We’ve created a list of the most common marketplace terminology that can confuse the most seasoned business owners. In this glossary, we’ve defined the essential terms you’ll need to know when speaking to product development agencies, consultants or potential investors.
Basic marketplace terminology
The key difference between a marketplace and a traditional eCommerce store is the multi vendor element. Where customers can purchase products or services from multiple vendors rather than from a single vendor store.
The administrator (admin) is the owner or operator of a marketplace. They provide the platform and manage the day-to-day operations, user rights and access, and data.
A vendor is a seller – they will list their products or services on a marketplace to reach a wider audience of customers – taking their products or services to market quickly through a ready built platform with a large user base.
A customer is a buyer – one of the key benefits of a marketplace to a customer is being able to compare prices and products in a single place. In some cases, like with C2C or P2P marketplaces, customers can also be vendors.
Onboarding is the process of getting vendors onto your marketplace.This first step is crucial to a marketplace’s success. The more quality vendors (and products or services) you have, the better experience your customers will have on the site.
Listings are posted to a marketplace by the vendors. These can be products, services or even jobs or digital courses.
The network effect is a phenomenon where increased numbers of people improve the value of a service. Many online platforms have grown in popularity due to this, think eBay or facebook.
Liquidity is the likelihood of vendors selling their products and services, and customers finding what they are looking for on a marketplace platform. They are both key metrics when understanding the success of a marketplace.
Marketplace business models
A B2B marketplace is a website where businesses sell goods or services to one another, helping connect manufactures, retailers, vendors and wholesalers.
A B2C marketplace platform is the most common of the three systems and is something you’ve likely encountered before. It connects businesses to customers and allows customers to easily buy products or services.
C2C / P2P marketplaces
C2C or P2P marketplaces are built for customer-to-customer (or peer-to-peer) transactions, where individuals sell goods or services to one another, and not businesses. C2C marketplaces make their revenue from fees charged to sellers for listing items for sale, taking a commission per transaction or adding on promotional features to their listing ability.
A product marketplace refers to a marketplace that solely deals with physical or digital products.
A service marketplace describes a marketplace that offers services, such as event catering or private tuition.
A rental marketplace is a marketplace that allows customers to hire or rent goods, such as holiday accommodation or plant machinery.
As the name suggests, a hybrid marketplace is a marketplace that offers a combination of products, services and rentals.
With a curated marketplace the admins review what the vendors list before publishing it to the platform. This is typically done when an admin wants to ensure the listings include the necessary information or have good quality images.
Reverse marketplaces switch the roles of a vendor and a customer, where the customer posts a listing and the vendor purchases or bids on it.
Managed marketplaces are common where a human element is required in matching vendors and customers. This is typically required for personalised or luxury products or services.
Local vs. global marketplace
Local marketplaces will operate in a specific geographic location, while a global marketplace will operate worldwide. Starting with a specific geographical area may help grow your marketplace faster and find liquidity.
Vertical vs. horizontal marketplace
Vertical marketplaces offer a niche range of products or services, whereas horizontal marketplaces offer a wide variety of products and services and do not focus on a specific niche or market.
Commission or transaction fee
Commission or transaction fee refers to the fixed fee or percentage the marketplace owner takes for the facilitation of the transaction. We’ve put together a list of the most common business models found on marketplaces to help you make the best decision for your marketplace.
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Above the fold / below the fold
Above the fold refers to the area on a page that the user can see without scrolling down. Anything below this line is referred to as below the fold – which can only be viewed by scrolling.
Search functionality ensures customers find it easy to locate what they’re looking for, if it’s too painful they’ll simply move on to another site. That’s why, as already discussed in ‘How can I ensure users find what they’re looking for on my marketplace?’.
When selling a wide variety of products, you’ll want to put them into categories to narrow things down. They’re really useful for customers and vendors alike, as they will alert vendors as to whether you have a category that matches what they are trying to sell, and if so, your site will be more attractive to them.
Filtering & sorting
When the search or category selection isn’t enough for a customer to find what they’re looking for, a filter may be required. Sorting by the most relevant results first is preferred , but the ability to sort by newest, cost, or location if relevant is also useful.
The transaction flow describes the journey a user takes from initially choosing a product or service, paying for it, and receiving their goods or services. Some transaction flows on marketplaces can be complex, with payments held in escrow, cancellations and refunds, all coming into play.
A payment gateway refers to a service provided by a marketplace that authorises secure online card payments through the site.
Split payments is a term used to describe a payment being split between multiple recipients. This can be between the vendor and the marketplace admin, or with various third parties.
Delayed payout & escrow
Delayed payouts or escrow refers to funds being held and not released to the vendor until certain conditions are met. This could be as simple as proof or delivery or until certain contracts have been completed.
Platform leakage is a term used when a user circumnavigates the marketplace and goes directly to the vendor. This is one of the key challenges of a marketplace and providing added value is one of the ways to discourage this behaviour.
With double-blind reviews the vendor and customer are asked to review each other at the end of the transaction, but neither can see the other’s review until they have left one themselves. This is used to discourage dishonest reviews and promote positive feedback.
Marketing & analytics
Analytics is the collection, measurement and reporting of real user data to help understand and optimise a website or online platform.
Call to Action (CTA)
A Call to Action is a term used to describe an element of the design that encourages a user to perform a specific action, for example a ‘Buy Now’ button or a ‘Subscribe to Newsletter’ banner.
Click Through Rate (CTR)
Click Through Rate is the percentage of users who click on a specific link to the total number of page views of that page. For example, if you had a page with 1,000 page views and 100 users clicked on your desired link, your CTR would be 10%.
Conversion Rate is the percentage of users who ‘convert’ on your site. The conversion (or goal) is defined by you, this could be a sale, a lead or a form competition. For example, if your chosen conversion metric was a sale and you had 1,000 visits to your marketplace and 100 sales, your conversion rate would be 10%.
Cart abandonment rate
Cart Abandonment Rate is the percentage of users who do not complete a sale after they have added products to their cart. It is one of the key metrics to watch on a marketplace.
Bounce rate represents the percentage of users who enter a page on a site and leave without clicking through to any other pages.
Search Engine Optimisation (SEO)
Search Engine Optimisation (SEO) is the process of improving the quantity and quality of traffic to a website. There are various aspects to SEO e.g. technical, content, backlinks, which are aimed at driving ‘free’ traffic to a site.
Domain authority is a search engine ranking score created by Moz and summarises the relevance of a site for a specific subject or industry. This relevance has an impact on the site’s ranking by search engines.
A backlink is a link from one website to another. Backlinks are a good way to build authority around specific subjects or industries and can help drive additional traffic to a site.
Search Engine Results Pages (SERPs) are the results displayed on a search engine (like google) in response to a user’s search query. SERPs include organic listings, PPC ads, featured snippets, knowledge graphs and even images and video results.
PayPerClick is an advertising channel used to quickly drive traffic to a website. You pay the publisher (like Google) to display a search engine listing in the SERPs. Each time the ad is clicked you will be charged based on how competitive that search term is.
Return on ad spend (ROAS)
Return on ad spend (ROAS) represents the amount of revenue received for each £ spend on a campaign such as Google Ads (PPC).
Cost Per Click (CPC)
When running paid ads, such as Google Ads, you will want to keep an eye on your Cost Per Click. If the CPC is too high compared to your returns, you will want to identify which search terms are causing this and look for alternatives at a lower CPC.