How does a Service Marketplace differ from Other Marketplaces?

A marketplace is a platform where buyers meet sellers to trade commodities or sell and buy services. The concept of marketplace dates back to bartering days when transactions were tangible and simple. However, much has changed since then! Introduction of currency opened human minds, lives and trading systems to a plethora of options. Even the age old concept of classifieds was brought online. However, nowadays people hardly talk about classifieds – they search for things and services on various websites – which are called online service marketplaces. Well, not all marketplaces are same or fall in one league. To start with, e-commerce marketplaces are entirely different from global service marketplaces. Let’s examine how a service marketplace differs from the rest.

Data Gambling:

A service marketplace plays on data, it on-boards a variety of skillful sellers (from freelancers to consultants and everyone in between) who are willing to serve clients without meeting them physically. Thus, it creates a directory – also referred as listing or posting skills on that particular platform to get work from buyers. Similarly, it also attracts numerous buyers who would like to avail services from sellers. Hence, a service marketplace diligently maintains database of sellers and buyers. The thumb rule is: more the sellers on the site, the more business from buyers. Here the only risk factor involved is a dearth of sellers. In that scenario, buyers either bounce back from the site or look somewhere else as their demands are not met. Building a service marketplace needs abundance of sellers in the first place; otherwise the marketplace may suffer from infamy or corrode with no business coming at all.

Nature of Transactions:

Nearly, the revenue model of many marketplaces works on commission basis. Be it horizontal or vertical – when trading people meet – marketplaces get commission. However with e-commerce portals transaction process becomes tough because they need to rope in three points at a time. They are courier services, acceptance or rejection of the products by consumers, and sellers’ business conduct. Thus, transaction process of e-commerce is lengthy. On the other side, a service marketplace owns a transaction by escrow system. Typically a buyer parks his/her sum before advancing on a project. When the work gets accepted, the seller receives the payment (excluding commission) soon.

Vertical Nature:

Broadly, there are two kinds of marketplaces: vertical and horizontal. When a marketplace serves industry-wise demands, not for wide use, it is referred as vertical. Whereas e-commerce sites act as horizontal marketplaces: their on-display products can be useful to many segments, for example, furniture can be used by many class of people. But, an automotive manufacturing company can serve its spare parts to limited class like mechanics or stores, not for masses. It is an example of vertical market. E-bay, Amazon, Airbnb etc. all fit in horizontal category, while service marketplace startups: Upwork etc. fall in the purview of vertical marketplace.

Online Service marketplaces are poised to grow significantly in the times to come. However, in every marketplace there are a few bad actors like data manipulation or faulty transaction system, which can affect their growth significantly, thus service marketplace start-ups should consider delving into these hindrances for creating smooth platforms for buyers and sellers.

Since ages, market scenarios across the world have evolved from time to time. However, today’s online service marketplaces are unparallel – and the reason is simple and best – they have worldwide reach.

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