily on the basis of the lowest price for a particular product.^[8]

For services and outsourcing

There are marketplaces for the online outsourcing of professional services like IT services,^[9] search engine optimization, marketing, and skilled crafts & trades work.^[10] Microlabor online marketplaces such as Upwork and Amazon Mechanical Turk allow freelancers to perform tasks which only require a computer and internet access.^[11] According to Amazon, its Mechanical Turk marketplace focuses on "human intelligence tasks" that are difficult to automate computationally. This includes content labelling and content moderation.^[12]

Microlabor online marketplaces allow workers globally, without a formal employment status, to perform digital piece work, such as classifying an image according to content moderation guidelines. Gig workers are paid for each task performed, for example US$0.01 for each moderated image. Gig workers accumulate payment on the microlabor platform.^[13]

The sharing economy

An Uber driver in Bogotá, Colombia with the Uber app on a dashboard-mounted smartphone

In 2004 Yochai Benkler noted that online platforms, alongside free software and wireless networks, allowed households to share idle or underused resources.^[14] As the sharing economy inspires itself largely from the open source philosophy,^[15] open source projects dedicated to launching a peer to peer marketplace include Cocorico^[16] and Sharetribe.^[17] In 2010 CouchSurfing was constituted as for-profit corporation and by 2014 online marketplaces that consider themselves part of the sharing economy, such as Uber and Airbnb, organized in the trade association Peers.org.^[18]

Criticism

A 2014 study of oDesk, an early global online marketplace for freelance contractors, found that the service outsourcing of microwork increased opportunities for freelancers regardless of their geographic location, but the financial gains for most contractors were limited as experience and skills did not translate into higher payment.^[19]

A general criticism is that the laws and regulations surrounding online marketplaces are quite underdeveloped. As of consequence, there is a discrepancy between the responsibility, accountability and liability of the marketplace and third parties. In recent years online marketplaces and platforms have faced much criticism for their lack of consumer protections.^[20]

Market economy

In 1997 Yannis Bakos studied online marketplaces and came to regard them as a special type of electronic marketplaces. He argued that they reduce economic inefficiencies, by lowering the cost of acquiring information about the sellers' products.^[21]

The operators of online marketplaces are able to adapt their business model because of the data they hold on the platform users. Online marketplace operators have a unique ability to obtain and use in their economic decision making personal data and transaction data, but also social data and location data. Therefore academics have described online marketplaces as new economic actor, or even as a new type of market economy. In 2010 Christian Fuchs argued that online marketplaces operated informational capitalism. The inherent feedback loop allows the operators of online marketplaces to grow their effectiveness as economic intermediaries. In 2016 Nick Srnicek argued that online marketplaces give rise to platform capitalism.^[22]

In 2016 and 2018 respectively, Frank Pasquale and Shoshana Zuboff cautioned, that the data collection of online marketplace operators result in surveillance capitalism.^[23]

See also

• List of online marketplaces
• Darknet market
• Digital distribution
• Drop shipping
• Online shopping

References

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2. "Channel Integration Software Reviews 2023 Gartner Peer Insights". Gartner. Retrieved 2023-02-15.^{[permanent dead link‍]}
3. Matthew L. Nelson; Michael J. Shaw; Troy J. Strader, eds. (2009). Value Creation in E-Business Management: 15th Americas Conference on Information Systems, AMCIS 2009, SIGeBIZ track, San Francisco, CA, USA, August 6-9, 2009, Selected Papers. Springer Science & Business Media. pp. 156–157. ISBN 978-3-642-03132-8.
4. Oswald Mascarenhas (2018). Corporate Ethics for Turbulent Markets: The Market Context of Executive Decisions. Emerald Group Publishing. p. 123. ISBN 978-1-78756-189-2.
5. Matthew L. Nelson; Michael J. Shaw; Troy J. Strader, eds. (2009). Value Creation in E-Business Management: 15th Americas Conference on Information Systems, AMCIS 2009, SIGeBIZ track, San Francisco, CA, USA, August 6-9, 2009, Selected Papers. Springer Science & Business Media. pp. 156–157. ISBN 978-3-642-03132-8.
6. Adler, Manuel; Wohllebe, Atilla (December 2020). "Consumers Choosing Retailers On Online Marketplaces: How Can Retailers Differentiate Apart From The Price? An Exploratory Investigation". International Journal of Applied Research in Business and Management. 1 (1): 27–36. ISSN 2700-8983. Archived from the original on 2023-01-26. Retrieved 2023-02-15.
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8. Manuel Rolf Adler; Atilla Wohllebe (2020). "Consumers Choosing Retailers On Online Marketplaces: How Can Retailers Differentiate Apart From The Price? An Exploratory Investigation". International Journal of Applied Research in Business and Management. 1 (1): 27–36. doi:10.51137/ijarbm.2020.1.1.3.
9. "Leveraging offshore IT outsourcing by SMEs through online marketplaces Archived 2023-06-29 at the Wayback Machine". U.L. Radkevitch, E. Van Heck, O. Koppius, University Rotterdam, Journal of Information Technology Case and Application, Vol. 8, No. 3, Date posted: August 23, 2006; Last revised: November 24, 2013
10. Head and Hands in the Cloud: Cooperative Models for Global Trade to be Murray, Kevin, RMIT University, Melbourne, Australia, 2013
11. Sarah T. Roberts (2019). Behind the Screen: Content Moderation in the Shadows of Social Media. Yale University Press. p. 46. ISBN 978-0-300-23588-3.
12. Sarah T. Roberts (2019). Behind the Screen: Content Moderation in the Shadows of Social Media. Yale University Press. p. 47. ISBN 978-0-300-23588-3.
13. Sarah T. Roberts (2019). Behind the Screen: Content Moderation in the Shadows of Social Media. Yale University Press. p. 47. ISBN 978-0-300-23588-3.
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15. "The Sharing Economy: Why People Participate in Collaborative Consumption". ResearchGate. Retrieved 2019-05-31.
16. ☑ Cocorico is an open source marketplace solution for peer-to-peer marketplaces.: Cocolabs-SAS/cocorico, Cocolabs SAS, 2019-05-31, archived from the original on 2021-11-25, retrieved 2019-05-31
17. Sharetribe Go is an open source marketplace platform, also available with SaaS model, Sharetribe, 2019-05-31, archived from the original on 2021-11-25, retrieved 2019-05-31
18. Cristiano Codagnone; Athina Karatzogianni; Jacob Matthews (2018). Platform Economics: Rhetoric and Reality in the "Sharing Economy". Emerald Group Publishing. pp. 51–52. ISBN 978-1-78743-810-1.
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20. Nicholls, Rob. "Who bears the cost when your Uber or Airbnb turns bad?". Archived from the original on 2021-11-25. Retrieved 2016-08-02.
21. Bakos, Yannis J. (12 December 1997). "Reducing Buyer Search Costs: Implications for Electronic Marketplaces" (PDF). NYU.edu. Archived (PDF) from the original on 27 November 2022. Retrieved 27 February 2023.
22. Nick, Srnicek (2016). Platform Capitalism.
23. Sarah Barns (2019). Platform Urbanism: Negotiating Platform Ecosystems in Connected Cities. Springer Nature. p. 115. ISBN 978-981-329-725-8.