What is an Online Marketplace and How Do They Work?

Online Marketplace

Online marketplaces are becoming more and more popular as the world moves online. This is because people are now choosing to buy products from websites rather than walking into a store. With so many options, it can be hard to choose which marketplace you want to sell your product on.

In this article, we will talk about what an online marketplace is, how they work, the different types of marketplaces and tips for success with them. We’ll also discuss how marketplaces have evolved in recent years along with examples of popular marketplaces out there today. Finally, we’ll cover some benefits that come from selling your product on an online marketplace.

What is an online marketplace?

An online marketplace is a place where you can list your products and sell directly to customers. The two most popular types of marketplaces are an ecommerce site (like Amazon) or a broker website, such as Shopify that allows entrepreneurs to create their own storefronts for selling items from other sellers on the platform.

How do online marketplaces work?

Online marketplaces are a marketplace for both buyers and sellers. For the buyer, it is an easy way to find new products that they would otherwise be unable to access in their local area or in person at brick-and-mortar stores. They can browse through all different types of items on one site and compare prices until they find what they want – all without leaving the comfort of their own home.

Online marketplaces are also beneficial for sellers because they don’t have to worry about having a physical store or warehouse, and can sell items that are not available in stores at all. They simply list their products on an online marketplace with relevant information such as price, quantity and shipping options (usually between $0 and $20).

The buyer places an order with the seller on their online marketplace account, pays for it by credit card or PayPal. The items are then shipped to the customer’s address as provided during checkout process.

Online marketplaces also allow small businesses get a lot of exposure they wouldn’t otherwise have because these sites are visited by nearly every online shopper.

Online marketplaces have low start-up costs, and they do not require a brick-and-mortar store or warehouse space to operate.

The other type of marketplace is an offline platform that connects buyers with sellers in the physical world such as local flea markets, auctions or trade shows. These types of marketplaces are not online, but they can still be considered a type of ecommerce.

Evolution of the marketplace from Yellow Pages to online

Yellow Pages was the first marketplace. It was a directory of businesses, classified by category and alphabetized for easy searchability. The categories ranged from “Airlines” to “Zoos.” These directories were paper-based until they moved onto the internet in 1995 with Yahoo! Yellow Pages Canada as an example.

As time went on, it became evident that there was a need for an online marketplace. Amazon, eBay and Alibaba were the first to jump on this opportunity. They did not start out as marketplaces but they became a type of ecommerce because it allowed users to buy products from one site without going through multiple sites or apps.

Amazon added its Marketplace in 2009 which consisted of third-party sellers. eBay added its marketplace in 1999 and it currently has over 250,000 users who sell their items on the site. Alibaba is a different type of online marketplace because it mainly focuses on wholesale products so manufacturers can buy from wholesalers rather than other small businesses or individual consumers that may not have enough capital to purchase these goods themselves.


Right now, there are over 60 online marketplaces in the U.S. and more than 50% of Americans have bought something on an online marketplace before without ever visiting a physical store location from them. Online marketplaces also provide benefits for sellers such as reaching new customers through their site or app, faster transactions with less overhead costs like shipping or hiring customer service representatives, ease of selling internationally and more.

What do you need to know about online marketplaces?

When it comes to online marketplaces there are a few things you need to know before jumping in headfirst. There is no one perfect marketplace for everyone, so different sellers will have different opinions on which type of platform they prefer. Some people like the high-volume strategy with Amazon while others prefer a more niche strategy where they are selling on smaller marketplaces with less competition.

Here is some advice to consider before jumping into an online marketplace:

  • What type of product do you sell?
  • What size company do you work for, and what’s your budget?
  • How many products do you want to sell?
  • What marketplaces are your competitors selling on, and how many units do they have for sale in that marketplace?

If you’re not sure what type of online marketplace is best suited for your business goals then here’s a list of the different types to help to narrow down the field:

-Marketplace aggregator: this type of marketplace aggregates all types of products from many different sellers, making it easier for shoppers to find your product.

  • Ecommerce marketplace: An ecommerce marketplace is a website that sells goods and services online through multiple individual vendors or merchants with the same types of products. They are often used by resellers who want to increase their sales.
  • Private marketplace: A private online marketplace is where you can sell your products to other people or businesses without using it as an open platform for anyone to buy.
  • Barter/trade markets: These types of marketplaces allow sellers and buyers alike from around the world to trade goods with each other, often at reduced prices.
  • Open marketplaces: These types of online marketplaces are open to anyone and everyone, where sellers list their products for sale and buyers browse through the range of goods on offer before buying.

What are the best online marketplace platforms?

  • Amazon: The granddaddy of ecommerce, this is a good option for new businesses or those who are looking for an established customer base that’s also affordable. Although you need to pay listing fees and subscription costs here too, Amazon offers benefits like free shipping and payment processing and it’s got a vast inventory of goods.
  • Etsy: An online marketplace for handmade or vintage items, Etsy is a good option if you want to set your own prices and be in charge of marketing too. You will need to pay listing fees though which start at 20 cents per item but this can vary depending on how popular your products are and it’s worth it if you want to be in control of your pricing.
  • EBay: EBay is one of the world’s largest online marketplaces for buyers and sellers, with a focus on collectibles and hard to find goods since 1995. If you want to sell your products internationally then this marketplace will offer global reach and potential customers from all over the world.
  • AliExpress: An online marketplace that connects buyers directly to a global selection of sellers from around the world, AliExpress is useful for international customers looking for bargains on high quality goods. It’s also good if you want to sell your products internationally because it has such an extensive reach and potential customer base all over the world.
  • Bonanza: This site is a little less popular, but it’s worth checking out if you are looking for an online marketplace that has a laid-back feel. It doesn’t have as many features or options as some of the other sites do and they seem to attract mostly vintage items like furniture and clothing which means your products will have to fall into that category as well.

What are the challenges for online marketplaces?

The challenges for online marketplaces depend on the type of marketplace. You have one-click buying and selling, which is great because you don’t need to spend time with customer service or shipping your products out yourself. But if a buyer doesn’t pay then it will be hard to get your money back so make sure that you set up your account properly to avoid fraud.

Some online marketplaces will have specific rules about what you can sell, while others are more open and allow items that don’t fall into their niche. Some sites might charge for listing new products or there may be a monthly fee which means it’s not worth setting up an account with them if those fees will eat up your profits.

Online marketplaces work because companies like Amazon and Alibaba joined the marketplace game, which means that there are more people looking to buy online than ever before. But it’s not just marketplaces who have profited from the internet – small businesses can be successful too! Instead of having a brick-and-mortar storefront, the online marketplace provides a platform for your business to exist and grow.

Navigating through the world of ecommerce is difficult because there are so many marketplaces that it’s hard to know which one you should use. There are different types of online marketplaces, such as an auction-based site or an open bidding site where sellers can list their products and customers can buy them.

Tips for online marketplace success

There are a number of tips for online marketplace success that you should take into consideration before committing to any given one. You want to make sure the site is reputable, has high customer trust ratings, offers secure payments, allows sellers to have shipping rates with different parameters such as flat rate or by weight, and allows sellers to use different types of payment options.

online marketplaces

Future of online marketplaces

Many online marketplaces have been around for a while, but new ones are constantly popping up. As the world of ecommerce grows and more people shop on their phones instead of in-store, we’ll see many changes to how these initial marketplaces evolve.

Because there are myriad choices in ecommerce marketplace platforms, it’s important to do your research first. One way to do your research is to check out reviews on I Buy I Review. We buy programs and then review them to answer the question, “Is it legitimate or is it a scam?”

We recently reviewed Team National, a direct selling company that offers Big N Marketplace, an online marketplace. Read our review of Big National here.