It’s clear that online marketplaces can solve problems in a world where consumers have an ever-increasing appetite for convenience. The benefits of e-marketplaces to consumers are well-known: they never close, they’re not limited by geography, and they create more open and transparent competition, especially based on price. As much as we enjoy poking fun at the need for convenience in the modern world, it is undoubtedly addicting. Thanks to their many advantages, online marketplaces can grow quickly.
Marketplaces’ inherent advantages enable them to create a vastly superior experience for both consumers and producers. Craigslist is an early example and, despite its archaic technology, it single-handedly replaced newspaper classifieds. In the last decade, companies like Airbnb have built entire businesses based on innovative technology tailored to a particular vertical and tapping into a massive, unused capacity that yields economic benefit for users. As a result, your unused bedroom or guest house can now be a means to generate extra income.
Beyond their obvious convenience, online marketplaces allow for efficiency in industries by offering improved searchability based on price and proximity as well as data aggregation as opposed to fragmentation. These factors lead to low distribution costs and lower transaction fees.
A great example of a successful e-marketplace that adds enormous value is OpenTable. The platform offers enormous time savings and convenience for both restaurants and consumers by showing users which restaurants in their area have availability at their preferred time.
The offline method to obtain the same information would be an endless cycle of calling restaurants, being put on hold and going to voicemail. It is infinitely more convenient to make a reservation with a couple of taps of your finger. Restaurants benefit equally because OpenTable allows them to spend less time answering phones. And they can more easily sell unused inventory—in this case, empty tables.
When online marketplaces don’t work
Marketplaces leverage the advantages offered by new technology. However, despite their ubiquity, there remain some spaces where marketplaces may not catch on for some time. This is currently the case with real estate.
Technology has benefitted the real estate market by giving home buyers access to listings previously only available to agents. However, buying a house is an emotional decision with many variables in which human interaction is irreplaceable. As a result, real estate today is a hybrid online/offline marketplace that has not yet completely eliminated the middleman.
Concerns over e-marketplaces
As automation begins to replace middlemen, online marketplaces have faced backlash over the loss of jobs in the spaces they occupy. Nevertheless, resisting technological innovation will always be a losing battle. Consumers tend to respond to convenience, and while a changing landscape can result in job loss, it can also lead to the creation of new jobs that would not exist otherwise.
What’s next for online marketplaces
There are many industries ripe for disruption by e-marketplaces. Live music will be the next frontier because of the current inefficiencies in booking live music. Both indie bands and venues are small businesses struggling in a DIY world. Talent buyers and other talent seekers currently have no easy way to discover, evaluate, book and pay talent; they instead rely on unsolicited emails from bands and booking agents or referrals.
The Gigmor marketplace makes it easier for the two sides to connect and when they do, buyers can watch a band’s videos, listen to its music and read its ratings, reviews and gigging history all on one page.
Online marketplaces have set the bar high for convenience and transparency in a very short time. With e-marketplaces, consumers have access to information about various markets, from transportation to music to hospitality, that was unavailable to them only a few years ago.