The Rise of Marketplaces and Its Impact on the Future of eCommerce
When online marketplaces emerged around two decades ago, they mainly focused on retail and goods. Horizontal marketplaces that sell a wide range of goods — examples being eBay, Amazon, and Rakuten — dominated the era. However, in the last 5 years, the world saw a revival and accelerated growth of online marketplaces.
Unlike their predecessors, these new generation of marketplaces are more industry specific or local. They include Uber, Grab and Airbnb, which disrupted traditional modes of transport and accommodation. Retail marketplaces like Lazada and Tokopedia also rose to prominence to solve a particular pain-point for specific regions.
On November 25, 2016, Arcadier’s co-founder and Chief Commercial Officer, Kenneth Low, was invited by the organizers of SITEX, Singapore’s most established lifestyle consumer IT exhibition, to discuss the phenomenon. Here are the highlights of the interview:
What exactly is a marketplace?
Ken: A marketplace is formally defined as “a medium that allows buyers and sellers of specific goods or services to interact in order to facilitate an exchange.” A shopping mall is a marketplace, and so is an exhibition such as SITEX. It’s where collective buying happens. An online marketplace brings this experience to the digital world.
What has caused the current wave of disruption?
Ken: It’s all about discovery! The first reason is that horizontal marketplaces such as eBay are becoming clunkier and over-loaded with sellers and items — from cars to handbags — which makes it hard for any seller to be discovered. Secondly, everyone wanted an online shop, and now there are too many online stores out there. Most are hardly visited because they don’t appear in the first page of any searches.
Really, the winners in this game are the search engines and social networks that profit from merchants spending on Search Engine Marketing, Search Engine Optimization, and advertising.
The proliferation of mobile devices is also a huge factor. Consumers want to locate what they need instantly and conveniently. It’s projected that mobile Commerce will account for 50% of all eCommerce spending by 2018. This has resulted in a need to re-address the market, creating clear verticals by industry and also more local items for sale, enabling a consumer to search specifically for an item or service when they need it.
So where is eCommerce heading?
Ken: Online marketplaces will continue grow, and new ones will be created. The trend is in hyper-vertical and hyper-local marketplaces. Many of them will support a single market or a single use case or utility. Examples include Honestbee for grocery shopping services in Singapore, Kaodim for cleaning services and house repairs in Malaysia, Gojek for on-demand transport in Indonesia, and Vanitee for beauty and spa booking in Singapore. Their true value lies in their utility.
We have also seen the emergence of peer-to-peer marketplace, which brings people together and encourages community sharing and the use of underutilized assets for environmental sustainability. They succeed because they are more accessible to those who need it and they serve the community better.
The benefits of the new era of marketplaces. Photo credit: Arcadier.
Will online marketplaces be purely for profit generation?
Ken: Marketplaces have always been the way people transact, from wet markets, charity bazaars, associations, to B2B procurement. Online marketplaces provides the digitization capability for many traditional forms of marketplaces. Many of these traditional marketplaces are created for collective buying as a form of a utility to benefit the greater good, not merely to be a major profit generating machine.
However, the cost of building an online marketplace is high, preventing many of these traditional models to benefit from the efficiency online marketplaces provide, allowing only big companies to be able to invest and build them. The ability to enable digitization of less for-profit, utility marketplaces will also drive the greater good of humanity, using less global resources (people, building materials, paper, electricity) to set up physical stores, yet allow the same facilitation of driving a perfect economy of discovery and trade or peer-to-peer exchange.
So what is needed in the new era of eCommerce?
The recognition that online marketplace is the next wave of eCommerce means that there is a need for online marketplace technology that is simple to use, enabling anyone with a marketplace idea or need to create one easily. Just like in the days where online stores were disrupting brick-and-mortar shops, which resulted in the birth of companies such as Shopify, Wix.com and Bigcommerce, such a platform is needed to simplify the complexity of operating a marketplace.
We need to support entrepreneurs who aspire to be the “Uber for X” and enable communities who just need the technology as a utility, for instance to support a charity fair, a trade show, or conference. This is where Arcadier comes in. We have created the world’s first proprietary marketplace platform, giving an opportunity for those who want to build a marketplace by removing the hefty cost and the need for technical knowledge.
Supporting the new generation of marketplaces. Photo credit: Arcadier.