Here’s Everything You Need To Know About Horizontal Marketplace

What Is A Horizontal Marketplace?

A horizontal marketplace has consumers and sellers from a diverse range of industries. They cater to a broad target audience and are generally safe from low demand. 

Amazon and Flipkart are good examples of such a marketplace, offering a wide spectrum of products. 

What Are The Characteristics Of A Horizontal Marketplace?

Horizontal marketplaces share a few common characteristics, which include:

1. While the products are generic, there is a variety in them.
2. Horizontal marketplaces have customers from different locations, sectors, segments and demographics. 
3. Horizontal marketplaces can enjoy massive market share owing to a wide product selection and diverse customer base.
4. Horizontal marketplaces may forge joint partnerships with other non-competing brands that sell their offerings on these marketplaces often for a fee or other benefits.
5. Horizontal marketplaces may become household names and have a high brand recall value since they offer something for everyone. 
6. Since horizontal marketplaces offer little personalisation, they compete on low pricing.
7. To keep the costs down, horizontal marketplaces also have an efficient logistics and distribution system. 
8. Technology such as analytics, customer segmentation and product recommendation systems keep their platforms competitive. 

What Are The Benefits Of Horizontal Marketplaces?

From $3.9 Bn in 2009, the Indian ecommerce market is estimated to reach a size of $400 Bn by 2030. And, horizontal players account for a major chunk of the larger ecommerce landscape. So, what makes these marketplaces so popular?

1. A Diverse Consumer Base: Horizontal marketplaces aren’t limited by niche and have massive market potential. They enjoy significant growth opportunities as they attract a huge chunk of the consumer base seeking a diverse range of products and services.
2. Economies Of Scale: Horizontal marketplaces can leverage economies of scale with their vast user base. So, the operational costs are potentially lower and there is competitive pricing for buyers and sellers.
3. Brand Recognition: Horizontal marketplaces can build brand recognition by offering a one-stop shop for diverse needs.
4. Sophisticated Personalisation Strategies: Data-driven personalisation is possible with the vast user data collected by horizontal marketplaces. It can lead to improved user experience, highly targeted recommendations and ultimately improved sales and customer satisfaction. 

What Are The Challenges With Horizontal Marketplaces?

1. Longer Timeline For Achieving Product-Market Fit
   To generate profit, horizontal marketplaces rely on economies of scale. It means they are essentially loss-making businesses until there are enough customers and enough value transactions. Investors, in today’s landscape, are much more interested in profitable ventures that have product-market fit and possess liquidity. 
2. Difficulty In Standing Out Among A Sea Of Competitors
   It is difficult for such businesses to differentiate themselves as several competitors offer identical products and services. With so many options available, customers may get overwhelmed and find it tough to choose one business over another. 
3. Massive Upfront Investment
   A massive upfront investment is required to develop new features and capture market share through advertising and referral programmes. Horizontal marketplaces require a large number of users to hit liquidity initially since they sell something for everyone. Often, horizontal marketplaces run incentive programmes for new users. These incentive programmes also burn cash initially.