Digital Insight

Published on October 22nd, 2014 | by Saurabh Pandey

Why Marketplace Model Is #Fail For Ecommerce?

Internet was conceived with a promise and hope that it will cut the intermediaries. Internet also promised democratization, i.e. whether you are a small time blogger or a big publication, whether you are a small ecom portal or an MNC ecom portal- you will have an equal and fair chance of doing business.

I think internet has failed on both the promises.

Look at the current scenario, first in classifieds, classifieds should be a perfect example of startups and hyperlocal platforms making a killing- but what’s happening is that large players are investing so much money that it has become impossible for any small time hyperlocal platform to get any traction!

Internet , here is just replicating the offline traditional model, where if you have money you can kill competition and scale up. Infact classifieds platforms should talk about 3 major attributes- Content Quality, Hyperlocation and Liquidity.

None of these large classifieds platforms talk about these attributes (except quick selling) and squander money on brand building as if they are an FMCG product Why?

Look at the ecommerce platform. The internet promise here was that Brands can sell directly to consumers and hence pass on the savings on distribution channel expenses to consumers. Which Brand is selling at a conspicuously lower price online (than offline)today? None that I know of. Infact you can get many brands across categories at a cheaper price offline than online.

Even worse, the marketplace model attracts small retailers, distributers and whole-sellers to sell the Brands to consumers. And when they sell in marketplaces they of course will keep their margins and there is no way a Brand can sell directly to consumer in a marketplace model. Which implies that the prices we pay are as high as in offline world, or even more.

We are getting excited at huge online sales numbers which are unsustainable (because they are achieved through discounts or hype and not because of marketplace attributes) in ecommerce and an equally unsustainable and artificial aura around classifies marketplace (by way of push advertising only, without looking at traction metrics)

I am of a firm belief that we need and we will eventually get a serious and honest ecommerce player who can maintain inventories or devise a way where Brands can ship directly to consumers at a cost which is lower not because of discounts but because the strengths of internet is leveraged. (For classifieds, I see a bleak future for Horizontals, thanks to an amateur strategy of mass advertising too much too soon).

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