An online marketplace (or online e-commerce marketplace) is a type of

e-commerce E-commerce (electronic commerce) is the activity of electronically buying or selling of products on online services or over the Internet. E-commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain manageme ...

website where product or service information is provided by multiple third parties. Online marketplaces are the primary type of

multichannel ecommerce Omnichannel is a neologism describing a business strategy. According to ''Frost & Sullivan'', omnichannel is defined as "seamless and effortless, high-quality customer experiences that occur within and between contact channels". History "Omnis" is ...

and can be a way to streamline the production process. In an online marketplace, consumer transactions are processed by the marketplace operator and then delivered and fulfilled by the participating

retailer Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...

s or

wholesaler Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In g ...

s. These type of

websites A website (also written as a web site) is a collection of web pages and related content that is identified by a common domain name and published on at least one web server. Examples of notable websites are Google, Facebook, Amazon, and Wikipe ...

allow users to register and sell single items to many items for a "post-selling" fee. In general, because marketplaces aggregate products from a wide array of providers, selection is usually more wide, and availability is higher than in vendor-specific online retail stores. Since 2014 online marketplaces have become abundant. Some online marketplaces have a wide variety of general interest products that cater to almost all the needs of the consumers, others are consumer specific and cater to a particular segment.

B2B online marketplaces

Business-to-business Business-to-business (B2B or, in some countries, BtoB) is a situation where one business makes a commercial transaction with another. This typically occurs when: * A business is sourcing materials for their production process for output (e.g., a ...

(B2B) online marketplaces are platforms that allow companies to buy and sell products or services to other businesses. These marketplaces typically focus on a specific product or service category and are used by businesses to find suppliers, negotiate prices, and manage logistics. Some examples of B2B online marketplaces include

VerticalNet Verticalnet, Inc. was a host of 43 business-to-business (B2B) procurement portals headquartered in Horsham, Pennsylvania. It was famous for its market capitalization of $10.89 billion on March 10, 2000, during the dot-com bubble, despite sales of ...

Commerce One Commerce One, Inc. was a B2B e-commerce company that used online auctions to connect business to their suppliers. At the peak of the dot-com bubble, the company had a market capitalization of $21.5 billion. The company's technologies included ...

, and Covisint, which were some of the earliest B2B marketplaces to emerge in the early days of

. More contemporary B2B marketplaces include EC21,

Elance Upwork Global Inc., formerly Elance-oDesk, is an American freelancing platform headquartered in Santa Clara and San Francisco, California. The company was formed in 2013 as Elance-oDesk, after the merger of Elance Inc. and oDesk Corp. The merg ...

, and

eBay eBay Inc. ( ) is an American multinational e-commerce company based in San Jose, California, that facilitates consumer-to-consumer and business-to-consumer sales through its website. eBay was founded by Pierre Omidyar in 1995 and became a ...

Business, which focus on specific product or service categories and facilitate complex transactions such as requests for quotations (RFQs), requests for information (RFIs), and requests for proposals (RFPs). B2B online marketplaces differ from consumer-facing online marketplaces like

Amazon Amazon most often refers to: * Amazons, a tribe of female warriors in Greek mythology * Amazon rainforest, a rainforest covering most of the Amazon basin * Amazon River, in South America * Amazon (company), an American multinational technology c ...

and

, which are designed for retail sales to individual consumers. B2B marketplaces are typically more specialized and focused on facilitating transactions between businesses, and may require more complex negotiation and logistical processes.

Online retailing

Online marketplaces are

information technology Information technology (IT) is the use of computers to create, process, store, retrieve, and exchange all kinds of data . and information. IT forms part of information and communications technology (ICT). An information technology system (I ...

companies that act as

intermediaries An intermediary (or go-between) is a third party that offers intermediation services between two parties, which involves conveying messages between principals in a dispute, preventing direct contact and potential escalation of the issue. In la ...

by connecting buyers and

seller Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the Goods and services, goods or services, c ...

s. Examples of prevalent online marketplaces for

retailing Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...

consumer goods A final good or consumer good is a final product ready for sale that is used by the consumer to satisfy current wants or needs, unlike a intermediate good, which is used to produce other goods. A microwave oven or a bicycle is a final good, but ...

and

services Service may refer to: Activities * Administrative service, a required part of the workload of university faculty * Civil service, the body of employees of a government * Community service, volunteer service for the benefit of a community or a p ...

are

Taobao Taobao () is a Chinese online shopping platform. It is headquartered in Hangzhou and is owned by Alibaba. According to Alexa rank, it is the eighth most-visited website globally in 2021. Taobao.com was registered on April 21, 2003 by Alibaba ...

and

. On the

website A website (also written as a web site) is a collection of web pages and related content that is identified by a common domain name and published on at least one web server. Examples of notable websites are Google Search, Google, Facebook, Amaz ...

of the online marketplace sellers can publish their

product Product may refer to: Business * Product (business), an item that serves as a solution to a specific consumer problem. * Product (project management), a deliverable or set of deliverables that contribute to a business solution Mathematics * Produ ...

offering with a

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...

and information about the product's features and qualities. Potential customers can

search Searching or search may refer to: Computing technology * Search algorithm, including keyword search ** :Search algorithms * Search and optimization for problem solving in artificial intelligence * Search engine technology, software for findi ...

and

browse Browsing is a kind of orienting strategy. It is supposed to identify something of relevance for the browsing organism. When used about human beings it is a metaphor taken from the animal kingdom. It is used, for example, about people browsing o ...

goods, compare price and quality, and then purchase the goods directly from the seller. The

inventory Inventory (American English) or stock (British English) refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying the shap ...

is held by the sellers, not the company running the online marketplace. Online marketplaces are characterized by a low setup cost for sellers, because they do not have to run a

retail store Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesaler, and t ...

. While in the past

Amazon Marketplace Amazon Marketplace is an e-commerce platform owned and operated by Amazon that enables third-party sellers to sell new or used products on a fixed-price online marketplace alongside Amazon's regular offerings. Using Amazon Marketplace, third-party ...

has served as a role model for online marketplaces, the expansion of the Alibaba Group into related business such as

logistics Logistics is generally the detailed organization and implementation of a complex operation. In a general business sense, logistics manages the flow of goods between the point of origin and the point of consumption to meet the requirements of ...

e-commerce payment system An e-commerce payment system (or an electronic payment system) facilitates the acceptance of electronic payment for offline transfer, also known as a subcomponent of electronic data interchange (EDI), e-commerce payment systems have become incre ...

s and

mobile commerce The term mobile commerce was originally coined in 1997 by Kevin Duffey at the launch of the Global Mobile Commerce Forum, to mean "the delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless tech ...

is now trailed by other marketplace operators such as

Flipkart Flipkart Private Limited is an Indian e-commerce company, headquartered in Bengaluru, and incorporated in Singapore as a private limited company. The company initially focused on online book sales before expanding into other product categories ...

. For consumers, online marketplaces reduce the

search cost Search costs are a facet of transaction costs or switching costs and include all the costs associated with the searching activity conducted by a prospective seller and buyer in a market. Rational consumers will continue to search for a better produ ...

, but insufficient information on the quality of goods and an overloaded goods offering can make it more difficult for consumers to make purchasing decisions. Consumers' ability to make a purchasing decision is also hampered by the fact that an online marketplace only allows them to examine the quality of a product based on its description, a picture and

customer review A customer review is an evaluation of a product or service made by someone who has purchased and used, or had experience with, a product or service. Customer reviews are a form of customer feedback on electronic commerce and online shopping sites ...

s. Another characteristic of online marketplaces is that the same product can be offered by several merchants. In this case, consumers can often make the selection of a merchant with the support of reviews of that merchant, for example. Despite many conceivable factors influencing merchant selection, customers choose primarily on the basis of the lowest price for a particular product.

For services and outsourcing

There are marketplaces for the

online outsourcing Online outsourcing is the business process of contracting third-party providers (often overseas) to supply products or services which are delivered and paid for via the internet. Background Online outsourcing is the internet-based version of o ...

of professional services like IT services,

search engine optimization Search engine optimization (SEO) is the process of improving the quality and quantity of Web traffic, website traffic to a website or a web page from web search engine, search engines. SEO targets unpaid traffic (known as "natural" or "Organ ...

, marketing, and skilled crafts & trades work. Microlabor online marketplaces such as

Upwork Upwork Global Inc., formerly Elance-oDesk, is an American freelancing platform headquartered in Santa Clara and San Francisco, California. The company was formed in 2013 as Elance-oDesk, after the merger of Elance Inc. and oDesk Corp. The merg ...

and Amazon Mechanical Turk allow

freelancer ''Freelance'' (sometimes spelled ''free-lance'' or ''free lance''), ''freelancer'', or ''freelance worker'', are terms commonly used for a person who is self-employed and not necessarily committed to a particular employer long-term. Freelance w ...

s to perform tasks which only require a computer and internet access. According to

, its Mechanical Turk marketplace focuses on "human intelligence tasks" that are difficult to automate computationally. This includes content labelling and

content moderation On Internet websites that invite users to post comments, content moderation is the process of detecting contributions that are irrelevant, obscene, illegal, harmful, or insulting with regards to useful or informative contributions. The purpose of ...

. Microlabor online marketplaces allow workers globally, without a formal employment status, to perform digital

piece work Piece work (or piecework) is any type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed, regardless of time. Context When paying a worker, employers can use various methods and combinations of ...

, such as for example rate an image according to content moderation guidelines.

Gig worker Gig workers are independent contractors, online platform workers, contract firm workers, on-call workers, and temporary workers. Gig workers enter into formal agreements with on-demand companies to provide services to the company's clients. In ...

s are paid for each task, for example U.S.$0.01 for each moderated image, and accumulate payment on the microlabor platform.

The sharing economy

In 2004

Yochai Benkler Yochai Benkler (; born 1964) is an Israeli-American author and the Berkman Professor of Entrepreneurial Legal Studies at Harvard Law School. He is also a faculty co-director of the Berkman Klein Center for Internet & Society at Harvard Univers ...

noted that online platforms, alongside

free software Free software or libre software is computer software distributed under terms that allow users to run the software for any purpose as well as to study, change, and distribute it and any adapted versions. Free software is a matter of liberty, no ...

and

wireless networks A wireless network is a computer network that uses wireless data connections between network nodes. Wireless networking is a method by which homes, telecommunications networks and business installations avoid the costly process of introducing c ...

, allowed households to share idle or underused resources. As the sharing economy inspires itself largely from the

open source Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized sof ...

philosophy, open source projects dedicated to launching a peer to peer marketplace include Cocorico and Sharetribe. In 2010

CouchSurfing CouchSurfing is a hospitality exchange service by which users can request homestays or interact with other people who are interested in travel. It is accessible via a website and mobile app. It uses a subscription business model, and while host ...

was constituted as

for-profit corporation A for-profit corporation is an organization which aims to earn profit through its operations and is concerned with its own interests, unlike those of the public ( non-profit corporation). Structure A for-profit corporation is usually an organizatio ...

and by 2014 online marketplaces that consider themselves part of the sharing economy, such as

Uber Uber Technologies, Inc. (Uber), based in San Francisco, provides mobility as a service, ride-hailing (allowing users to book a car and driver to transport them in a way similar to a taxi), food delivery (Uber Eats and Postmates), package ...

and

Airbnb Airbnb, Inc. ( ), based in San Francisco, California, operates an online marketplace focused on short-term homestays and experiences. The company acts as a broker and charges a commission from each booking. The company was founded in 2008 b ...

, organized in the

trade association A trade association, also known as an industry trade group, business association, sector association or industry body, is an organization founded and funded by businesses that operate in a specific Industry (economics), industry. An industry tra ...

''Peers.org''. In 2015 Alex Stephany, the founder of online marketplace

JustPark JustPark is a technology platform that matches drivers with parking spaces through its website and mobile application. JustPark, previously known as ParkatmyHouse, was founded in London in 2006 by Anthony Eskinazi. As of 2013, the JustPark servic ...

, defined the sharing economy as the economic value arising from making underutilized assets available online.

Criticism

A 2014 study of

oDesk Upwork Global Inc., formerly Elance-oDesk, is an American freelancing platform headquartered in Santa Clara and San Francisco, California. The company was formed in 2013 as Elance-oDesk, after the merger of Elance Inc. and oDesk Corp. The merg ...

, an early global online marketplace for

freelance ''Freelance'' (sometimes spelled ''free-lance'' or ''free lance''), ''freelancer'', or ''freelance worker'', are terms commonly used for a person who is self-employed and not necessarily committed to a particular employer long-term. Freelance w ...

contractors, found that the service

outsourcing Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...

microwork Microwork is a series of many small tasks which together comprise a large unified project, and it is completed by many people over the Internet. Microwork is considered the smallest unit of work in a virtual assembly line. It is most often used to ...

increased opportunities for freelancers regardless of their geographic location, but the financial gains for most contractors were limited as experience and skills did not translate into higher payment. A general criticism is that the laws and regulations surrounding online marketplaces are quite underdeveloped. As of consequence, there is a discrepancy between the responsibility,

accountability Accountability, in terms of ethics and governance, is equated with answerability, blameworthiness, liability, and the expectation of account-giving. As in an aspect of governance, it has been central to discussions related to problems in the publ ...

and liability of the marketplace and third parties. In recent years online marketplaces and platforms have faced much criticism for their lack of

consumer protection Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent business ...

Market economy

In 1997

Yannis Bakos Yannis Bakos is a professor at the Leonard N. Stern School of Business at New York University. His primary area of expertise is the economic and business implications of information technology, the Internet, and online media. He is the co-founder (w ...

studied online marketplaces and came to regard them as a special type of electronic marketplaces. He argued that they reduce economic inefficiencies, by lowering the cost of acquiring information about the sellers' products. The operators of online marketplaces are able to adapt their

business model A business model describes how an organization creates, delivers, and captures value,''Business Model Generation'', Alexander Osterwalder, Yves Pigneur, Alan Smith, and 470 practitioners from 45 countries, self-published, 2010 in economic, social, ...

because of the data they hold on the platform users. Online marketplace operators have a unique ability to obtain and use in their economic decision making personal data and

transaction data Transaction data, or transaction information, constitute a category of data describing transactions. Transaction data/information gather variables generally referring to reference data or master data – e.g. dates, times, time zones, currencies. ...

, but also social data and

location data Geographic data and information is defined in the ISO/TC 211 series of standards as data and information having an implicit or explicit association with a location relative to Earth (a geographic location or geographic position). It is also call ...

. Therefore academics have described online marketplaces as new

economic actor Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...

, or even as a new type of market economy. In 2010

Christian Fuchs Christian Fuchs (; born 7 April 1986) is an Austrian former professional footballer who played as a left back. He began his senior career as a teenager at Wiener Neustadt before signing his first professional contract at 17 with SV Mattersburg ...

argued that online marketplaces operated ''informational capitalism''. The inherent

feedback loop Feedback occurs when outputs of a system are routed back as inputs as part of a chain of cause-and-effect that forms a circuit or loop. The system can then be said to ''feed back'' into itself. The notion of cause-and-effect has to be handled c ...

allows the operators of online marketplaces to grow their effectiveness as economic intermediaries. In 2016

Nick Srnicek Nick Srnicek (born 1982) is a Canadian writer and academic. He is currently a lecturer in Digital Economy in the Department of Digital Humanities, King's College London. Srnicek is associated with the political theory of accelerationism and a pos ...

argued that online marketplaces give rise to

platform capitalism Platform capitalism refers to the activities of companies such as Google, Facebook, Apple, Microsoft, Uber, Airbnb and others to operate as platforms. In this business model both hardware and software are used as a foundation (platform) for other a ...

. In 2016 and 2018 respectively, Frank Pasquale and Shoshana Zuboff cautioned, that the data collection of online marketplace operators result in

surveillance capitalism Surveillance capitalism is a concept in political economics which denotes the widespread collection and commodification of personal data by corporations. This phenomenon is distinct from government surveillance, though the two can reinforce each o ...

References

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