Online marketplaces
What is a marketplace?
- A meeting place between buyers and sellers
- Online marketplaces are platforms where buyers and sellers meet. They can be Business to Business (B2B), such as Alibaba.com, Business to Consumer (B2C), such as Amazon.com, or Consumer to Consumer (C2C) such as eBay.com. B2C and C2C marketplaces are set up for instant transactions, using an auction format (eBay), a retail direct sales format (Amazon) or a combination of both. On the other hand most B2B marketplaces are not designed for instantaneous transactions. This is because international B2B transactions in most cases take place only after the buyer and the seller establish a trusting business relationship. So most international B2B marketplaces are used by buyers and sellers to find new partners and establish an initial contact with them. Negotiations and order placements usually only take place after personal meetings (either online or in person).
- Different kinds of marketplaces
- Some online marketplaces are multi-industry (Sourcingparts, Alibaba) while others are "vertical", meaning they are focussed on a specific sector, (Aeroxchange, Powernext). Some marketplaces are hosted by a company or a public institution that is also a buyer, seller or both (Aeroxchange, Supplyitnow).
Why should you use an online marketplace?
- Advantages for the seller
- Enhance the company's visibility
- Reach new markets without prohibitive marketing costs
- Fulfill new demands for products quickly
- Advantages for the buyer
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- Access to a large pool of suppliers
- Immediate access to information about what products are available
- Get complete information (photos, specification sheets, advice forms)
- Take advantage of prices already negotiated
- Advantages and additional services offered by some marketplaces
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- Information technology services
- Marketing support
- Logistics management
- Other services
How does a marketplace work?
- The supplier
- The supplier makes a tender offer or offers goods in the form of an online catalogue or a temporary online offer. For B2C and C2C products are offered on the marketplace and the marketplace makes a commission on the sales. Most B2B marketplaces work on a fee-based system where sellers pay a fee to be listed in a prime position.
- The buyer
- The buyer searches for the tender offers made by suppliers or makes a no-cost request for offer ("trade lead").
Most B2C and C2C transactions are done as immediate online purchases. Most B2B transactions are finalised outside of the marketplace. - N.B.: As is the case with all international business, buyers and sellers must use online marketplaces with the same caution they use when doing business offline. Make sure you have done proper due diligence on your partners to ensure that they are reliable.
What does it cost?
- Free registration
- Registration is free on most marketplaces. Some basic services (different for each of them) are usually offered for free because marketplaces seek to expand their listings and face increased competition.
- Paying ancillary services
- Most marketplaces add fees for various services, such as high placement on searches, posting a full catalogue, posting videos, etc. Alibaba ,for example, lets you list your company for free but then charges anywhere from USD 600 per year up to USD 10,000 per year or more to publish due diligence information ("Gold Supplier"), post catalogues and videos and feature a company on the platform.
- Cost of time
- It takes time to get set up on a marketplace. You must learn how to set up your company and products, how people use it, what the most advantageous services are for your business, etc. In any case, the advantages most often outweigh the costs in both time and money as reputable marketplaces are now the main place buyers go to find suppliers.
