Selling products on a local (and even national) scale is not enough, so many businesses have taken a decisive step and created virtual selling spaces, from where they could reach a global audience. In the following article we will have a look at the most successful forms of online marketplaces.

Electronic commerce - a multi billion dollar industry.

The terms e-commerce or ecommerce are extremely popular nowadays, and it seems more and more businesses are considering some form of online sales or online promotion. According to Forrester Research ecommerce generated sales worth US $12.2 billion in 2003. E-commerce has the exact same features of a local business - sales, distribution, marketing and servicing of goods - except it all happens over the Internet. Millions of online marketplaces using e-commerce techniques can be found on the world wide web and hundreds more are born every day. In the IT world, ecommerce is defined as an electronic business application that has the primary goal of facilitating online transactions. From e-marketing, online marketing and automated inventory management systems, electronic commerce also integrates other features and tools such as supply chain management or electronic funds transfer. Of course, e-commerce wouldn't be possible without online transaction processing and different data collection and storing systems.

Why e-commerce works

There are different aspects that make e-commerce the power source of all online marketplaces:

Value for money - there are fewer costs to worry about when it comes to e-commerce, so vendors can offer their merchandise at lower prices. In fact, this is the most important characteristic of all the large online marketplaces that exist today.

Personal attention - many ecommerce online marketplace websites offer personalized sales web pages and free buying guides and resources.

Belonging to a community - each online marketplace aims to become your "favorite Internet shopping zone". Many attract visitors over and over - often as paying customers, by creating a sense of community through forums and chat rooms, as well as loyalty programs.

Prompt service - a good online marketplace will offer lightning fast order response and distribution management.

One stop shop - many e-commerce online marketplace businesses try to create a complete experience for the visitor, where he or she can choose from a huge variety of products and services.

Time saving tools - such online businesses often provide customers with integrated search features as well as other comparison tools that help a customer find the product in a timely manner.

The online auction business model

This sort of online marketplace relies on customer's bids on different products. The most popular online marketplaces that use the online auction business model are eBay and Amazon, but there are now thousands of reputable virtual marketplaces where sellers and customers meet. Online marketplaces such as eBay simply facilitate the transaction between sellers and clients and they also offer product display, bidding tools and payment options. Here are the main positive features and strengths of the online auction business model:

International sales - as this online marketplace reaches a global audience, sellers and buyers are no longer constrained by location.

24/7 availability - since the system of purchasing and selling items is automated, you can place or receive bids at any time of the day or night.

Buying intensity - some interesting sociological phenomena define online marketplaces such as eBay. There are many similarities between bidding on a product and gambling, and the person that buys the product is announced as the "winner".

High numbers of sellers and clients - the auction process favors both sellers and bidders, and most large online marketplaces encourage frequent participation in their programs.

Spiraling - this refers to the fact that the online auction business model works like a spiral, with more sellers attracting more bids, and vice versa. The huge success of eBay is based on this phenomenon.

Consumer surplus - the online auction business model uses the so called first degree price discrimination. This represents the price that is above the market's line but also situated under the demand of the consumers.