Learn about the basics of online marketplaces. What is a marketplace? How does it differ than an online store? Why start one in the first place?

What is a marketplace?

When you visit your local mall, shopping center, or farmer’s market, you’re actively browsing a marketplace. A marketplace, simply put, is a shared space where multiple sellers list their products or services. As a marketplace founder, you’re on the hook to customize the space, attract a community of customers, and facilitate transactions between buyers & sellers. There are several types of online marketplaces that you can read about here.

How does an online marketplace differ from an online store (e-commerce site)?

There are three primary ways that marketplaces differ from online stores, or traditional e-commerce websites:

1. Multi-Seller Hosting
   An online store acts as the storefront for a single company’s products or services. A marketplace, on the other hand, hosts listings from a community of sellers that all grow together on the same app or website.
   
2. Inventory Management & Order Fulfillment
   An online store is responsible for the procurement and inventory management of their own products or services. When a customer purchases from an online store, the store must also handle shipping and any customer support or communications. A marketplace doesn’t hold any inventory or fulfill orders—those responsibilities are handled directly by the third party sellers on the marketplace. The marketplace mediates any issues between buyers and sellers.
   
3. Business Model
   Typically, online stores makes money directly from the sale of their own products or services. Since marketplaces doesn’t actually produce it’s own goods or services, they earn revenue from either levying a commission fee on facilitated transactions or charging a subscription fee to participate on the platform.
   

Why start an online marketplace?

First, marketplaces make great businesses. There’s a reason why several of the world’s largest companies are online marketplaces—Amazon, eBay, and Etsy to name a few. While there’s considerable work to get them off the ground, marketplace businesses are highly scalable and lower overhead than selling directly. As a marketplace founder, your primary goal is to connect great buyers and seller together on your platform—that means no longer worrying about procuring supplies, manufacturing products, managing inventory, fulfilling orders, or dealing with shipping. If you’re a creator, that also means more significantly upside than brand sponsorship deals, as marketplace commission fees serve as an uncapped, ongoing revenue stream.

Second, marketplaces support communities of real people. Small businesses and individual sellers should have more places on the Internet for them to sell. More marketplaces mean dedicated, custom spaces designed for niche communities to call home. When there are only a handful of massive online platforms available, buyers and sellers are subject to weaker community engagement, a generic user interface, and impersonal customer support that doesn’t serve their communities effectively.

How does District help?

District provides the technology and support you need to launch, grow, and monetize your marketplace. Customize the experience to match your vision. Bring on a community of your favorite people. We handle everything else.

Web hosting, listing tools, live selling, payment processing, shipping options, and customer support—District offers everything in one place so you can focus on building your own corner of the Internet.

Get started by chatting with our team today.