So in the last video, we had a discussion about platform business.
And this video, we'll talk about Marketplace.
But if you are purchasing things online, then there is a very high chance that you are already using
a marketplace.
So before understanding Marketplace, let's talk about what exactly is a market.
Now, in simple term, a market is a place where people buy or sell things.
Now, there may be a special building for this marketplace, or this can be held in an open area where
sellers can put up their stall like a kind of tent.
And the marketplace existed way back in the ancient time where people used to go out to buy or sell
things.
But in 2023, we all are lazy and we are buying all of our products online.
And that's why let's understand about online marketplace versus offline marketplace.
The best way to understand offline versus online marketplace is by looking at the distribution of a
product.
So let's understand that with the help of this diagram.
So if you look at a product, normally a product is produced by a producer or a manufacturer.
Then they sell all of these product in bulk quantity to a wholesaler and then these wholesaler will
sell these product to all these different retailers that are very close to our house and we end up purchasing
these product from retailers.
That's a normal supply chain or a distribution of a product.
And that is there in case of offline marketplace.
But in online marketplace like Amazon or.
Whatever e commerce site that you are using, they are acting as a bridge between producer, so-called
manufacturer and consumer.
And they have removed these two parties like wholesaler and retailer, because you don't have these
two parties in between.
These producer or manufacturer will end up selling their product directly to the consumer at a much
cheaper price.
And that's the beauty of online marketplace.
So if you look at companies like Amazon, they directly ship you the product with the help of a logistic
partner, or sometime Amazon use their own logistic network to ship you the product.
Now, before going deep into that, let's understand about what exactly is a marketplace.
So a marketplace creates a trusted place for buyers and sellers to discover a product and exchange product
and services.
Now, this marketplace can be a mobile app or a e commerce website, but their main role is to bridge
a gap between buyers and sellers.
Now, these marketplaces can provide you a product or a service.
If you look at companies like Fiverr, they are more into service.
And if you look at companies like Amazon, they are more into product, but their main role is to bridge
a gap between a buyer and the seller.
Now if you talk about a company like Amazon on Amazon, this producer or manufacturer can sell their
product directly to the end consumer with the help of this platform.
That is their e commerce website and a mobile app.
Now, these producers are getting value from the platform because they are able to sell their product
directly to the end consumer and they don't really have to worry about the logistics part and return
of that value.
Amazon is taking a small cut that can be 15% or 20% in different countries.
And that's the marketplace business model in case of Amazon.
Now, when we talk about Marketplace, they have three important role.
Number one is to balance out the supply and demand of a product.
Let's see on Amazon if more people are purchasing the same product and those producers are not able
to produce that product, then it's a loss for Amazon and the producer as well.
And the customer will be unhappy and we'll understand how exactly Amazon solves that problem.
Now the second role of a marketplace is to facilitate the transaction.
Now Amazon has multiple payment options.
So you can pay using your credit card, your debit card, or let's see if you're using some third party
apps.
So Amazon provides you payment flexibility and they will ensure that if they accept the payment from
you, they will transfer that payment to the producer.
So they facilitate the transaction between two different parties.
The third main role of these marketplace is to make sure that they have created a trusted and safe environment
for both the people, the producer and the consumer.
So if a consumer is not happy with the product, they can always rate one star or they can return the
product back to the producer as well.
So these are the three important role of a marketplace.
Balancing of the supply and demand, facilitating the transaction and creating a trusted place for users.
Now, before we go deep into this, let's understand about the different types of marketplace we have.
And I have divided the different types of marketplace based on the control and interaction.
So let's talk about the different types of marketplace based on the control that how much control does
a marketplace have?
And we can divide marketplace in three different types.
So you have a light marketplace.
Then you have managed marketplace.
And in the end, we have heavily managed marketplace.
Let's talk about light marketplace.
So if you look at companies like Craigslist.
Or Thumbtack or Zillow.
These are the really good example of light marketplace.
That means anyone can list.
Their property or their legal service or a carpenter service on Craigslist or Zillow.
And other people can contact that specific person.
That's a light marketplace.
That means companies like Craigslist and Zillow don't really have strict standard or quality control
on all the services that are listed on their platform.
And that's the example of a light marketplace.
Then you have managed marketplace companies like Airbnb, Etsy and Uber.
These companies have very strict controls on the product that are there on their platform.
They have strong quality check and standard to make sure that all the people who are listing their product
on the platform are of good quality.
So if someone is not following their quality standard on Airbnb, they will throw them out of the platform.
And that's why we call these managed marketplace, because companies like Airbnb and Uber make sure
that everything that is there on the platform is top notch.
The third one is heavily managed marketplace.
If you look at companies like Amazon, they have the best quality product on their platform, so they
have strong quality standard.
They are shipping their product by themselves.
So they are using their own logistic network.
And they are also helping these sellers in the payment part.
And they also have their own warehouse in case if some seller wanted to use their warehousing service.
So these are the different types of marketplace based on control.
So in light marketplace, they don't really have a very strict control on their platform in managed
marketplace.
They have a specific guidelines that you have to follow.
If you wanted to list your product on their platform.
And then you have heavily managed marketplace.
They will provide you almost everything you need to sell your product.
So from warehousing to logistics to payment integration, they will help you in almost everything you
want.
So these are the three different types of marketplace based on control.
So now let's talk about the different types of marketplace based on the product type.
So a marketplace can sell a digital gold or a physical gold or a service or maybe a mix of all.
So let's talk about a marketplace with physical or digital gold.
So if we talk about Amazon and Etsy, they are basically simple marketplace that will bridge a gap between
a seller and a buyer.
On the other side, eBay is a peer to peer marketplace.
So if you have a product and if you wanted to sell that product to different people, or let's say if
you want other people to bid for your product, well, you can do that on eBay.
And I've seen Gary be doing a lot more stuff on eBay.
You can watch the videos, but on Eventbrite, you can buy the tickets of this concert or latest event
that are happening in a specific area or in a city, and that's your physical or digital gold marketplace.
Then you have a marketplace that will provide you some service.
Things like Uber or Airbnb and you already know about this.
Uber will provide you taxi service and Airbnb can help you find good places where you can stay.
Then you have your service marketplace and they will help you find a freelancer that can do a job for
you.
So platforms like Fiverr, Upwork or TaskRabbit, these are all the example of a service marketplace.
So let's say if you are looking for someone for your website design or you're looking for a UI designer,
you can find all these people on Fiverr or Upwork or TaskRabbit.
In the end you have your connection marketplace and a good example of this is Bumble or Match.com,
which is the parent company of Tinder.
So you have all of these different types of marketplace based on the product type.