E-Commerce vs. Online Marketplace

14 May, 2020
E-Commerce vs. Online Marketplace

I still remember when Uber reached Australia in October 2012.

I had only ever used trains and the occasional taxi to travel to and from meetings. Occasionally I would drive and pay excessive parking fees in Sydney’s CBD, which never seemed worth it.

Uber was created soon after the global financial crisis, and I remember encouraging my family to use Uber with me for the first time during the holiday period of December 2012. I didn’t need to instruct the driver on the precise route, nor worry about paying at the end. The whole idea seemed too easy. Getting out of that Uber and watching the car drive off without asking me for any cash was surreal.

It was awesome.

Uber the Online Marketplace

That was over 7 years ago, and most of us haven’t looked back. But is it really that revolutionary?

Since the early 1900s, you could pick up a phone to order a taxi. So what was the difference? The platform allowed for ease of order, and removal of the frustrating process of making the call, paying cash, and collecting change (which they never seemed to have). Not to mention, as behavioural science would attest; it played into our love of certainty. As humans, we would rather wait 7 minutes for an Uber and know when it will be there, as opposed to waiting 5 minutes for a taxi in a state of uncertainty.

Online Marketplaces Enabled via Platform Entrepreneurship

All this was possible due to a field known as platform entrepreneurship. Specifically, Uber is a marketplace platform; a type of e-commerce that connects potential buyers and sellers within a platform to help buy, rent, swap, or negotiate.

Of course, these platforms come in many varieties; the other popular examples are Airbnb and Spotify, spawned by the original giants in the early days like Amazon and eBay.

Existing Marketplaces Only Scratch The Surface

I recently had the pleasure of speaking to Ted Ladd, the Dean of Research and a Professor of Entrepreneurship at the Hult International Business School, and an Instructor of Platform Entrepreneurship at Harvard University.

Ted has founded, led, or otherwise participated in five platform startups (the most recent was acquired by Google to become WearOS), and insists platform entrepreneurship is the future.

A conventional e-commerce platform connects a single seller with buyers. A marketplace, driven by “platform entrepreneurs”, is a platform connecting buyers with multiple sellers. They don’t own any product by definition, but they are often larger than any individual vendor.

“I actually think that we’ve only scratched the surface with where multi-sided platforms will influence economic growth,” Ted insisted.

“And we’re I’m anticipating the next continuation of this revolution is in business to business platforms.”

Ted went on to use Station Five as an example of how a company could take to a platform for the future. He outlined how Station Five builds technology solutions for our clients. However, what he said next transformed a service based business seemingly unable to be disrupted into a platform.

“You could consider an alternative business model where instead of actually doing the work to build things, you own the customer relationship, you determine customer needs and then you find other software developers that you don’t employ, and you’re only using on a contract basis to fulfill that service.”

It sounds simple, but a slight change in the business model changes it operationally.

This all sounds really exciting, and certainly left me thinking long after the podcast. However, the shift isn’t for everybody. Regardless, it is worth considering as it is this basis that has and will continue to transform many industries globally.

A lot of our clients also believe in the future of platforms.

Example Online Marketplaces

ShoreTrade came to Station Five to connect buyers with sellers of fresh seafood in a two-sided marketplace focussed on primary industry; making the purchasing of seafood a smoother process for both parties.

We also created a platform called Parlour, which connects tattoo artists and the shops in which they operate, with potential clients.

In any case, have a think about online marketplace solutions, as this transformative business model will continue to disrupt industries into the future.

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