It’s challenging to keep up with new terms, especially in a world defined by breakneck technological advancement and ever-shifting business paradigms.
You’d be forgiven, therefore, for not knowing what a digital marketplace is. Perhaps you’ve heard of digital marketplaces via business articles or friends. In all probability, you’ve even unwittingly visited a couple. But if someone were to corner you at a party and ask for your take on digital marketplaces, you would come up short.
Let’s fix that. In this article, let’s explore what a digital marketplace is, how people typically categorize digital marketplaces, and where to find examples of the concept in practice.
What Is a Digital Marketplace?
If you know what a marketplace is – and it’s fair to assume you do – you’re halfway there. Marketplaces have been around for millennia, serving as open, communal hubs for commercial participants on either side of the transactional divide. Put more plainly: they are meeting spaces for buyers and sellers.
A digital marketplace applies this age-old concept to modern, online commercial activity. The main difference is how the marketplace itself functions. A brick-and-mortar marketplace is simply a venue – a convenient, non-participative locus for buyers to attract customers. By contrast, digital marketplaces often act as third-party matchmakers, linking customers to relevant merchants and service providers using AI-powered recommendations. In this way, digital marketplaces offer a much more personalized experience than their brick-and-mortar counterparts.
Types of Digital Marketplaces
Not all marketplaces operate in the same way. Broadly speaking, there are three main types of digital marketplace:
- B2C: business-to-customer marketplaces
- B2B: business-to-business marketplaces
- P2P: peer-to-peer or consumer-to-consumer marketplaces
However, there are several notable digital marketplaces that don’t cleanly fall within these three buckets. Some online marketplaces match buyers and sellers with real estate agents (more on that below). Some match consumers with manufacturers (see Chinese C2M firm Pinduoduo). And some people go a step further, separating out vertical, service-focused marketplaces (like TaskRabbit) that match freelance labor with customers.
Examples of Successful Digital Marketplaces
Undoubtedly the largest example of a B2C digital marketplace is Amazon, which operates horizontally, connecting several vendors with customers – much in the same way traditional shopping malls do.
In the B2B sphere, you have marketplaces like Packhelp, which matches e-commerce businesses with sustainable packaging manufacturers. And in P2P, you have big players like Craigslist and Facebook Marketplace, in which users can buy or sell – often using the platform for both.
Finally, some digital marketplaces fall outside these cleanly delineated terms. CEO of Nobul, Regan McGee, refers to his business as a “digital marketplace that connects homebuyers and home sellers to the real estate agents that are right for them.” Their mission, according to McGee, is to bring “choice, accountability and transparency to an industry that has – for decades – been widely regarded by homebuyers as opaque and challenging.”
Hopefully, this article has shed some light on an emerging, often-misunderstood term. Next time you buy a vacuum cleaner from Amazon or sell that vacuum cleaner on Craigslist, you can comfortably declare that you are using a digital marketplace.