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.
In general, because marketplaces aggregate products from a wide array of providers, selection is usually more wide, and availability is higher than in vendor-specific online retail stores. Since 2014 online marketplaces have become abundant. Some online market places 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
B2B online marketplaces
Some of the earliest online marketplaces were for business-to-business (B2B) trading. Early examples of online platforms that enabled e-commerce between businesses include VerticalNet, Commerce One and Covisint. Contemporary B2B online marketplaces focus on a limited range of commodities or service, such as EC21, Elance and eBay Business, and have not achieved the dominance online marketplaces have obtained in B2C retail. B2B purchasing requires that online marketplaces facilitate complex transactions, such as a request for quotation (RFQ), a request for information (RFI) or request for proposal (RFP).
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. 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. 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.
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.
For services and outsourcing
There are marketplaces for the online outsourcing of professional services like IT services, search engine optimization, marketing, and skilled crafts & trades work. Microlabor online marketplaces such as Upwork and Amazon Mechanical Turk allow freelancers to perform tasks which only require a computer and internet access. 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.
Microlabor online marketplaces allow workers globally, without a formal employment status, to perform digital piece work, such as for example rate an image according to content moderation guidelines. Gig workers are paid for each task, for example U.S.$0.01 for each moderated image, and accumulate payment on the microlabor platform
The sharing economy
In 2004 Yochai Benkler noted that online platforms, alongside free software and wireless networks, allowed households to share idle or underused resources. As the sharing economy inspires itself largely from the open source philosophy, open source projects dedicated to launching a peer to peer marketplace include Cocorico and Sharetribe. 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. In 2015 Alex Stephany, the founder of online marketplace JustPark, defined the sharing economy as the economic value arising from making underutilized assets available online.
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.
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.
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. 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. In 2016 and 2018 respectively, Frank Pasquale and Shoshana Zuboff cautioned, that the data collection of online marketplace operators result in surveillance capitalism.
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