Small Business Trends

Virtual Marketplace: What Is an Online Marketplace?

By and | 6 min read | Published

Selling goods and services online has never been easier—or more necessary—for growing businesses.

An online marketplace is a virtual store where individuals or businesses buy or sell goods (new or used) and services. Online marketplaces are run by third-party vendors or service providers who often take a part of the sales profits in exchange for listing the items on their sites and facilitating transactions.

Online marketplaces can connect businesses to businesses, businesses to customers, or peers to peers. In this article, we explain the different types of online marketplaces, why they are so popular, and how your business can benefit from using them.

Types of online marketplaces

Online marketplaces take on three forms: business to business, business to customer, and peer to peer. Let’s read more about each in the next sections.

Business-to-business marketplaces

In B2B marketplaces, wholesale suppliers sell goods or services in bulk to other businesses. These marketplaces allow the sellers to distribute their products and services to a large audience, without building or maintaining an eCommerce platform of their own. Businesses can start selling quickly, without any upfront investment in web development, eCommerce, and marketing.

B2B marketplace vendors make money via subscription fees, commission off each sale, or listing fees for items or services.

Business-to-customer marketplaces

Business-to-customer (B2C) marketplaces sell products and services directly to customers. Amazon, eBay, and Facebook Marketplace are examples of popular B2C marketplaces. As with B2B platforms, B2C marketplaces take a commission or charge a listing or subscription fee from the sellers.

Peer-to-peer marketplaces

In peer-to-peer marketplaces—also called customer-to-customer marketplaces—individuals with similar needs share their requirements for specific products or services. Ride-sharing platforms and house-swap or room rental platforms are examples of peer-to-peer marketplaces.

In these marketplaces, sellers can choose to promote their products or services, which is one of the ways the marketplace vendor earns profits. Other income sources can include subscription fees, listing fees, and third-party advertisements.

Why are online marketplaces so popular?

During the COVID-19 pandemic, online shopping gained in popularity. Based on the number of monthly visits (as of April 2021), Amazon, eBay, and Etsy are three of the five most popular online marketplaces in the U.S. Amazon averages two billion monthly visits, while eBay has 689 million and Etsy has 238 million.

Traditional retailers are not the only ones profiting from virtual marketplaces. The above list includes Etsy, which sells boutique items—often artisan and handcrafted—made by small businesses and provides these small shops an easy-to-use platform to sell their creations.

The popularity of online marketplaces is also due to the convenience they offer to consumers. Browsing products in an online store and having them delivered to the door cuts the time involved in driving to a physical store, shopping at the store, and waiting in line to pay. Many popular social media platforms, including Instagram and Pinterest, now offer online shopping.

With online shopping, buyers can reach out to various vendors for their required products or services. They can purchase anything—from general interest products such as home decor to more specific items such as commissioned art pieces. They can also read product reviews—and browse other sites to match prices—to make informed purchase decisions.

The online shopping convenience extends to the transaction itself. When purchasing online, shoppers can use applications such as Apple Pay to purchase items via their saved data. They don’t have to hunt for a credit card and manually enter their details. Finalizing a purchase is as easy as a few clicks of the mouse or taps on their mobile device.

What are the benefits of an online marketplace?

Will your business profit from selling on an online marketplace? Since we can purchase anything online, the short answer is yes. Regardless of what you sell, there is a market for your business to tap into. And reaching that market is now easier with marketplace vendors who help you get started as well as support your business as it begins to grow.

Ease of start and use

The more products an online marketplace has, the more attractive it is to buyers. It is, therefore, in the best interest of marketplace vendors to make it easy for sellers to set up shop and begin selling. Online marketplaces often provide vendor support to walk you through the steps of setting up your store, listing items, and initiating transactions; many also offer support for technical issues. Amazon, for example, has a detailed beginner’s guide on how to start selling on its site and offers cost calculators, advertising tips, and more.

More customer trust

When your business sells through a popular vendor such as Amazon, Etsy, or eBay, you take advantage of the name and reputation already built by the vendor. Airbnb, for example, is known for its 24-hour chat service and customer support for hosts and guests. Since consumers already trust Airbnb, selling via the vendor—rather than directly through your website—will be more beneficial for your business.

Built-in and focused marketing

Marketing your products on your own can be daunting. Do you purchase Google Ads? Find the right hashtags via social media channels? Advertise locally? It’s difficult to know where to begin.

When you sell via an online marketplace, the marketplace operator helps bring in buyers via its own marketing channels, while you can focus on marketing within the marketplace (e.g., choosing the right descriptions and images for your products, opting for paid promotions, running special offers). Etsy, for instance, provides marketing guides to help promote seller shops and items via its platform.

Want software tools to help sell on online marketplaces?

The virtual marketplace you choose will mostly offer built-in seller support services. After all, the more you sell, the more the virtual market profits!

Thanks to these services, setting up your online marketplace is a breeze but maintaining it across platforms as your business grows can be challenging. To tap into a larger audience and increase sales, consider online marketplace software, which can help your business build and manage multivendor eCommerce shops.

Want to try out the products before purchasing? Here are some free marketplace software tools you can check out.

About the Authors



At Capterra, we believe that software makes the world a better place. Why? Because software can help every organization become a more efficient, effective version of itself.

Andrew Conrad

Andrew Conrad

Andrew Conrad is a senior content writer at Capterra, covering business intelligence, retail, and construction, among other markets. As a seven-time award winner in the Maryland, Delaware, D.C. and Suburban Newspapers of America editorial contests, Andrew’s work has been featured in the Baltimore Sun and PSFK. He lives in Austin with his wife, son, and their rescue dog, Piper.

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