In the previous blogs, you might notice the word “Two-Sided.” But what does Two-Sided mean in the marketplace? Amazon, Fiverr, Uber, and Airbnb use the two-sided marketplace model to create a marketplace. So,
What is a Two-Sided Marketplace?
An exchange platform for products and services between two different user groups that benefit from a vast network is known as a two-sided marketplace. For example, take Airbnb, an online vacation rental marketplace where property owners and renters use the Airbnb platform to share their rental services.
The two-sided online marketplace platform is also known as multi-sided platforms (MSPs), multi-sided markets, or multi-sided or 2 sided networks. Companies that operate two-sided marketplaces have rapidly gained popularity and are growing exponentially.
The Coresight Research Report says in 2022, the income of these platforms will increase to 40.2 billion U.S. dollars which is twice the income in 2014 is 18.6 billion U.S. dollars.
Why are Two-Sided Marketplaces So Popular?
Simplicity and Convenient
The simplicity of the marketplace is one of the main reasons behind its popularity. In a convenient way, it connects the users and the service providers or vendors.
Uber is the best example of a simple and convenient 2 sided marketplace. In this, the ultimate need for the user is safe and affordable transport. Uber makes it possible for the user by providing options to choose the drivers, same for the drivers they can have many customers helps them to build their business.
Marketplaces scale incredibly effectively because they are not required to own their merchandise.
Airbnb is the best example of a 2 sided marketplace’s scalability. It is among the top 100 vacation rental businesses globally without owning a single hotel room.
It seems to sense that you could create a multinational company without having to make an initial inventory investment. In reality, there are several instances of successful marketplaces found through bootstrapping.
Like it was at the beginning of the sector, marketplace technology is no longer an entry barrier. With its intricate transaction processes and two-sided capabilities, building the platform itself used to take months and a considerable budget. Today, there are many alternative methods for developing a marketplace.
No matter the market concept, sector, or size of the firm, employing an online marketplace platform like QoreUps to create a multi-sided platform has been a practical alternative recently. The time and money needed to start a B2B marketplace have dropped significantly because of the development of an online b2b marketplace with a SaaS platform.
Two-sided Marketplace Progress
The network effect is a strong dynamic that may be created by 2 sided markets and can hasten the expansion of an organization. When these forces are in motion, the platform’s users, vendors, and B2B marketplace entrepreneurs (sometimes known as consumers and providers, the demand and supply, respectively) all benefit.
After that, we’ll examine the advantages of the business model and the challenges it presents.
Two-Sided Marketplaces VS One-Sided Marketplaces
A one-sided marketplace draws all its value from a single set of customers, but a two-sided marketplace derives all its value from various customers.
For instance, ficedollarteeshirts.com is a one-sided online marketplace platform where a single seller sells T-shirts to the customer. Amazon is a two-sided marketplace where multiple users sell multiple products to customers.
There is a vast difference between these two business models.
- A one-sided marketplace does not have a network effect. But a two-sided one takes advantage of the network effect. It becomes difficult for the competitors to beat the two-sided platform with a strong network effect, even though their product is better.
- Also, these two marketplaces differ in the flow of the revenue model. The revenue flow of the two-sided marketplace is from both the user and vendor. But in the one-sided marketplace, the revenue flow is from one side to another.
Perks of Having a Two-Sided Marketplace
All three participants—the customer, the provider, and the platform—benefit highly from the 2 sided marketplace business model.
Advantages For Users On The Two-Sided Marketplace
The 2 sided online marketplace platform gives purchasers a wide range of options. Typically, a typical marketplace would not offer such choices.
Quick and hassle-free
For the user, using a 2 sided online marketplace platform is typically effortless, uncomplicated, and saves time.
Product excellence A lot of rivalries exist among the platform’s providers. They are motivated by this rivalry to maintain high product standards and lower prices.
Advantages For Vendors On The Two-Sided Marketplace
Compared to what they would find on their own, marketplaces increase demand for vendors.
The platform provides the providers with access to a sizable client base. As a result, the provider has a high potential for developing his brand.
Instead of the vendor, a consumer chooses Amazon because he trusts the marketplace. The vendor might use the time he saves to establish their reputation.
Advantages For Platform Owner On The Two-Sided Marketplace
The marketplace brand has no items of its own. It just links the two parties together. Compared to a one-sided marketplace, it avoids spending a lot of money.
The Network Effect benefits the 2 sided marketplace with tremendous growth. The platform may expand and automatically draw in new users thanks to it.
Network effects can enhance greatly by cross-side virality. The platform acquires a new client at the risk of losing a current one, but it also loses a present provider. The latter attracts new consumers, new providers, and so on.
Challenges in the Two-Sided Marketplace
Every business faces a challenge. Though a 2 sided marketplace has an enormous advantage, it also has some challenges.
Your company can grow significantly with a 2 sided market business strategy. However, finding the appropriate 2 sided market tactics which help your firm succeed.
Based on this model, one cannot just create a company overnight. Building supplier and customer communities and gaining traction takes time. However, as soon as the market grows and things start to operate, it is hard to dethrone it from its position due to the robust networks at work.
Even though this company model fosters connections between various customer groups, it frequently runs into problems that limit its development.
The Chicken-And-Egg Problem
The chicken-and-egg dilemma is one of the most frequent difficulties a brand managing a two-sided marketplace encounters. The network effect is the cause of this issue. Since suppliers will only utilize the platform when there is a demand for their goods and vice versa, it requires determining which side of the market to target first.
Ensuring Quality Standards
A 2 sided marketplace must ensure that the offering’s quality meets the requirements it promises to the parties in its capacity as an intermediary.
There is a good chance that after using a particular platform for their requirements, consumers and providers would set up their own networks to avoid paying the middleman platform. In order to keep them, the market must offer ongoing benefits to both parties.
Building Trust And Improving Customer Experience
A two-sided market brings together two groups of customers who meet one another demands. Only when these two groups of users have confidence in the platform and one another will they use it. Only until customers feel confident that an Uber is both secure for them and worth their money will they book one. Therefore, the market needs to be trustworthy. Additionally, the marketplace business owner must provide a positive user experience for both user groups.
The two-sided marketplace approach creates enormous potential and challenges that may be difficult to overcome. User behavior, which is famously hard to forecast, is the focus of these firms.
The best way to check whether your marketplace idea will be successful or not is to launch the marketplace as soon as possible. We offer QMarket to launch your marketplace instantly. QMarket is a Ready-made marketplace software for creating a two-sided marketplace rental business, eCommerce business, or service business.
Create a marketplace first version as MVP (Minimum Viable Platform). This MVP should have all the necessary features that enable you to take advantage of the company model while minimizing its drawbacks. It entails, in a nutshell, the development of profiles and listings, chats, review features, and comprehensive admin tools.
The MVP should be built and launched as quickly and cheaply as feasible. When employed for marketing, community development, and user research, such resources offer a substantially better return on investment. By achieving liquidity, resolving the chicken-and-egg dilemma, and building a solid foundation, these actions lay the groundwork for the emergence of network effects.
Hope you get knowledge on the two-sided marketplace. So, next design a perfect business model for your marketplace.