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Understanding the service marketplace universe
21 March 2021
I. The history of marketplaces
The democratization of the Internet in the 90s opened the doors to a new type of commerce: e-commerce.
If at first it was the platforms selling retail goods that took the turn of e-commerce, the platforms offering services began to set up a decade later. This is the case of the giant Airbnb, which in just over 10 years of existence declares 4.7 billion in revenues in 2019. Other unknowns have become big names thanks to the unparalleled growth opportunities that the marketplace model offers to services.
II. Improving an existing model
A marketplace is the digital alter ego: a tripartite platform that brings together sellers and buyers, managed by an operator/administrator, who ensures the smooth running of the platform and the security of transactions. For sellers, marketplaces offer visibility at a lower cost; for buyers, it is an opportunity to find specific products or services with full knowledge of the facts.
The community aspect, even online, is not to be denigrated. WeFarmUp, for example, is much more than a farm equipment rental platform, it is a gathering place for the farming community. The implementation of collaborative economy platforms is actually on the rise.
Marketplaces have improved an already existing model: by removing space-time barriers they have given a new dimension to marketplaces. The presence of other functionalities such as a search engine that combines geolocation, availability and seller behavior increase the performance of the marketplace.
III. Why differentiate services and goods marketplaces?
We could divide marketplaces into 3 typologies:
btob platforms, which connect professionals to each other. These marketplaces are experiencing exceptional growth. In 2022, Gartner predicts that 75% of professional purchases will take place on marketplaces.
btoc platforms, which connect individuals and professionals. This is the most common type of marketplace.
But this segmentation of marketplaces is not logical: the experience of Airbnb and Ebay is diametrically opposed, even though these two platforms are ctoc platforms.
Two families can be distinguished within marketplaces: goods/products and services. Based on opposite user experience logics and facing different challenges, it is important to distinguish these two large families.
1. What is a product marketplace?
A product marketplace connects suppliers and sellers for the sale of products online. One of the main challenges of this type of marketplaces is the management of the products inventory while the user experience is focused on the shopping cart. The delivery is also one of the big challenge completely different from service delivery.
2. What is a services marketplace?
A services marketplace puts suppliers and sellers in contact for the sale of online services. For this type of platform, onboarding is one of the main challenges: we don’t import sellers like we would import references on a product marketplace. The user experience is centered around the availability calendar, while quality of service is one of the main challenge.
3 main families of service marketplaces
This somewhat simplistic nomenclature of marketplaces families has its limits: sometimes it can be complicated to determine whether the platform you want to create allows the sale of services or products.
Let’s take the example of a company that sells computers: if it sells one computer, it will sell a product; whereas if it sells a hundred computers to a company, it will sell a service. More than just selling computers, it will have to provide a whole range of services. Finally, it is up to the operator to decide on the nature of its platform and to propose a UX adapted to its target.
Since the two families of marketplaces have different stakes, it is structurally incompatible to propose a single technical solution for both. The Cocolabs team has chosen to specialize in selling services to offer more efficient and competitive marketplaces.
IV. Service marketplaces: only the sale of services?
The name service marketplace suggests that this type of platform would only allow the sale of services. But it is not. There are three main types of service marketplaces: rental marketplaces, such as Airbnb; network marketplaces, which connect several players and facilitate data sharing; and finally, marketplaces that sell services.
V. Which business model should I choose for my service marketplace platform?
At Cocolabs, we offer a plethora of business models depending on your platform and market type. Each model has specific advantages:
the commission model, which can be applied to both buyers and sellers. This model facilitates the on-boarding of new users.
the subscription model, which can also be applied to buyers and sellers. This model ensures a regular income for the operator.
Media buying model: to get paid, the operator sets up a space buying system so that sellers can promote their services.
non-transactional models: transactions are made outside the platform.
These models can be combined to create the model that best suits your platform.
VI. What are the steps to develop successful service marketplaces
1. Two management methodologies
The development cycle of the project when creating marketplaces will depend on the project management methodology you choose. There are two main project management methods:
the Waterfall method, which is a sequential method: in order to move on to the next step, you must have validated the previous step. In concrete terms, this means that at the beginning of the project you must have a precise and inflexible idea of the final platform.
the Agile method, preferred by Cocolabs, which is a much more flexible method. The development is divided into development sprints of 2 to 4 weeks where the client will decide on the features to be developed. This allows us to move forward more quickly and to accompany the evolution of projects.
To illustrate the difference, let’s take a simple project: a trip from Paris to Marseille by bike. In Waterfall you decide on each step precisely before the start. In Agile, you just ask yourself where you will sleep the next day, leaving room for the unexpected.
2. The road map to launch your online marketplace
Conception. Establish the outline of your platform and its functional spectrum.
Design. With UX teams you would establish the wireframe or layout of your marketplace. With the UI team the wireframes will take shape with a design in the colors of your brand.
Development. The established design is coded, while the features to be deployed are developed.
The update. Application Maintenance allows your platform to evolve over time based on customer feedback.
Marketplaces are a constantly changing world and marketplaces trends are constantly changing. The relatively recent emergence of the service economy’s platformization makes them a particularly interesting subject to study, and one that is less deeply discussed than goods marketplaces.
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