Marketplaces vs online retailers


Would you go to an online marketplace when buying a new laptop, instead of directly entering a Bol.com or any other E-retailer? What is the actual contribution of these marketplaces and why aren’t they yet turning into retailers?

According to Clemons (2008), informdness is altering the demand side of the market. Buyers are more and more looking for discounts on products, but only for those items they already gained information about. This could be an explanation, of why consumers enter a vergelijk.nl or kieskeurig.nl. However, it does not seem to provide a confident future since online retailers are starting to show prices of their competitors on their websites. Basically these E-retailers are becoming more and more a marketplace, instead of marketplaces turning into retailers.

Levi van Wijngaarden, head of Search for Havas Media, explains that an average retailer is known by only 3% of the consumers. Based on this information, marketplaces do create an enormous amount of brand awareness. These firms provide a confidence for those buyers who are new to online shopping. Because they are fulfilling an intermediary function, for those consumers who don’t have enough faith in buying directly. The independent marketplace solely assists with the payment and creates an overview of the product specifications, reviews and prices.

Currently the earnings for marketplaces are most of the time created by a combination of the cost per click and connection charges, which the retailers pay. Wijngaarden explains in his article that many E-retailers still doubt whether joining a comparing website is a clever choice. Ultimately companies decide to pay the costs, go grow their brand awareness beyond this 3%. Providing this service, is a different business, compared to selling the products. With the current growing amount of online retailers, this demand of being noticed will keep growing. Therefore websites like vergelijk.com still provide the service for this laptop you have been reading about, paid the lowest price for and reviewed.

Sources:

Clemons, E. (2008). How Information Changes Consumer Behavior and How Consumer Behavior Determines Corporate Strategy. Journal of Management Information Systems, 25 (2), 13-40.

Wijngaarden, L. (2013). Een vergelijkingssite is geen webwinkel. Emerce magazine, vol. 122.

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One response to “Marketplaces vs online retailers”

  1. twploeger says :

    Personally, when I am interested to buy some type of consumer electronics, I always browse on http://www.tweakers.net/pricewatch. An advantage is the big range of specs you can filter the search results with. Sticking with a laptop as an example, I would specify my requirements, e.g. price maximum, resolution, etcetera. In my experience, the best price among different web shops visible on tweakers.net is accurate. Moreover, it gives me enough product information to decide on.

    During last week’s lecture, guest speaker Pieter Zwart was asked about how he copes with online marketplaces related to brand recognition of his consumer electronics company Coolblue. The reason a fellow student asked this question was obvious: he stated Coolblue has been that successful because of taking care about customer satisfaction (96% of its customers are satisfied; 30% of Dutch people recognizes Coolblue). According to Pieter, offering products against lowest prices is generally not a good differentiation strategy.

    He stated that Coolblue’s customer satisfaction expresses itself as well on online marketplaces. I just checked it out and in this particular case, he is right: although the Chromebook is not sold against the cheapest price, Coolblue got the best rating of all webshops. (www.tweakers.net/pricewatch/407607/hp-chromebook-11-2000nd.html)

    So in the case of consumer electronics, Pieter’s answer might be correct. But what about other industries? “Online markets pose a difficulty for evaluating products, particularly experience goods, such as used cars, that cannot be easily described online” (Dimoka et al., 2012). Search goods, on the other hand, have less product uncertainty than experience goods and can therefore be fully evaluated before a purchase (Ba and Pavlou, 2002). Thus, one might argue that the usefulness of an online marketplace depends on what kind of product the consumer is looking for.

    Sources:

    Ba, S., and Pavlou, P.A. 2002. “Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behaviour,” MIS Quarterly (26:3), pp. 243-268.

    Dimoka, A., Hong, Y., and Pavlou, P.A. 2012. “On Product Uncertainty in Online Markets: Theory and Evidence,” MIS Quarterly (13), p.9.

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