Amazon’s move to open their first distribution centre in Australia is creating a lot of buzz, but how are online marketplaces really affecting businesses and everyday consumers? Global e-commerce retailers like Amazon only make up a small part of the total picture. Small businesses, governments, artisans, freelancers, and individual consumers all take advantage of different kinds of digital platforms to connect businesses to their customers, and to help make business more efficient and more competitive.

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Online marketplaces have been disrupting industries and transforming how we do business for years. They’ve made the global economy more efficient overall, but the benefit to startups and small businesses is especially significant. To understand why that is, however, we need to look at more than just retail giants like Amazon.

Types of online marketplaces

While we tend to focus on just one or two major examples, Internet marketplaces have been adapted to function in a huge variety of capacities to transform how we sell goods and services in almost every industry. Moreover, they cover an entire spectrum of involvement, from hands-off bulletin board style platforms like Gumtree and Craigslist, to industry specific organisations that treat businesses almost like contractors.

Retail Marketplaces

Online retail giants like Amazon, Alibaba, and Ebay have made by far the biggest splash, and are typically what we think of when we hear the term “online marketplace”. However relevant they are, though, they’re only one very specific kind of marketplace among many. Even among retail platforms, there is enormous variety. Specific marketplaces exist to cater to the needs of different types of businesses, specific industries, or groups of consumers.

Service Marketplaces

Services have also found a home online. Consumers can compare options and buy everything from insurance, to mental health services, to language lessons via Internet based marketplaces. More importantly, unlike physical goods, they can often also receive and manage these services electronically.

Online service marketplaces are especially relevant because they’ve empowered many small and local service businesses and freelancers. Catch-all platforms like Gumtree, general service platforms like Upwork, or smaller industry specific options allow businesses to reach and provide services to customers that they otherwise would never be able to connect with. These are, in many ways, the driving force behind the much-hyped “gig economy”.

How online marketplaces are helping small businesses evolve

These new kinds of marketplaces are having a profound effect on small businesses and startups. Specifically, it makes it much easier and cheaper for them to break into markets and to compete with larger and more established businesses.

Getting products and services in front of customers

Brick and mortar stores have a limited amount of space, and need to stock their shelves with exactly those products that consumers are likely to buy. For startups whose products aren’t well known or proven to be a safe investment, that presents a significant barrier. Online, on the other hand, space isn’t really at a premium. Anyone can create a merchant account on Amazon (or any of a wide variety of online retail marketplaces) and offer their products alongside those of well established competitors under the same, or similar, keywords. While incumbent brands certainly still benefit from their established reputations, startups also get their seat at the table and have the opportunity to compete.

Service marketplaces that operate in this way also exist, but many are specifically designed to aggregate and compare smaller service providers, and effectively set themselves up as a hub that can draw traffic and customers with the combined relevance of their associated businesses. A lot of web-based translation platforms, for example, simply list projects and allow translation businesses and independent translators to bid on them. In all cases, online marketplaces work to connect customers to more and more varied options than was previously possible.

Greater growth potential

Besides making businesses more visible to their target markets, online marketplaces are fundamentally not geographically limited in the same way that small businesses usually are. By using an online marketplace, businesses can reach the entire market targeted by that platform, which is often regional, national, or even international in scope.

Best of all, a startup can immediately get access to the marketplace’s users without being forced to spend months or years on digital marketing to establish themselves sufficiently to attract significant web traffic to their own site. If your product or service is good, you can start making sales practically right away. As a result, these businesses have the opportunity to grow much faster than would otherwise be possible.

In sum, online marketplaces help to level the playing field for businesses, and offer consumers more choice. That gives innovative startups with disruptive new ideas a better chance to be noticed and to gain traction.

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