To see where online marketplaces are headed, look to the past.
The mid-’90s ushered in the internet’s first wave of widely used consumer marketplaces. Although early multi-vendor ecommerce examples date as far back as the ‘80s, many of today’s most recognizable marketplaces didn’t emerge until the following decade.
Since then, some of the companies at the fore have expanded further. In 1995, Amazon was known as a book dealer, while today, it’s the world’s largest marketplace with 25,000 unique product sub-categories.
Others, though, have struggled harder to adapt in the face of challenges — especially when it comes to the unbundling of marketplaces, which has disrupted more than one heavyweight from the previous century. It’s also likely to shape the face of ecommerce looking ahead.
Horizontal marketplaces were the first success stories (horizontal marketplaces seek to be one-stop shops, while vertical marketplaces differentiate themselves by carving out a specific niche). Ecommerce was still gaining traction among consumers who were new to online shopping. With fewer potential buyers, operators of marketplaces cast the widest net possible.
You would be hard-pressed to find a first-wave horizontal marketplace more popular than Craigslist. Still, the virtual-classifieds website provides a cautionary tale for marketplaces operators vying for future success. As recently as 2009, when it had a staff of 30, Craigslist’s web traffic was beating out Amazon and eBay — each with workforces of roughly 20,000 strong.
Craigslist remains a formidable ecommerce enterprise, but it doesn’t have the same footprint it once did. It’s in the top 100 U.S. websites by overall traffic, but its revenue began falling dramatically in 2020 and has been on the rocks before that. At the heart of the issue is the unbundling of Craigslist’s many boards, which span many products and services, from car sales and apartment rentals to employment.
Unbundling is a process through which multiple vertical platforms arise, each focused on different segments of existing horizontal marketplaces. These verticals eat away at the user bases for different product and service categories of horizontal marketplaces. Over time, vertical platforms that are laser-focused on specific markets — for example, real estate platform Zillow that began competing with Craiglist’s housing sections — eat away at portions of a one-stop shop’s business.
eBay is another example of a wildly successful horizontal marketplace that has paved the way for many vertical marketplaces we know and love today. Out of eBay, marketplaces like StockX, Airbnb, and SeatGeek were founded.
A few shifts in consumer behavior continue to enable the unbundling of major marketplaces:
Here are two ways unbundled marketplaces are carving out a bigger slice of the ecommerce pie:
1. Quality: Sure, the latest iterations of horizontal marketplaces improve product or service quality in ecommerce. Amazon, for instance, has consumer protections in place: there are vendor ratings and verification and streamlined customer service channels. But when it comes to niche orders, vertical marketplaces are offering buyers unparalleled experiences.
StockX is an online marketplace that kicked off in 2015 with high-end sneakers (sneakers alone are now a $72-billion industry, showing how much upside potential hyper-specific marketplaces have). Now it deals in high-value collectibles, from streetwear and accessories to NFTs. But all these items share something in common: the need to determine their authenticity reigns supreme for buyers and resellers, and StockX has responded.
While horizontal competitors like eBay are still trying to address quality concerns over counterfeit goods, StockX has laid out the blueprint. The marketplace has several authentication centers throughout the globe where experts evaluate every single item before it is shipped to the buyer.
This quality assurance and trust are what enables marketplaces to thrive, whether you’re guaranteeing authentication as part of your service or 2-a day delivery window.
2. Curation: Because vertical marketplaces are launching at a smaller scope, they’re able to focus on and market to the needs of a smaller customer segment. This curated product catalog and customer journey create a higher quality buying experience for customers.
An example of this is SeatGeek. Before, buyers would spend hours scrolling through Craigslist, messaging sellers, and bartering back and forth on prices before making a purchase that was not protected by the marketplace.
With SeatGeek and other vertical ticket marketplaces, there are seat maps of stadiums, buyer and seller protections, mobile ticket downloads, and other features specific to the needs of a ticket exchange.
Technology is going to continue to allow niche, vertical marketplaces to play a bigger role in the future of multi-vendor ecommerce. Where Craigslist delayed rolling out a mobile app until the point where so-called “mcommerce” transactions were in the hundreds of billions, niche marketplaces today can easily position themselves on the cutting edge.
Only recently have purpose-built multi-vendor marketplace platforms like Nautical Commerce surfaced. Nautical was developed to let marketplaces focus on generating buyer and supplier demand and leave the underlying marketplace infrastructure to marketplace experts. With Nautical, businesses can launch their marketplaces within 90 days, not years.
Craigslist and eBay have long had to contend with vertical upstarts — and that was before niche marketplaces had access to powerful-yet-accessible ecommerce platforms tailored to the multi-vendor model. A quick and efficient tech solution further underscores the massive opportunity for niche marketplaces today.