Types of Online Marketplaces: Horizontal vs Vertical vs Global eCommerce Marketplace
The eCommerce industry is evolving and the competition is getting tougher with new entrants coming to the market every day. It is important to keep improving so that your customers do not switch to your competitor. This doesn’t mean that you just have to be completely focused on your competitors but what you exactly need is to endure the competition by focussing on what your customers want. This is where the concept of direct and indirect competition comes into play.
“If you’re competitor focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering.” — Jeff Bezos, CEO of Amazon
Direct competition is any company that offers the same thing as you while indirect competition refers to a business whose products or services are different from yours but, it can potentially satisfy the same need and reach the same goal as of yours.
There used to be a time when only direct competitors were taken into consideration while making business decisions but, now the rules have changed. Even your indirect competitors could have the capability to smash you out of the market.
Let’s understand this with the help of a very popular example — Smartphones. These technologically advanced mobile phones were never considered as direct competition for Camera Companies, Radio or Music Players but, all of these segments were badly affected by this innovation.
Another example is Netflix, we never realized how OTT platforms threw the idiot box out of our lives. Yes, I am talking about traditional TV here. Similarly, Amazon has killed the Neighbourhood supermarkets. If you noticed, Amazon is a Global Marketplace while Netflix works on the Vertical Marketplace model. So, what is the best business model to survive in this cut-throat competition?
Let’s explore the three types of Online Marketplaces and understand which one is good for you!
These are the marketplaces where multiple categories of products are offered but with a secondary character in common. Horizontal Marketplace is a blend of Vertical & Global marketplace because it offers multiple categories like a Global Marketplace but it still has one factor common for all the offerings like Vertical Marketplace.
Let’s understand this with the help of an example,
Etsy is the perfect example of Horizontal Marketplaces because they offer a varied range of products. But, the only characteristic that is common for all their offerings is that they are all handmade.
Following are the 8 categories they are dealing in and all these categories offer handmade products:
These are the marketplaces focusing on an individual niche. Vertical marketplaces offer the same products from a large number of sellers/vendors. While eCommerce marketplace leaders like Amazon or eBay are dominating the eCommerce space, there is still a lot of unexplored opportunities for niche-specific marketplaces.
For instance, Airbnb or Instacart, once startups have now emerged as success stories for aspiring entrepreneurs and now they are looking to grow their eCommerce business in a vertical market.
So, if you are someone who wants to focus on a specific niche and wants to follow a specific business model, then you can proceed with a Vertical eCommerce Marketplace.
This is the most complex yet very popular marketplace type. These types of online marketplaces are developed for delivering items or services from a wide range of categories to consumers.
Amazon is the perfect example of Global Marketplaces. Can you think of a single category of products that is not available on Amazon? If you know one, please share your answer in the comment section below!
If you are planning to build a marketplace like Amazon then make sure to find an eCommerce solution that is exclusively developed to build multi-vendor eCommerce marketplaces.
Which eCommerce Marketplace Model is Ideal For You?
The success of your eCommerce marketplaces do not completely depend on the business model you choose, it depends on many other factors like eCommerce platform development, customer service, branding, marketing, acquisition cost and many more. But, if you are just stepping into the eCommerce world then start with a niche-specific marketplace and further you can scale your business. Also, the revenue streams for all types of marketplaces remain standardized, here are the few:
- Subscription fee
- Listing Fee
- Featured listings
In a Nutshell,
“For a healthy eCommerce ecosystem, horizontal, vertical and global marketplaces must co-exist.”
Your primary focus must be to find an eCommerce solution that is capable of building all sorts of eCommerce marketplaces. Yo!Kart developed by FATbit Technologies is one such solution. It offers both, Ready-made Marketplace solution as well as Custom ecommerce development services. The expert team at Yo!Kart has catered to multiple industries and built many eCommerce marketplaces belonging to all the discussed categories.
For instance, UNI Diamonds is a vertical marketplace while Go Ethnyk is a horizontal marketplace offering multiple categories from fashion & beauty.
Check Yo!Kart Portfolio for more details!