Online marketplaces are now a key part of our daily lives, as they connect buyers and sellers in a simple, efficient way. These platforms make it easier for businesses to reach customers and for shoppers to find what they need.

If you're thinking about starting your own online marketplace or just want to understand how these platforms work, this guide is for you.

We’ll explore the different types of marketplace models and their features, as well as some lesser-known models that you might be interested in.

What is an Online Marketplace Business?

An online marketplace business is a website or app where buyers and sellers can connect and do business. It’s like a virtual shopping centre where people can browse products or services and make purchases and bookings.

The marketplace can either sell its own products or let other sellers list their items. Its main job is to make buying and selling easy by handling things like searching, communication, and payments. This way, businesses can reach more customers, and shoppers can find everything they need in one place.

Two Types of Online Marketplaces

Online marketplaces come in two main types: vertical marketplaces and horizontal marketplaces.

Each type serves different needs and offers unique shopping experiences.

1. Vertical Marketplaces

A vertical marketplace specializes in one specific category or industry.

For example, a marketplace that only sells electronics or focuses solely on fashion is a vertical marketplace.

These platforms cater to a specific audience and offer a wide range of products or services within that niche.

Because they focus on one area, vertical marketplaces often provide additional services and expertise related to that category, which makes the shopping experience more specialized and tailored.

2. Horizontal Marketplaces

Horizontal marketplaces, like Amazon or eBay, offer a wide variety of products across different categories. They provide everything from electronics to clothing to home goods, all in one place.

These platforms are designed to appeal to a broad audience, which makes them convenient for customers who want to shop for different types of products and services without having to switch platforms.

Both types of marketplaces can work for different businesses. The choice between vertical and horizontal marketplaces depends on the target audience and the business’s specific goals.

Online marketplaces can operate under various business models, each serving different types of buyers and sellers.

Here are five popular models:

1. B2B (Business-to-Business)

In a B2B marketplace, businesses sell products or services to other businesses. These platforms are designed to meet the needs of companies looking to buy in bulk or source specific goods for their operations.

Example: Alibaba is a well-known B2B marketplace where manufacturers and wholesalers sell large quantities of goods to other businesses.

2. B2C (Business-to-Consumer)

B2C marketplaces allow businesses to sell directly to individual consumers. These platforms are what most people think of when they hear "online shopping," offering a wide variety of products for personal use.

Example: Amazon is a classic B2C marketplace where businesses list products that consumers can purchase directly.

3. C2C (Consumer-to-Consumer)

C2C marketplaces connect individual sellers with individual buyers. These platforms enable people to sell items they no longer need or to create small businesses by selling handmade or secondhand goods.

Example: eBay and Etsy are popular C2C marketplace where individuals can auction off or sell their items directly to other consumers.

4. P2P (Peer-to-Peer)

Similar to C2C, P2P marketplaces focus on connecting people directly, but they often revolve around services or rentals rather than physical goods.

These platforms facilitate exchanges between individuals, often within a community or network.

Example: Airbnb is a P2P marketplace where people can rent out their homes or rooms to travelers.

5. Aggregator Model

In the aggregator model, the platform brings together different service providers under one brand, offering a unified service experience.

The marketplace doesn't own the products or services but helps standardize and present them under a single umbrella.

Example: Uber operates on an aggregator model by connecting passengers with drivers, all under the Uber brand, without owning the cars themselves.

All these models offer flexibility for different types of businesses, whether they are selling products, offering services, or creating a community for peer-to-peer exchanges.

Besides the main marketplace models, there are a few others worth mentioning.

  • Local marketplaces focus on serving a specific area, like a neighbourhood, and can be linked to B2C or C2C models, depending on whether businesses or individuals are involved.
  • Global marketplaces operate internationally, fitting into B2B, B2C, or C2C models by connecting buyers and sellers from different countries.
  • On-demand marketplaces provide quick access to goods or services and usually align with P2P, B2C, or aggregator models and serve to meet immediate needs.
  • Subscription-based marketplaces offer ongoing access to products or services for a regular fee, generally fitting into B2C.
  • Niche marketplaces focus on specific interests or categories and often fall under vertical marketplaces or B2C models.

These minor models often overlap with the main ones, adapting to different needs and audiences. Understanding these connections helps businesses choose the best approach for their goals.

End Note

Understanding the various online marketplace models can help you make informed decisions about building or optimizing your platform.

Whether you’re choosing between a vertical or horizontal marketplace, or exploring specialized models like local or on-demand, each option offers unique benefits and opportunities.

We hope this guide has provided valuable insights to help you navigate the world of online marketplaces.

Thank you for reading, and best of luck with your marketplace journey!