Online marketplaces offer a new take on how goods and services can be exchanged. Consumers no longer require an intermediary to connect to producers, as platforms do the matching.
It’s always a good idea to have a big picture of solutions that are currently popular on the market. We’ve categorized these solutions to make it easier for you to see the big picture of this market.
According to the Gen Z: Emerging Talent report by SNC-Lavalin, 66% of people say they’re willing to use or rent products or services from service providers in a shared community. Actually, the concept of sharing things existed long before P2P platforms appeared. However, the possibilities to share physical goods were quite limited. It was rather difficult to match supply and demand. What’s more, there was a lack of trust, hindering interactions between consumers and service providers. Digitalization has managed to bridge these gaps, giving a start to the sharing economy, or collaborative economy. Now, producers and consumers rely on online platforms to interact with each other. These interactions are based on trust and convenience.
A few factors have led to the development of the sharing economy.
- The growth of smartphones and applications;
- Global economic crisis;
- Shift in people’s attitudes towards sharing services and goods with others.
Let’s take a closer look at some startups that are rather disruptive and that represent the peer to peer e-commerce sector.
Airbnb is a US-based peer to peer marketplace platform that allows hosts to share their places with travelers. Airbnb is valued at $30 billion.
Pinterest lets users discover information on almost anything on the internet. Pinterest’s valuation is $10.47 billion.
The last startup on this list is, of course, Uber. With its $72 billion valuation, it’s considered the most successful marketplace software on the market for on-demand taxi services and one of the fastest-growing businesses in the world.
Besides these, there are more marketplaces of various types. We can classify them based on items that can be exchanged, participants that interact with one another, and how the platform is managed.
Platforms usually let users exchange services, goods, or content. Currency such as money, reputation, attention, or influence is offered in return for these items.
Traditionally, people contacted agents to rent apartments. But with services like Airbnb and HomeAway there’s no need for an agent. Travelers can visit a platform to find accommodation of their liking. Platform owners benefit since they don’t own any of the inventory they’re selling, so all expenses of running and maintaining lodgings fall on hosts. Platform owners, however, need to invest time and resources into insurance and user verification.
Take Airbnb as an example. This P2P marketplace platform lets hosts create property listings with compelling images taken by professional photographers. Airbnb charges hosts a 3% transaction fee, whereas guests are charged 6% to 12% for every booking.
Online platforms can host goods. Producers that want to sell their products online can create listings. They don’t need to own brick-and-mortar stores, pay for rent, or pay salaries to employees to be able to offer things for sale.
eBay is free to use for buyers. Sellers, on the other hand, get a limited number of free listings. After that, all additional listings are paid. When an item is sold, sellers are also charged a percentage by the platform.
Services and skills can also be successfully exchanged. Let’s say that someone needs a plumber to fix their pipes or someone needs to move furniture. For either of these things there’s TaskRabbit, the best online marketplace for finding people to do small tasks.
TaskRabbit is a two sided marketplace that allows TaskPosters to post tasks and find TaskRabbits who have the necessary skills to complete them. The platform runs a background check on all taskers and conducts interviews before allowing people on the platform. TaskRabbit offers reimbursement for property damage, theft, or bodily injury that occurs while tasks are being done. TaskRabbit earns money by taking a cut of every transaction.
Hitchhiking has been replaced with ride sharing. We see that people are becoming more comfortable with sharing their cars to offset the cost of fuel.
The BlaBlaCar marketplace platform lets people share the cost of a lengthy ride. People can find a driver who’s going in the same direction and request a ride, indicating whether they want to talk during the ride. Those who want to ride pay in advance via the application after the driver accepts the ride. This tactic allows the service to reduce cancellations and disappointed drivers by 3%. The platform takes a cut of the total cost from point A to point B.
Creative minds look for money to bring projects to life. Others are willing to support creatives by funding their projects. Kickstarter was founded to help creative professionals receive funding from all over the world. Kickstarter users have backed more than 34,000 projects. To get money on Kickstarter, indicate the amount needed for your project and wait for backers to donate.
Kickstarter earns money by taking 3% to 5% of the total amount gathered and a payment processing fee of 3% + $0.20 per pledge. Backers are promised a monetary reward, incentive, or free product by project creators.
There are certain risks that Kickstarter backers bear. A campaign creator may need more money than they initially stated, ending up with an unfinished project. On the other hand, backers may have their money taken and spent on some other purposes. They aren’t guaranteed that they’ll get something in return.
Indiegogo allows people to collect funds to support an idea, charity, or startup. Indiegogo earns money by taking 5% from the total raised. Depending on the location of the backer, the platform also charges a payment processing fee that ranges from 3% to 5%.
To avoid traditional banks, users may turn to a peer to peer marketplace with lenders. It allows individuals to lend and borrow money from others. The platform facilitates the transactions. The Kiva platform is a good example of peer to peer lending. Kiva allows collaborative microlending at $25 or more per loan.
Platforms like Kiva don’t bear the consequences of losses from loan default, so they can be leaner than traditional banks and fund a wide variety of causes.
Online education is not a new concept. There are many platforms that offer educational content and give educators outlets to share their knowledge and earn at the same time.
Skillshare is an online learning community and the best marketplace platform for learning design, business, technology, and more. Anyone can learn cutting-edge skills with Skillshare, which emphasizes videos. Skillshare helps educators get used to their video teaching format so that the Skillshare brand is consistent across all videos. Educators are motivated to be creative in how they deliver content to learners. What’s more, there are also project-based classes that walk learners through creating something so they can improve their skills and use creativity in learning.
Skillshare has a subscription business model. Students pay a monthly or annual fee to become Premium members. With Premium membership, students get unlimited access to Premium classes and features such as viewing classes offline via the mobile app.
Different platforms have different participants. There are three types of platforms as distinguished by participants: customer-to-customer (C2C), business-to-customer (B2C), and business-to-business (B2B).
With a C2C online platform, there’s no clear distinction between participants as they all are equal. Known as peer to peer websites, these platforms attract people with similar interests and incomes. These individuals are usually willing to share their assets with others. They see the online marketplace website as a way to:
- Save money;
- Form a community of like-minded people;
- Swap roles: consumers can become sellers and sellers can become consumers.
Role swapping is evident in BlaBlaCar. Users can be drivers one day and riders the next day. BlaBlaCar lets people share the cost of lengthy trips and save money on gas. That’s a true manifestation of the sharing economy. The service takes from 12% to 15% of the total amount paid for a ride.
The B2C model is based on the interaction between businesses and customers. B2C marketplace platforms offer clients a wide variety of options on one website.
For example, AliExpress is a big online platform. It offers goods from different Chinese manufacturers and distributors. Customers from Russia, the USA, the UK, France, and other countries can find anything from clothes and cars to household appliances and bikes. More than 500 million customers visit the platform monthly.
AliExpress makes money from every transaction, taking 5% to 8% from each purchase. AliExpress also takes a $1500 fee and a store fee to start or change a store on the platform.
At SteelKiwi, we’ve built the Snaapy platform. This marketplace is designed for small and mid-sized businesses that promote on-demand services. On Snaapy, customers can find anything from car rental agencies to pet services.
The B2C sector has partially evolved from the C2C sector in the following way:
- People come to C2C platforms to purchase goods or services. Entrepreneurs want to target the audiences in these markets and acquire rights to post their offers. When more and more salespeople start posting their offerings, the platform halfway or completely turns into a B2C space.
- Individuals profit from deals they offer on a marketplace platform and then they decide to continue as entrepreneurs.
For example, you can find many ads on Airbnb advertising accommodation. Some ads come from ordinary people, others come from companies. The same goes for Etsy. When it was first launched, it was solely a C2C online marketplace. Now some offerings come from companies/manufacturers.
The B2B sector allows a business to buy from another business. In the B2B sector, participants can exchange goods or services.
An example of a B2B product is NexDep, an on-demand court service that we’ve built for the US market. NexDep lets courts post hearings with detailed information. The platform then matches requests with available court staff via an algorithm. The advantage of this system is that our client no longer needs to contact each legal service provider in person. The application does it for them. Payments are also handled through the marketplace.
There are four generally accepted approaches to marketplace management: unmanaged, lightly managed, fully managed, and decentralized.
Unmanaged marketplaces like Etsy, eBay, and Fiverr don’t invest in quality assurance, background investigations, or feedback analysis. Customers mainly count on product reviews. These marketplaces are mostly peer to peer.
Craigslist, a US advertising website, is considered an unmanaged platform. Craigslist has sections devoted to jobs, housing, for sale, items wanted, discussion forums, and more.
Lightly managed marketplaces such as Uber, Grubhub, and Shutterstock do invest in quality control, however not that much. Airbnb, for example, puts money into address verification and client services to settle disputes. These marketplaces also guarantee the accuracy of content.
Uber verifies drivers’ IDs. If a driver keeps getting ratings below three, they’re banned from using the service. That’s how the platform manages interactions between drivers and riders.
Fully managed marketplaces such as Opendoor, Luxe, and thredUP monitor access to the market, supply, operations, and transactions. For instance, the real estate marketplace Opendoor can help you sell your property in just a few days. The company buys it, makes repairs if needed, and puts the house on the market. The only inspection you have to go through is the one from Opendoor to confirm or adjust your offer. This marketplace handles the whole process.
Decentralized marketplaces invest heavily in infrastructure to build reliable solutions to orchestrate the exchange of goods and services. Usually, the owners of decentralized solutions turn to the blockchain. There’s no entity that owns or controls a blockchain. Basically, networks of participants can exist within a blockchain and no one has the right to access this network or break it. The most evident benefit of decentralized platforms is that they’re confidential for non-participants who have no right to interfere with interactions on the platform. No one can ban agreements made and no one can dictate who is welcome to use these platforms.
Lendoit allows borrowers and lenders to interact without any third party. Participants use their e-wallets to perform transactions. The platform has a well-designed system of smart contracts and mimics some elements from the traditional lending world.
OpenBazaar is an open source peer to peer marketplace that uses Bitcoin. Its main advantage is that there are no fees and no item restrictions. All users register as buyers unless they decide to create a store. Sellers don’t have to pay a percentage to a payment gateway.
What made OpenBazaar famous is the anonymity it offers and its escrow system. Contracts require signatures from both interested parties. Once both parties have signed, the money is released to the seller.
Users will soon want to have full control and ownership over their interactions. They can leverage the tools of decentralized platforms to build peer to peer organizations. Blockchain technology can create secure peer to peer environments and help participants achieve total control.
- A blockchain is a decentralized distributed database;
- Each participant has a full record of the database;
- Hackers can’t destroy anything since there’s no central server;
- Since it’s a purely peer to peer network, buyers and sellers transact with each other without intermediaries;
- Terms and conditions are coded in smart contracts that are self-executing;
- Cryptocurrencies are used to pay for services or goods, eliminating the need for third-party payment providers;
- All processes that happen within the blockchain are encrypted.
The blockchain gives people freedom in how they own and use content and data. OpenBazaar, Daconomy, Origami, and other decentralized peer to peer organizations are paving the way to the future. Many predict that the development of decentralized marketplaces will lead the peer to peer economy. The rules of this economy will allow individuals to work and earn money.
Online marketplaces predetermined the rise of the sharing economy and enabled a variety of interactions. There are numerous platforms, but they can be sorted into categories by items, participants, and management approaches.
The blockchain has great potential to attract app owners to build next-generation online platforms and can offer true peer to peer sharing spaces.
At SteelKiwi, we’ve built online marketplaces and can offer practical advice and technical assistance. You can read our case studies in-depth to get a better idea of how we can build a marketplace website to meet your goals.
If you want to know how to build an online marketplace or would like to partner with us, get in touch! We’ll build a marketplace solution for your target audience.