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Why entrepreneurs must understand the collaborative economy

(Business Marketing) Mobile marketplaces can make competition tough, but learning to successfully navigate marketplaces can increase business and boost profit margins.

collaborative economy

collaborative economy

Modern versus traditional marketplaces

Marketplaces seem to be all the rage. People are constantly using them, media is constantly covering them, and investors cannot stop backing them. So what is the attraction to marketplaces? It is not exactly a new concept; marketplaces have been around since the dawn of time, when people met to trade goods. People still meet to trade goods in digital marketplaces aided by advanced technology.

Modern marketplaces range from money, to good and services, as well as payment apps; the most common marketplaces give just about anyone the chance to offer goods services or financial solutions to each other. You can even get someone to do your homework. So how is a small business to survive?

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Jeremiah Owyang and Crowd Companies offer a great visual representation of how diverse marketplaces have become. Owyang also uses the term “two-sided marketplaces,” which is an important distinct from those early marketplaces.

Click to enlarge:
marketplaces

What is a two-sided marketplace?

A good example of a two-sided marketplace is eBay: many of the people who sell on eBay are often times buyers as well. They also help explain why modern marketplaces are doing so well: they enable flawless transitions, despite locations or social relationships, simply by taking a cute of the revenue. This enables the platform to retain recurring revenue without taking ownership (for the most part) of the liability involved, allowing them to being money-making machines.

The platforms also offer a range of features that you would be hard-pressed to afford on your own. These features include inventory management, promotion, customer care, dispute resolution, and in the case of some financial platforms like PayPal: fraud protection for you and your buyers. For entrepreneurs and small businesses, your best bet is to offer your services on one, or more,  of these platforms.

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With more and more people turning to marketplace platforms because of their reliability and stability,  it becomes increasingly important to be proficient with the system. Especially in regards to financial platforms like PayPal, Stripe, and Coinbase.

Today’s marketplaces speed up the process

For example, in years past when an entrepreneur had an idea it was very difficult to find someone to market that idea too. However, now with marketplace platforms like kick starter, you can create your own campaign and market it to an already available audience of millions of people. The large market is already there and can assist with rapid growth even in a competitive industry.

Facebook did not invent social media and Apple didn’t invent the MP3 player, but they have survived and thrived in ever-growing marketplace scenario. So entrepreneurs: ideas are great, but the marketplace can make all the difference; ensure that you understand where the best place is to market your products and services.

What you need to do

Do your research, scope out your competition, and use those marketplaces to do your research: find out what’s out there, who’s offering it, and at what price point; then find a way to make it your own. Don’t be afraid to focus on what makes your business unique, emphasize originality, and enjoy the benefits that a small business has in offering a more personalized, cozy environment that is often lacking in big stores and in the big marketplaces.

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Jennifer Walpole is a Senior Staff Writer at The American Genius and holds a Master's degree in English from the University of Oklahoma. She is a science fiction fanatic and enjoys writing way more than she should. She dreams of being a screenwriter and seeing her work on the big screen in Hollywood one day.

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