How to Build a Three-sided eCommerce Marketplace?
The eCommerce landscape is no longer confined to simple buyer-seller interactions. Today, businesses are reimagining the marketplace model in order to unlock new revenue streams and deliver unparalleled value. While two-sided eCommerce marketplaces connecting buyers and sellers have become the norm—a three-sided eCommerce marketplace introduces a new dimension of opportunity. This game-changing structure that connects three distinct groups creates an ecosystem of mutual benefits and seamless collaboration.
What is a Three-sided eCommerce Marketplace?
A three-sided eCommerce marketplace is an innovative business model that connects three different groups of participants on a single platform and facilitates interactions between them. Dissimilar to traditional two-sided eCommerce marketplaces that focus solely on connecting buyers and sellers, three-sided marketplaces introduce an additional stakeholder—such as service providers, manufacturers, intermediaries, or complementary entities—who add unique value to the ecosystem. This triangular structure allows for greater complexity and functionality. Thus, enabling businesses to address multiple needs and create a holistic value chain. A three-sided eCommerce marketplace fosters a mutually beneficial relationship by serving as a bridge for three groups, optimizing efficiency, reducing friction, and enabling growth for all parties involved.
Key Elements of a Three-sided eCommerce Marketplace
- Demand Side (Buyers): The buyers or the end-users form the primary side of the marketplace. They are the ones who are seeking products, services, or solutions offered through the platform.
- Supply Side (Sellers or Vendors): The sellers, vendors, or service providers represent the supply side. They utilize the platform to showcase their offerings, reach a broader audience, and fulfill demand.
- The Third Side (Value-Adding Entity): This group is essential for amplifying the value delivered to buyers and sellers by addressing specific pain points or adding complimentary services. It could include Service Providers who enable seamless transactions, Intermediaries who curate listings, or Content Creators who drive engagement.
Different Types of Three-sided eCommerce Marketplaces
- eCommerce Platforms with Logistics Providers: Platforms like Amazon that incorporate logistics providers as the third side to streamline fulfillment and delivery. Sellers list products, buyers purchase them, and logistics partners ensure reliable and timely delivery.
- Freelance Platforms with Training Providers: Platforms such as Upwork and Fiverr integrate training providers or certification bodies as the third side. This ensures freelancers (sellers) can upskill, enabling buyers to access high-quality services.
- Retail Ecosystems with Financial Partners: Marketplaces such as Alibaba include financial institutions as the third side, offering credit, insurance, and payment options to both buyers and sellers, ensuring a seamless transaction experience.
Benefits and Network Effects
The addition of the third participant amplifies the network effects that are vital to the success of any marketplace. As more sellers join, buyers gain access to a wider range of options, while service providers benefit from increased demand. Consequently, a strong network of service providers makes the platform more appealing to both buyers as well as sellers by addressing pain points. From balancing supply and demand to ensuring a smooth user experience, building a three-sided eCommerce marketplace requires strategy, innovation, and precision.
Case Study: On-demand Delivery Networks
On-demand delivery networks connect a three sided marketplace made of merchants, customers and delivery riders. Performance of an on-demand delivery is measured as delivery time–time taken from placing the order to delivery to the customer. Reducing delivery time leads to happier customers, higher income for delivery riders, and better business for the on-demand delivery company. The process to reduce delivery time begins with quantifying how time was spent on past deliveries, then forecasting how time will be spent on future deliveries, and then optimizing delivery time with actionables.
Stages of On-demand Delivery
Data teams are able to break down the data for a typical on-demand delivery into several stages as shown in the table below:
| Delivery Stage | Description |
|---|---|
| Dispatch | Orders are assigned to available riders near the pick-up location. |
| On Trip (Pick-up) | The time from dispatch to pick-up, broken into trip time and service time. |
| Service Time | The time spent waiting and finishing pick up at the location. |
| On Trip (Drop-off) | The time from pick-up to drop-off, broken into trip time and service time. |
Activity Recognition and Optimization
Recent upgrades to hardware and Operating Systems have enabled Activity Recognition (AR) in devices running iOS and Android. Both OSes support detection of “driving”, “cycling”, “walking”, “still” and “unknown” as activity change events. Activity data can be used to increase the granularity of delivery stages and draw valuable insights from it. For instance, pick-up and drop-off may each be broken into the following stages: On Trip => Walk => Service Time => Walk back. Using activity data from past trips, operators can calculate distances at which their delivery riders are parking at the end of the trip. By looking at past trips, drivers can be made aware of popular parking locations closer to pick-up. This will reduce delivery time by minimizing walking time.
