Since ancient times, marketplaces have existed as a means and center of trade. A marketplace is a space where items or services are available to be bought and sold by consumers, serving as a staple for economies all over the world. Back in the old days, a person would go to the centralized gathering in a city to browse a selection of vendors and goods available. Eventually, that city center transitioned to the online arena. Goods started to be listed, bought, and sold on an individual, on-demand basis. The most popular online goods marketplace we know today is eBay.
But what was used to trade services such as laundry, childcare, automobile service, etc.?
As society progressed, we learned that listing information for local service providers in a single format (ex. Yellow Pages phonebook) for personal, decentralized contact was most efficient. With no customer reviews available in the phonebook, word-of-mouth recommendations were the best way to consider a single, trustworthy and quality provider out of the hundreds available. While the service marketplace continued its transition online, trust, quality, and convenience remained key in driving how consumers interacted with available platforms and how those platforms evolved.
As the internet became more popular entering the 1990’s, online listings of services and products became a much easier way to discover convenient and previously providers. A few examples of early adopters include Craigslist, YellowPages, and eBay. While these listing websites were straightforward and accessible, they left much to be discovered about the seller or provider. Lack of trust in the digital world led to the development of specific goods and service sites entering the 2000s. They were only populated with relevant topic information and included various filters to search for the right provider based on preferences and needs. This type of vertical marketplace promoted access to specific, targeted needs such as childcare (Care.com) or reality (Zillow).
Vertical marketplaces earned trust by gathering a high volume of users satisfied with their experience, so platforms moved to certify listed providers. Instead of hearing direct recommendations, knowing a particular service was used by hundreds of similar consumers allowed populated marketplace platforms to build a strong reputation and trust. However, there was no standardized process for the interactions and deals taking place on various platforms; individual consumers still had to do the work of sifting through providers, and continued to take risks.
By the early 2010s, mobile proved to be an important and lasting medium for business interactions; people stay on the move and want their needs fulfilled on-demand.
This brought on location-based, real-time services and products, which began to rely less on individual providers and more on platforms. Marketplace companies took it upon themselves to regulate and fulfill consumer needs through the entire consumption process, so people felt comfortable with a company willing to claim responsibility and clout for individual providers. By easing the work of individual consumers, services like Uber morphed into verbs referenced the full completion of service inside a single marketplace, such as “I Ubered” opposed to “I ordered a taxi.”
Creating a more convenient, quality, and trusted customer experience drove competition.
Added-value was needed in order to stay relevant, so platforms took further responsibility by not only providing a full-service marketplace for individuals’ needs but by fully employing potential providers that were otherwise undiscovered. A plethora of on-demand providers employed by the marketplace itself signaled to consumers that risk of utilizing a particular provider was minimalized.
The evolution of marketplaces has evolved consumers’ perception of risk–services that traditionally required a particular license for legitimacy are now used every day through trusted platforms, some with unlicensed providers (ex. No taxi license needed for Uber drivers); however, heavily regulated industries such as legal and healthcare still retain barriers to easy consumer access. Licenses can be expensive to obtain and do not necessarily reflect the true value of a service, which constrains the supply of providers and forces the work of finding quality, trusted providers on consumers once again.
The next wave of marketplace movers will utilize a variation of strategies to unlock the supply of regulated service providers:
- Make it easier to discover existing licensed provides
- Hire and manage existing providers to standardize quality
- Expand or facilitate the licensed supply pool
- Utilize unlicensed supply
- Automate services