Published: May 23, 2014 Last updated: Nov 26, 2021 Yan Kulakov

We are used to having modern devices nearby, doing online shopping and using other opportunities that the Internet can offer. Can you imagine that from the invention of the Internet to our days only about 50 years have passed? For sure, there were some significant events that led to this result. They were related to introducing long-distance communication technology in the 30s - 80s.

Business and technology were developing side-by-side and improvement in one of these spheres pushed forward the second one. Long before online marketplace technology was taken to masses, the great minds have been developing technology step-by-step. Let’s turn into history and look through this unbelievable way from telegraph to the global Internet and separation of such advanced technology as eCommerce.



Start from scratch

Online shopping, eCommerce, social sites, all these already familiar and common technologies have been developed relatively recently. These possibilities are available due to the Internet. And before the Internet has become a massive system there were 3 important steps:

  1. Invention of telegraph in 1836
  2. Laying of transatlantic telegraph cable in 1858
  3. Invention of the telephone in 1876

In some countries people used smoke and drum beats to transfer short information like prearranged signals. Then the semaphore became more common, firstly, it was used with flags or lights; a bit lately semaphore was developed to a line of stations with telescopes. But all these methods were limited by weather conditions.

The telegraph is a far cry from today’s communication systems but in comparison with its predecessors it was a big step further. Moreover, it was a groundwork for the technological revolution, but in those days people cannot imagine that. We owe a group of inventors with their leader Samuel Morse for the telegraph invention. Samuel Morse created a language and immortalized his name in it. Today we know it as the Morse alphabet or Morse code. This event has an idealistic meaning in history as well. It broadens men’s perception of the possibilities.

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The next triumph comes with laying the first transatlantic telegraph cable. The idea belongs to American businessman Cyrus West Field who was supported by the British and American government. The cable was laid on the floor of the ocean and connected Valentina island in Ireland and the Bay of Bulls in Newfoundland. Since the cable was as long as never before, about 4,000 kilometres, and there was no way to correct inaccuracies automatically, it required about 16 hours to get a message. The cable was not perfect and after 732 messages it stopped working.

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Telephone is an invention of Alexander Bell. He desired to create a distant communicator. He developed the idea of telegraph and learned how to convert sound signals to electrical signals. The idea of telephone networks was developed, and then followed by implementing computer networks. It has more practical applications in business, traditional paper-based workflow was partially discarded in favor of virtual transfering. But globalization came only with the Internet, the start of which is considered since the first contact between Stanford university and University of California in 1969.

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Every step was followed by a business boom. Telegraph, telephone, and the Internet economize expenses for delivering information. However, the purposes of usage were limited. Given that the inventions were not adapted for other aims except for information transferring, entrepreneurs cannot use it as a multifunctional tool, for marketing purposes, for instance.

All these technologies were used in business but eCommerce in 1979 looked so much different that you hardly could recognise it.



The idea of online shopping

It is rather a joke than a truth that online shopping was invented by a tired husband who was sick of shopping with his wife all day. That tired husband was English inventor, Michael Aldrich. He came up with the idea of so-called "teleshopping" in 1979. He suggested connecting TV and telephone lines so that people can order products from home. In 1980 Aldrich invented a "teleputer" special system which helps to make a purchase.

This scheme has become a prototype of eCommerce.

While people were ordering different stuff via TV, the Internet was gathering pace. The growth was extremely rapid. In fact, the first eCommerce company was Boston Computer Exchange which launched its platform in 1982. It was an online store of used computers. The concept of using a website as a marketplace comes naturally. It was a logically based step.

The successful pioneers in marketplace technology:

  • Book Stacks Unlimited was launched as the first online book marketplace by Charles M. Stack in 1992. It happened three years before Amazon's creation.
  • Amazon was introduced by Jeff Bezoss in 1995. For the first time, it was a platform for books and then it was expanded to various products.
  • eBay came to the scene in the same year as Amazon, in 1995. It was famous for online auctions and possibilities of online shopping.
  • In 1999 Jack Ma and his 17 friends founded Alibaba. Today it is a group of companies that provide B2B, B2C, and C2C services.
  • Six years later in 2005 Etsy was launched. It is a platform where artists can display and sell their art works.


From eCommerce website to Marketplace

Marketplaces are getting more and more popular. The reasons for this are quite obvious: on marketplaces prices are lower than in brand stores since the competition is higher and a big assortment of products which attracts more consumers.

Switching to the marketplace is a decision that is beneficial not only for start-ups but also to stable businesses. Let’s look at the reasons in a real example. A landmark event has happened in august 2021. One of the biggest and oldest companies, Hudson’s Bay, which was founded in 17s century, is splitting to create two businesses, a department store and marketplace.

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HBC claimed that this decision will positively influence digital shifting and contribute to sailings. A retail expert Bruce Winder regarded it as a way to get higher valuation and attract investors. The HBC strategy of switching got to admire. The leaders proceeded cautiously. They tested their marketplace in April 2021 when they added a lot of new brands to their website. It was a successful start which led to that decision.

Mr. Winder shared the opinion about the offline business model: "The department store sector within retail has very low valuations. They’re weighted down because department stores have been branded as yesterday’s business model. People are waiting for them to sort of eventually shrink and go under."



The major steps to successful launching an online digital marketplace

For those who decided to launch marketplace from the ground up, we prepared some useful tips how to do in the most effective manner:

  1. Create the idea and test it

    Any business starts from a concept. But how to check its relevance? Check that your idea is needed by talking with other entrepreneurs and customers. You can also look through search queries.

    Remember:

    • Your future marketplace should be beneficial for sellers and buyers. Find a "problem" of your audience. It is something that they sharply need to get.
    • Learn the successful and unsuccessful strategies of your competitors. Learn the history of development of successful businesses. Looking through business failures might be useful, too. You may notice the missteps and can escape them in your start-up.
    • Discuss your concept with people. When listening to people's thoughts, you can come up with breakthrough ideas. You might be so overexcited about your idea that some obvious mistakes might be left unnoticed. People can give rational esteem to your plan.
  2. Choose a specific business model

    Firstly, you should define who is your seller and who is your buyer. You have two options: an individual or legal persons. So, your business type may be:

    1. B2B—Business to business. Deals made between two businesses or wholesalers and retailers.
    2. B2C—Business to consumer. It deals with direct transactions between business and customers.
    3. C2C—Customer to customer. Products and services are provided by individuals to other individuals.

    It is the most common grading. The success of a marketplace platform depends on the right choice of a type a lot. There are some other classifications of marketplaces that can be important. You can read about them in our article.

  3. Start MVP of a marketplace

    Minimum viable product that can be relevant. MVP is about maximal speed and minimal input. Choose a developer company for starting your business.

    The criteria of a good developer company for MVP:

    • Technical support to save all your problems. Any unfamiliar technology requires time to get used to it. Support from the company you choose is indispensable.
    • Possibilities for expanding. MVP consists of minimal options but one day you will need to develop your company further.
    • Relatively cheap. On this step you should choose the cheapest option just to test your idea.

    We recommend you to test your business on the CS-Cart Multi-Vendor.

  4. Find sellers and buyers

    You should find both before releasing your marketplace. What you can do to find your key audience:

    • Small talks in communities. A free resource of traffic is talking with people on thematic communities and groups in social sites. Do not forget to mention your platform.
    • Find influencers. Find bloggers whose followers could be your target audience and arrange for advertisement. It may incur a charge but it is usually not extremely high.
    • Create a marketplace community. This will help you to mobilise like-minded people and attract new ones. Communities around platforms also help to find weak points of your website or products, since people when discussing all innovations can serve as a monitoring tool.
    • You can find more information about how to attract sellers here.

  5. Launch it!

    Check that it is technically complete and make an announcement.

  6. Follow a certain marketing strategy
    • Learn everything about your clients to create a win-win marketing strategy.
    • Look for marketing ideas of your competitors and adapt them according to your business.
    • Use vendor’s resources.

So, this was a brief look through the start steps. The technology of starting a marketplace is not difficult but every step should be considered well.



Forecast for marketplace platforms


Ian Sells, CEO and Founder at RebateKey

Ian Sells shared his opinion about marketplace industry:

"The online marketplace industry will continue to thrive, but only those who invest in technology to keep updated with the current climate will be successful.

While many startups are starting their journey in the eCommerce industry, only those who can keep up with the technological demands that come with the increasing and rapidly changing consumer demands will continue to thrive. Given that many if not most people go online to shop and now prefer online shopping than in-person shopping, consumers' expectations have also skyrocketed. They want the most streamlined, up-to-date, and friendly websites, with easy checkouts, and virtual try-ons. Only companies who are willing to grow and adapt to this rapid change can also reap the benefits of sailing your products on online marketplaces.

Brick-and-mortar stores will continue to transition to online marketplaces.

The market trends are largely shaped by consumer behavior. That said, even as the COVID pandemic stabilizes, many people will continue and prefer to shop from online marketplaces. This means that there will be a continuous migration of brick-and-mortar stores to online marketplaces and purely online stores outnumbering brick-and-mortar stores."



Conclusion

Online marketplace technology is a result of many years of evolution. It seems that just recently we used smoke to pass information, but for the last two centuries we have made a great leap towards technological future.

We learn the plan of how to launch a marketplace platform successfully and explore the switching process in the example of the big company. It appears to be a very profitable deal. The expert confirmed that marketplaces are more than just quoted in the market; this industry is flourishing.

There is no doubt that marketplaces’ future looks clear and stable. More and more leading companies are choosing this business type. The possibilities are expanding and online shopping is as popular as never before.

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