The Intangible Marketplace

Oct 23 2018

One aspect I find very interesting about the marketplace business model is that it allows formerly unviable businesses to form. Take Etsy. Mom and pop shops will post crafts on there. But so will amateurists who love to make a specific set of seashell earrings.

Those sellers could never open a store. Rent, electricity, advertising, and much more would cost way more than they could ever make, even with great margins. The fixed costs are too high. Similarly, there is a fixed cost of time. If there was a chance, this would have to be a full time job.

Marketplaces remove those fixed costs. They can make as few or many as they like on whatever hours they want. They are free to run a microbusiness with no risk or stress.

Etsy simply takes a cut to help pay for their massive overhead. With so many sellers they can diversify away the risk of a small little shop.

I think marketplaces have downsides as well, but this is an aspect I love.