Market Networks

Market Networks – Intersection of Marketplaces and Social Networks

A detailed retrospection reveals that service marketplaces undergo evolution every five years on average. From the listings era in mid-nineties to managed services marketplaces in the middle of current decade, the depth and breadth of these marketplaces have steadily increased. While the scope is becoming wider, the business models are eliminating ambiguities. The success of social networks is enabling technologists to push marketplaces on the verge of another revolution called market networks. Thus, the aspirants aiming to build a service marketplace startup have an impressive opportunity at their disposal.

A marketplace for goods is also an option. However, this article emphasizes services because, as per the statistics from Bureau of Economic Analysis, consumers spend 69% on services and a mere 31% on goods.

The stats further reveal that only 7% of this spending on services goes toward internet marketplaces while the traditional brick and mortar service providers get the rest of it. The primary reason is the fact that consumers are distrustful of service providers since they carry an apprehension about providers of being inefficient.

Evolution and Scope of Marketplaces

The pioneering market used to be highly vague since there was no predefined domain in which they served. Instead, those platforms offered everything from product advertisements to job listings. Craigslist is a pertinent example. Such services were more like the advertisement section in newspapers.

Nevertheless, business owners and innovators brought clarity in marketplace business models by classifying services over the time under various categories. This classification gave rise to industry-specific on-demand marketplaces. These platforms were far more automated.

A considerable amount of trust built by on-demand services allowed investors to push money into managed marketplaces. Another reason for success of managed marketplace companies was the excessively high rate of digitization of companies.

This digitization prompted businesses to outsource the technical tasks so that they focused more on growth. It also allowed a remarkable cost reduction. A number of B2B marketplace startups emerged as a result of managed marketplace business model.

One notable difference between on-demand marketplaces and managed ones is the fact that latter requires proactive trust building. You cannot expect consumers to trust you with massive amount of money for acquiring services unless you develop a trustful reputation.

Earlier, marketplaces tend to be more horizontal. In essence, they offered broad range of services, thereby targeting a greater consumer base. The access of wide segments of market allowed them to have users from a diverse range. However, the breadth disallowed such services to specialize in some areas.

Modern marketplaces tend to have narrower scope. Although this relatively thinner scope targets lesser audience, yet sticking to specific consumer-base improves business-consumer relationship.

How are Market Networks Reshaping Consumer Trust?

What is so good about Uber, or for that matter Airbnb and Alibaba, that people excessively use them instead of traditional services. It is true that these services facilitate users but what really encourages consumers is the amount trust.

These marketplaces have limitations as well. Consumers may trust a services marketplace to travel a few miles within a city or to make a purchase under $50. However, one is highly unlikely to acquire health services or house construction or renovation through a provider listed at marketplaces.

Get Started with your M-Commerce platform today.

Social networks are another source of trustworthy connections. One would rarely make a LinkedIn connection or Facebook friend if the subject has crumbling reputation. The probability further declines if the underlying aim of this social relationship is a business affair.

While social networks and service marketplaces in their distinct capacities are serving to grow trust among providers and consumers, market networks at the junction of these multiply their individual impact.

Market networks take a selection of features from social networks and marketplaces. People using such networks are able to develop more business oriented relationships rather than social ones.

The founders of marketplaces and investors alike speak highly of the significance of market networks. For this reason, an efficiently-built network tends to attract impressive funding as with the case of HoneyBook.

Telling Market Networks Apart from Marketplaces

Since a market network is an extended form of marketplaces, one may find it challenging to tell apart the two. Following are some of the most telltale signs which create the distinctions.

  1. Unlike an Uber driver or parcel delivery person, the consumers know their agents far more. They start knowing their service providers months or even years before trusting them with spending money.
  2. In on-demand or goods marketplace, any individual or group referring a service or product to another individual or group results in an increased likelihood of latter spending a small amount of money. The referrals in market networks, on the other hand, can result in huge business deals worth millions.
  3. Most of the relationships between service providers and consumers in marketplaces are volatile and remain for shorter periods. For instance, you would rarely make friends with your Uber driver or passenger even if you have interacted multiple times. However, market networks trigger longstanding relationships.
  4. The operating markets of market networks are excessively complicated as compared to services marketplace startups. Usually, it takes days, months, and years rather than minutes or hours to serve one client for once.
  5. Like the large amount of cashflow involved in each service provision, the amount of money for collaborations between businesses will also be massive.

Let’s Collaborate

Market networks do not tend to replace social networks. Instead, they will enhance them by developing a stronger bond between followers, friends, or connections. With a workflow provided by cloud-based SaaS, the startups providing market network platforms will be at the center-stage of corporate sector in upcoming times.

Startup development is one of the areas where Mob Inspire specializes with a decade-long experience and unparalleled expertise. The businesses which worked with us for their software tech infrastructure are promising to lead their respective industries in future. Contact us today and share your startup idea so that we can work together.

Startup-Friendly E-Commerce Revenue Models

E-Commerce Revenue Models for Covid-19 Era and Beyond

There is no uncertainty about the significance of e-commerce revenue models considering the remarkable increase in demand. The Covid-19 onslaught has further stirred the already rising traction for e-commerce and m-commerce. 

However, most of the startups fail to go beyond the first year of business. As per 2016 statistics, only 47% of the online retail businesses managed to survive more than four years.

The primary reason for alarming failure rate is the absence of an appropriate business model. Most of the unsuccessful startup owners are unsure about what they are going to offer. Besides, they fail to identify the target audience. Consequently, the model is too vague for potential customers.

Second most critical challenge is the marketing of the nascent business. An inefficient approach toward marketing may lead to failure regardless of the business model effectiveness. This article shares the most in-demand business revenue models of e-commerce. The text also briefly unveils some of the effective marketing and growth strategies specific to e-commerce.

Types of Revenue Models in e-Commerce

Although there is a wide range of models falling in e-commerce domains, yet three of them are most productive ones.

1. Marketplace Platform

Marketplace is a company which provides a platform for third-party individuals to sell and purchase products and services. This platform, commonly referred to as C2C e-commerce, is the best bet for cash strapped entrepreneurs. They do not need to have initial capital to replenish stores. Instead, independent buyers and sellers connect to each other while marketplace offers a gateway.

However, this model is not limited to financially challenged individuals. Some giant companies also provide C2C services. For instance, telecom prodigy Ericsson started a marketplace last year for technical gadgets. While people usually use it for purchasing used products, the company also encourages manufacturers to sell new devices.

OLX is one of the pioneers and most successful marketplace companies. Currently, it is operating in 45 countries. Unlike Ericsson, OLX does not confine users to sell objects from specific domains. YouTube provides another instance of the marketplace with some features of subscription model. It enables users to subscribe to other users for accessing videos. However, it is notable that subscribers do NOT pay for a subscription.

The revenue streams in C2C e-commerce depends on the advertisement. The more the traffic on the site, the greater will be the chances of attracting advertisement. Besides, some companies also keep a commission from every deal. For example, a company offering a platform for selling used cars may grab a small share of money from every deal with the consent of primary stakeholders.

2. Online Retail Store

This B2C e-commerce platform requires the owners to sell manufactured products at retail. Online retail is around since the initial years of the web. In fact, first ever recorded e-commerce deal between university students was also online retail. It works for the aspirants who are able to invest a considerable initial capital.

Moreover, most number of e-commerce business and revenue models belong to this domain. It is not that other types are less effective. The primary reason for this model to be more widespread is the transformation of traditional stores into on-demand parallels.

The clarity in business model is most crucial in online retail. Some companies fail to live longer because they try to sell a wide range of products. The diversity of products is a decent choice only when the company is up and running. Initially, the owners have to begin in a specific domain. They need to make an online presence by offering some trademark products from a limited set of industries. With time, they may also add products from other industries.

Amazon is an example of diversity in retail products. The retail giant offers almost every household and enterprise product available on earth. Consequently, Amazon e-commerce revenue is over $250 billion. The current coronavirus pandemic has boosted the revenue by 29% in Q1 of 2020. This e-commerce giant had to hire 175,000 people in March and April 2020 to cater the increased demand. However, it was not the case in the past since the company started with a selection of products.

3. Subscription Revenue Model

This model emerged after the introduction and implementation of cloud computing. Cloud-based platforms allow users to run services remotely instead of downloading them on one’s personal computer or mobile. This mainly B2B e-commerce model requires online hosted services. Although most of them are trademark cloud-based services, yet some of them are licensed too.

For instance, a company may offer Microsoft’s Office 365 to users. These users can access the services through service provider’s website and do not require downloading Office 365 package. The reason of success is the substantial reduction in costs. Many enterprises require a software system temporarily. Purchasing the license and installing it on every user’s machine is an inefficient approach. Many of these companies offer B2C services too.

The rise of on-demand economy also owes to cloud-based subscription platform. Uber is one of the most pertinent examples when considering B2C cloud platforms. Amazon is one of those companies which have successfully implemented each of these three e-commerce revenue streams.

E-Commerce Marketing and Growth

The process of attracting potential customers to website (or mobile app in case of m-commerce) requires a combination of marketing approaches that fit  It also relates to the strategies which push customers to use the platform for selling or purchasing. The owners can spread the word by inbound marketing. Under such publicity campaigns, the owners need to make an effective social media presence. Moreover, they should ensure to create search engine optimized content.

Once the website traffic reaches the order of tens of thousands, the company can launch business intelligence campaign. This campaign models the users and determines the sources which are driving the traffic onto the site. If the company offers B2B business, connection building is essential. Pay-per-click (PPC) campaigns are highly effective in B2C business model.

The fact that biggest e-commerce companies by revenue and by volume use robust marketing strategies is precedence for startups. Selecting an appropriate model followed by a comprehensive marketing campaign increases the probability of success.

You can be the next big prodigy in the e-commerce universe. Contact us today and share the business model that you want us to build for you. Leave the rest upon us because Mob Inspire loves to assist startups.