Why Niche Marketplaces
Are the Future?

The eCommerce market develops in two main formats:

• Online shops
  These are websites used to find a product or service and place an order. The range can be extensive. These are some of the most popular places for online commerce.

• Marketplaces
  These aggregator websites serve as specialized intermediaries receiving and processing information from various vendors in online and offline formats. Since there are multiple vendors, several instances of the same product can be present in a large marketplace at different prices.

Types of marketplaces

It is now common to divide marketplaces into horizontal and vertical ones.

Horizontal

Horizontal marketplaces are represented by such big players as Amazon, Alibaba, and eBay. These marketplaces offer an "all-in-one" experience by bringing together a variety of buyers and sellers, and a huge variety of stock that can meet the basic needs of any buyer.

Vertical

Vertical marketplaces are focused on a specific category of products or services. This way they can cater to more specific customer requests and work with each customer on a point-by-point basis.

The rise of vertical marketplaces

For a long time, the main paradigm was to buy quickly and without problems. The ability to walk into a supermarket like Walmart and get everything in one place appealed to almost everyone. This provided a great push for the horizontal marketplaces to emerge. However, over time, sellers and customers began facing various problems: price dumping, poor selection of specific products, service issues, and bloated catalogs. The new ecological and cultural paradigm pushed customers to look for marketplaces that can help with specific products.

A prime example of a shift to vertical marketplaces is Craigslist. In the 2000s, it was a popular website with ads, many directories, and individual boards. The platform ended up with many separate sub-boards that evolved into different markets. Craigslist itself created space for vertical niches that split it and grew into such platforms as Airbnb and Indeed.

Ebay took the same path. The original idea to resell used items grew into a huge marketplace where you could find many products. However, it didn't cover the needs of individual niches, so out of eBay grew StubHub with the ability to pick up ticket categories, and Poshmark focused on second-hand clothes. The emergence of these vertical marketplaces was fueled by a tendency toward a better shopping experience, which is intrinsically linked to bigger profits and growth.

Horizontal marketplaces are unable to cover some particular individual needs of customers. For example, a customer needs dancing shoes and a horizontal marketplace offers different options from different sellers but it does not help the customer with the next step. There may be extensive but generic feedback from non-professionals on items. Also, there is no product-specific community and support. The situation pushes users to niche marketplaces where specific products with more insightful details are collected. These platforms pay attention to details: how to use a product and what results to expect. A targeted marketplace would tell our customers that these shoes are unsuitable for tango because the heel is the wrong shape and requires a high degree of wear. Vertical marketplaces can also be called profile marketplaces because they address specific issues.

Top vertical marketplaces

Let's look at how the pandemic has changedeCommerce . In 2021, The Marketplace 100 list saw a major change in its rankings. Twenty-five companies entered the top tier for the first time, ten companies were sold or IPO'd, and the rest showed brisk growth in the squeeze of the lockdown. What the facts showed at the end of 2021:

Newcomers to the Marketplace 100 ranking have occupied the niches of eco-travel, hyper-local food, second-hand shops, and animal adoption. These and related categories account for more than 70% of total sales.

The effects of COVID are visible in food and beverage trends, with players like Mercato, which works with local food retailers. Travelling is no longer a dream trip to Paris but a holiday in the countryside. Among the newer companies are Tentrr, which offers unique camping options; Harvest Hosts, a caravan park; and Glamping Hub, a well-known option for glamping in comfort. For Hipcamp, which already has a strong grip on the camping niche, and Outdoorsy, which offers caravan hire, the situation has improved; the popularity of these marketplaces has risen.

New marketplaces like Curtsy, Depop, and Vestiaire Collective have emerged. They offer unique items that have already been used. It's not hard-luxe but a new take on consumer fashion. Whatnot is a young and exciting website that launched in 2019. It helps not only to buy collectibles but also to check authenticity. With the popularity of NFT, experts advise paying attention to collectibles this year.

The pet 'adoption' category has been expanded by just one company, Good Dog. They have joined the ranks of the already famous Rover. The pandemic has pushed families to take animals up for adoption, as many wanted to care for and feel supported during this difficult time.

User costs are of the utmost importance

The pandemic has taken a literal toll on food and food delivery companies. They have become coveted targets for purchasing now. Instacart's amazing results confirm this. The marketplace accounted for more than 70% of GMVs in Marketplace 100. The number of users has grown by fifteen thousand per cent since 2014. During the pandemic, Instacart grew the number of couriers from 180,000 to 500. They are second only to Amazon and Walmart in terms of popularity.

COVID both helped and destroyed

In front of our eyes, many companies were falling apart and people were losing their jobs. The service market was shaken very badly. Companies that helped care for children were affected, and cleaning companies tried to restructure the format of their work to meet the demands. The rental market and ticketing marketplaces were in danger. During these challenging times, niche marketplaces started offering point-to-point solutions for customers.

The remote learning marketplace grew by almost 80% thanks to Outschool and MasterClass offerings. This came as no surprise since people had the time and opportunity, the marketplaces offered free webinars, easy payment methods, and re-education courses to get a new profession.

Floom, a bouquet and plant delivery service, brought together florists across America and allowed them to increase their profits. While concerts were banned, Bandcamp got even more popular with artists. Social distance made it impossible to travel in the usual fashion, which drove the popularity of marketplaces for van rentals and isolated camping sites.

Tips on building an online marketplace

• Focus
  Create a unique user experience for your marketplace. You don't want to clutter up your products one on top of another. The "I'm the author - that's how I see it" philosophy doesn't work in eCommerce. Take advantage of the best practices in marketing and advertising, and create a unique offer for the customer. Consumers wants their needs heard. Pay attention to the service, values, habits, and interests of a certain consumer. Have an exclusive assortment that addresses the specific needs of the customer.

• Don’t forget about sellers
  For horizontal marketplaces, sellers are often only an afterthought because of their scale and volume. Luckily for niche marketplaces, this is an opportunity. Working with the seller is just as important as working with the customer. If you don't have a salesperson, you have nothing to sell. Create a comfortable experience for your salespeople: confidence and value for their brand. Don't forget about word of mouth: one seller will appreciate your unique relationship and share with the business community that your marketplace is easy to use; this is how you build popularity and expand your pool of partners.

• Be determined
  As said by famous mathematician David B. Hertz, "uncertainty and risk are a major challenge and a major business opportunity". Go to the market now and use a basic version of your marketplace. Use MVPs, reduce risks and do the first product integrations that will eventually develop into a viable marketplace. Remember that Amazon started by selling books and Airbnb was just an air mattress for rent.

Make sure to read out complete guide on how to build an online marketplace for a deep insight into approaching marketplace UX design and technical development.

Conclusion

The world of marketplaces is a fast-paced one. Players come and go (Amazon stays, that's a joke), while world events and technologies make new business models emerge regularly. Maybe you'll come in with a unique selling proposition and rise above everyone else, or maybe you'll solve a narrow customer problem. Horizontal marketplaces have opened up great possibilities for vertical niches. Tap into the expertise of others and create your own marketplace without delaying it until tomorrow.