The complete marketplace glossary

Marketplace terminology can sometimes feel like a bunch of buzzwords. What exactly are network effects or platform leakage? How about commission and liquidity? Though these terms may seem inaccessible at first, they were coined for an important reason: to explain the concepts, challenges, and opportunities unique to marketplaces. In this glossary, we’ve compiled definitions for the essential terms you need to know to make the most out of the marketplace content and conversations out there. 

The key concepts

Marketplace
A marketplace is an online platform where multiple providers and customers offer and buy products. The marketplace facilitates transactions between these users and creates value for both – the ease of purchase and a large selection of options for the customers and access to demand and revenue for the providers.

Marketplaces can also be called two-sided marketplaces or multivendor marketplaces. The term two-sided marketplace emphasizes the two user groups the marketplace brings together, i.e., the customers and the providers. Multivendor marketplace highlights the difference from single-vendor online stores: instead of just one provider or seller, marketplaces have several.

Admin/Operator
An admin, or administrator, is the operator of a marketplace. They can be the owner or an employee.

Listing
A listing is an entry posted on a marketplace to reach customers or providers.

Supply and demand
A marketplace has two types of users: supply and demand.

Provider

A provider is a general term for the party on your marketplace that lists items or services for customers to sell or rent. Other terms that are used frequently are "supplier" or "seller".

Customer

The users who buy or rent items or services on a marketplace are customers (sometimes also called buyers, or more broadly "the demand".

Commission or take rate
Commission, also known as take rate or transaction fee, means the percentage or fixed fee a marketplace collects on a transaction.

Liquidity
Liquidity is the probability of providers selling what they offer and customers finding what they are looking for on your marketplace.

Chicken and egg problem
The chicken and egg problem is one of the unique challenges of marketplaces: how to get customers without many providers and how to get providers with only a few customers.

Network effects
Network effects are a phenomenon where a product becomes more valuable as the number of its users increases.

Business model terminology

P2P marketplace
A P2P (peer-to-peer) marketplace is a type of online platform that facilitates transactions between individuals rather than between businesses and consumers.

B2C marketplace
A B2C (Business-to-Consumer) marketplace is an online platform where businesses sell products or services directly to consumers.

B2B marketplace
A B2B (Business-to-Business) marketplace is an online platform where businesses sell products or services to other businesses.

Service marketplace
Service marketplaces are for providing services. Good examples are Fiverr, Thumbtack, Uber, and Urbansitter.

Product marketplace
A product marketplace is an online platform where physical goods are sold and purchased.

Rental marketplace
A rental marketplace is an online platform where items, properties, or services are rented out rather than sold.

Local marketplace
A local marketplace is an online platform that focuses on connecting buyers and sellers within a specific geographic area.

Global marketplace
A global marketplace is an online platform that facilitates the buying and selling of goods and services across international borders.

Vertical marketplace
A vertical marketplace is an online platform that specializes in a specific industry, sector, or type of product or service.

Horizontal marketplace

Horizontal marketplaces don't focus on just one industry but instead try to meet the needs of a diverse audience with all kinds of preferences.

Reverse marketplace
A reverse marketplace, also known as a demand-driven marketplace, inverts the traditional marketplace model by focusing on the buyer’s needs first.

Managed marketplace
A managed marketplace is an online platform that not only connects buyers and sellers but also actively participates in and oversees transactions to ensure quality, reliability, and customer satisfaction.

Curated marketplace
A curated marketplace is an online platform where the selection of products or services is carefully chosen or "curated" by the platform's team or experts in the field.

Marketplace technology & UX concepts

Matching
Matching is the process by which your customers and providers find each other on your marketplace.

Search costs / search friction

Search costs or friction refer to the effort users have to expend to search and be matched with the product or service they’re looking for.

Transaction flow
A transaction is an exchange of value between a customer and a provider.

Payment service provider / Payment gateway
A payment service provider or payment gateway is a third-party service provider that facilitates monetary payments on your platform.

Split payments
Splitting payments means that the customer’s payment is divided among multiple recipients.

Delayed payout
Delayed payouts mean that the funds are held and not released to the seller before agreed-upon conditions are met.

Escrow
Escrow is a financial arrangement where a third party holds and regulates the payment of the funds required for two parties involved in a given transaction.

User behavior concepts

Platform leakage / disintermediation

Disintermediation is a phenomenon where users use your marketplace to find each other and agree on a transaction, but make the payment outside of your platform—bypassing your fees.

Double-blind reviews
In a double-blind peer review process, the provider and customer review each other at the end of a transaction but can only see the review they received once they’ve sent a review themselves.

Feedback extortion

Feedback extortion is user behavior where a user makes a good review conditional on exorbitant demands or threatens to give a positive review only in exchange for one.

Multitenanting

Multi-tenanting is user behavior where users post the same listing on multiple platforms to reach a wider audience.

Market structure concepts

Concentration
The opposite of fragmentation, concentration means that a large part of a marketplace’s revenue comes from a small number of sellers or buyers.
Commoditization
Commoditization is the process of reducing variation between the services or products offered in a marketplace.

Fragmentation

Fragmentation on a marketplace means that a large number of both buyers and sellers are transacting on the platform.

Symmetry
Symmetry on marketplaces refers to how much overlap there is between supply and demand.

Conclusion

From the basics to marketplace business models and market structures and user behavior to UX concepts, we’ve defined terms that exist to explain the unique nature of marketplaces as businesses. 

You can continue learning by diving into Sharetribe’s Marketplace Academy, which has a host of excellent articles designed to guide you through your marketplace journey.

Were you looking for a definition and did not find it? Let us know which term (hello@sharetribe.com) – we’ll be happy to add it to the glossary! 👋