How Online Marketplaces are Increasing Efficiency Across Industries
Online marketplaces have been around almost since the beginning of the internet, but today their impact is being felt more than ever before. Industries that have historically relied on physical stores and face-to-face interaction are now shifting to an online presence.
In this article, we dig into how online marketplaces are increasing efficiency across industries by:
- Addressing supply and demand
- Facilitating interaction between parties
- Streamlining the transaction experience
- Removing traditional roadblocks
Addressing Supply and Demand
Your local grocery store is a good example of the traditional, brick-and-mortar marketplace. The store supplies items that are typically purchased in your area, and if demand for a certain item increases the store will order more of it to stock the shelves. The store might not always have what you are looking for but, for the most part, it satisfies your day-to-day needs.
The logistics behind this system have been around for years, but online marketplaces have found ways to address supply and demand far more efficiently.
Think about Amazon. Although a completely online marketplace (with the exception of a few physical stores) Amazon has managed to create a logistics network of thousands of trucks and millions of square feet of warehouse space that allows you to receive most items in two days or less. Since the marketplace is not restricted by a physical store, Amazon has the ability to offer a seemingly limitless number of products that almost always seem to be in stock. They have exceptional ability to meet supply and demand needs that rivals the biggest traditional retailers in the world, and have done so in a way that the traditional retailers have had difficulty duplicating.
WeWork is another good example of an online marketplace successfully addressing supply and demand. While its “product” is physical office space, WeWork’s true value comes from its online marketplace that allows users to find, reserve and pay for temporary office space. Before WeWork, finding this type of space was difficult and typically required having to go through a real estate broker. By shifting the search process to an online platform that the customer could do on their own, WeWork has been able to capitalize on a product with an exceedingly high level of demand and a relatively low level of supply.
These companies were amongst the first to make the shift to an online marketplace in their relative industries, and their success shows that it has paid off. The ability to address supply and demand quickly and efficiently has been one of the primary drivers of the shift towards online marketplaces.
Facilitating Interaction Between Parties
Buying or selling something can be frustrating when you can’t find where to buy it or someone to sell it to. Most industries have traditionally used some form of inefficient communication, like phone calls or emails, to connect buyers with sellers. This is another area where online marketplaces have made significant steps towards improving efficiency in a number of industries.
There is a good chance you have benefited from this increased efficiency yourself. How often did you book a short-term rental before AirBnB? How many times did you take a cab before Uber? By simply facilitating the interaction between the service provider and the consumer, these companies and others like them have had a significant impact on the growth of their respective industries.
Another good example of an online marketplace that has done an exceptional job connecting buyers and sellers is eBay. By using this platform, sellers can post their items and gain a massive amount of exposure that they would have difficulty replicating on their own, and buyers can browse thousands of items looking for the one that specifically fits their needs. It’s a win-win for both parties, and it wouldn’t be possible without the online marketplace eBay created.
The next time you book a vacation home, take an Uber to your favorite restaurant or use eBay to finally buy that one special item you’ve been looking for, think about how much more difficult it would have been without an online marketplace.
Streamlining the Transaction Experience
Another way online marketplaces are increasing efficiency is by streamlining the transaction experience. No consumer enjoys a long, complicated transaction, but they have become commonplace in many industries. To fix this, several companies have shifted to an online presence.
For starters, Carvana has managed to take the car buying process out of the stone age and transition it to a fully online experience. Rather than having their consumers visit a physical dealership, be pressured by pushy salespeople and have to negotiate for a better price, Carvana allows its users to search online, complete the transaction online and have the vehicle delivered straight to their home.
The residential real estate world is another industry beginning to see significant improvement in the transaction experience through the adoption of online marketplaces. One such company, Opendoor, has moved the home buying and selling process online. Users can sell their home directly to Opendoor, eliminating the need to hire an agent, and buyers can submit offers online and use Opendoor’s capital in a similar way to a cash offer.
As for residential real estate financing, Rocket Mortgage has made that transaction experience better as well. Instead of having to call around to multiple banks and fill out dozens of forms in the search for a mortgage, Rocket Mortgage allows its users to apply and be approved online. Users can then accept a loan directly from Rocket Mortgage, or be put in touch with a mortgage broker to find a loan that best suits their needs.
When it comes to streamlining the transaction experience, these companies and others like them have done exceptionally well. By shifting the transaction to an online platform, consumers are placed in a far better position and are able to avoid many of the traditional headaches prevalent in these industries.
Removing Traditional Roadblocks
The final way in which online marketplaces are increasing efficiency is by removing traditional roadblocks. By moving to an online presence, companies have been able to eliminate unnecessary steps and delays that can be so frustrating for every party involved.
A good example of a company using its online presence to remove the roadblocks inherent in its industry is Loopnet. An online marketplace for commercial real estate space, Loopnet has given tenants the ability to search for space on their own and not have to navigate the traditional roadblock of hiring a commercial real estate agent to find space for them. Although a tenant might still choose to hire an agent to help with the negotiation process, tenants now at least have the ability to do their own research.
Indeed is another example of an online marketplace removing roadblocks. If you ever tried to find a new job before Indeed (or worse, before the internet), you know that finding jobs outside of your immediate area was a huge roadblock. You either had to visit the area you wanted to work in and search for a job while you were there or rely on word of mouth. With Indeed and other online job boards, that roadblock has been completely eliminated. Job seekers now have the ability to search for jobs anywhere, all from the comfort of their home.
While some industries have roadblocks that are necessary, such as approvals and due diligence, many industries can greatly increase their efficiency by shifting to an online platform and removing roadblocks.
In the same way that these online marketplaces are increasing efficiency in their industries, Finance Lobby is doing the same for commercial real estate lending. We are making it easier than ever for lenders and brokers to find commercial real estate loan leads, negotiate terms and close on deals.
Interested in giving Finance Lobby a try? It’s free to create your personalized lending profile, and it only takes 30 seconds to get started.