An online marketplace is a website or app on which many sellers list their goods, and many buyers search, pay and wait for delivery. It is also called an e-commerce marketplace. The marketplace usually does not own the goods. It earns a commission, which is a percentage of each sale, and it also charges sellers for delivery and for ads.
What a marketplace really sells, to buyers and to sellers, is a set of services, and each one is software. Search and recommendations decide which products a buyer sees first. The payment gateway takes the buyer's payment, and split payments divides it between the sellers and the marketplace. An order management system (OMS) sends each order to the right seller or warehouse. A courier company, such as an express courier network, carries the parcel. Before the buyer pays, the marketplace also promises a delivery date.
Consider a pressure cooker that costs ₹1,499. A buyer in Guwahati orders it from a seller in Rajkot. The marketplace showed this cooker near the top of the results because it matched the search and has sold well. It promised delivery in five days, because it knows how long parcels take between the two cities. The buyer paid by UPI. The seller saw the order, packed the cooker and handed it to the courier. After the return period ends, the marketplace pays the seller ₹1,499 minus its fees. If the commission and the delivery fee come to ₹225, the seller receives ₹1,274. In India, the marketplace must also deduct a small tax under GST from each payment to a seller. This tax is called tax collected at source.
The seller does all this work in seller central, the part of the marketplace that buyers never see. Sellers who want to appear higher in the results pay for ads through the marketplace's retail media network. Buyers can also search with a photo through visual search. In smaller towns, social commerce lets buyers share products with friends on WhatsApp before they order.
In India, a company with foreign owners may run a marketplace, but it may not own the goods sold on it. So India's foreign-owned marketplaces must follow the marketplace model, as the page on the marketplace vs inventory model explains. India is also building ONDC, the Open Network for Digital Commerce. On ONDC, the app the buyer uses and the app that lists the seller can belong to different companies.
The search box is now becoming a conversation. An AI shopping assistant lets a buyer describe what they want in Hindi or English, and finds it for them.