Why platformization through marketplace is key

Miniseries E-commerce features Part 3

Welcome to the chapter 3 of our mini series dedicated to services e-commerce. In this article we will see why platformization through marketplace is key, especially for selling services. Indeed services represent 35% of online sales. Read our article on “services marketplaces are the next revolution in e-commerce” to learn more about the online services sales.

As previously seen, the marketplace model has generated revenues of € 16 billion, in 2018 in France, and is rapidly growing. Almost half of this amount is coming from the services sales. Indeed services sales are more represented in the marketplaces model than in e-commerce in general. This constatation is quite strange considering that the marketplaces are often considered as the next e-commerce revolution and not yet very developed. 

In this episode, Hugues Odasso, Channel Manager at Cocolabs will explain why platformization through marketplace is key for services.

1 ) What is a service and its implications on distribution

First of all, it is important to remind what the definition of a service is. Indeed, if the difference between a product & a service isn’t always binary, we can define a service through 5Is. Those 5Is are thoroughly explained in our podcast about the differences between selling a service and a product. You can also read our second episode of this mini series, “current e-commerce tools are not adapted to service”.

Those five specificities of services have impacts on their distribution.

1. A service must be experienced at a given place and time. Therefore, the offer needs to be fragmented in order to be available where & when it is needed
2. A service cannot be stocked & needs the customer’s involvement. It cannot be created in advance & stocked to face an increased demand. It must be “produced” in real-time
3. As a product can hardly be standardized, ensuring a consistent customer satisfaction is more difficult, making them potentially less loyal
4. As a service can be highly specific, each category needs a dedicated expertise, which makes it difficult to provide new offers

For all these reasons, and as services are by nature personalized & specific, selling service is a long tail economy. Offerors can benefit from way less economies of scale than when selling a product as services need more human resources. If a service provider wants to double its revenue, he will have to double its offer. 

2) The marketplace model, a win-win-win situation

The marketplace model offers a win-win-win situation for its three actors. 

• Win for the operator

A marketplace enables an operator to increase its offer through partnership. The offeror can better grow and scale the availability of the services offered on its platform. The marketplace business also gives the opportunity to better manage the cost and / or revenue.

 It gives the possibility and the agility to the operator to test new offers and/or new geographies, simply through partnerships. The marketplace model enables a direct link & discussion with customers and thus can help reinforcing the company’s customer centricity

• Win for the offeror

Thanks to the online marketplace model, offerors can digitize their assets at a low cost. Indeed, they don’t carry the weight of building a whole ecosystem for their services. 

They can gain visibility and improve their marketing growth. This is interesting for small businesses or big companies trying to improve their customer base. 

They are able to adapt to new consumer behavior of buying online. That way they can meet the digital demand and learn from digital experts.

In conclusion, we can say that it is the best way to have external growth with low cost and risk. Those advantages apply for both the operator, and the offeror. 

• Win for the asker

Finally marketplaces are a win for the asker, as they are able to access more offers, via online stores. They benefit from the rivalry between offerors both online and offline. 

Askers are closer to service providers and they are at the heart of user centricity. Askers also make the most of an easier user experience. They are able to buy services digitally as they want to and as they usually do to on commerce platforms.

3) Why platformization through marketplace is key for the services sales? 

There are different marketplace strategies and business models but platformization through marketplace is key. Obviously they create network effects in the long term. But they have many different advantages. 

First, marketplaces platforms are especially relevant for services sales. They increase the availability of the offer, by widening the range of services, the locations and the availability. Marketplaces enable companies and customers to have access to the electronic commerce world when they would have never done before. It is for sure a key for the expansion strategy. 

Secondly thanks to this model, every actor can benefit from economies of scale that would not have been possible otherwise. Operators, offerors and askers are therefore able to lower their costs. 

The marketplace model also improves the management of activity. On those platforms, the operators and the offerors have access to many different back-offices. Those enable them to have client driven operations. They can increase their agility as well. Operators and offerors can choose to offer new services, or to be present in new geographies, or else to create new partnerships.

All those different reasons and advantages justify why platformization through marketplace is key. Platformization is relevant for every actor of the service industry whether they are buyers and sellers on business to consumer b2c  Marketplaces, or business to business b2b marketplaces. 

If you want to have a look at platforms that use the marketplace model do not hesitate to visit our case studies page. You can also request a demo to learn more about the model.

Sources : E-commerce Nation – Top 100 E-commerce and INSEE – Les TIC et le commerce électronique dans les entreprises en 2019  / enquête de 2013 à 2019