The battle lines in the online marketplace war are blurring. The traditional titans of horizontal giants like Amazon and Flipkart face a growing challenge from niche-focused verticals like Nykaa, BlinkIt, etc. But what if the future lies not in choosing sides, but in merging them? This is where we discuss the prospect of a hybrid marketplace, a rising player that combines the breadth of horizontals with the depth of verticals, and emerges with a unique set of advantages.
Firstly, we will discuss individually what entails a horizontal and a vertical marketplace –
- Horizontal marketplaces allow customers to buy various products in one place. Horizontal e-marketplace definition combines markets with various retailers of several industries in a digital one-stop shop to reach broader coverage. Horizontal markets tend to be more suitable for small or medium-sized businesses and start-ups that lack sufficient capital, staff, or resources. Therefore, temporary or permanent partnerships with other companies are an opportunity for them to enter the market or to make better use of shared resources to generate profits.
- Vertical marketplaces stand out as a specialist online marketplace, catering to a specific industry, niche, or type of product/service. Unlike horizontal marketplaces that offer a broad range of goods across various categories, verticals dive deep into their chosen domain, becoming the go-to platform for buyers and sellers with specific needs. The key characteristics of a vertical marketplace are that they are industry focussed, involve deep expertise concerned with a single domain, they boast a targeted audience which sometimes acts as their competitive edge.
India was home to more than 165 online vertical marketplaces as of 2021 per inc42.com and in the FY21, 3 out of the top 5 funded online vertical marketplaces in the country were profitable. Although horizontal marketplaces account for 75% of the ecommerce industry in India, a whole bunch of vertical entities like Nykaa, FirstCry, Droom and Purplle catered to the rising demand for personalisation, customisation and unique experience among tech-savvy digital shoppers. Despite the recent successes of the vertical marketplace players this segment still lags in funding compared to horizontal ecommerce as according to Inc42’s Q2 FY22 ecommerce report, of the total $17.1 Bn raised by the marketplaces, around 81% ($12.5 Bn) went to horizontal players during FY14 to Q1 FY22.
This leads us to explore what is the potential of a hybrid marketplace. Below are some of the features we found which could prove the prospect of a hybrid marketplace to be popular among the audience:
- Tailored Selection, Wider Reach: A hybrid platform that offers diverse products like a horizontal, but caters to specific interests like a vertical. Fashion enthusiasts might find a hybrid marketplace housing independent designers alongside global brands, curated for their style preferences. This targeted selection attracts both niche buyers and casual browsers, creating a win-win situation.
- Community & Discovery: Unlike the anonymity of horizontals, hybrid marketplaces can foster a community feel. Shared interests attract like-minded individuals, encouraging interaction and product discovery. A platform for outdoor enthusiasts, where reviews, discussions, and curated collections go hand-in-hand with a vast array of gear – curating a deeper user engagement and brand loyalty.
- Personalized Curation & Expertise: Verticals often excel in offering expert advice and curation. Hybrid models can leverage this by incorporating dedicated sections with vertical-specific features like size guides, fit recommendations, or in-depth product information. This personalization enhances the shopping experience and builds trust with buyers, especially for complex or niche products.
- Flexibility & Adaptability: The beauty of the hybrid model lies in its flexibility. Platforms can adjust their approach based on the specific niche and target audience. A platform selling musical instruments, for example, might adopt a horizontal approach for common accessories but a vertical focus for rare or vintage instruments, catering to diverse buyer needs within the same space.
- Future-Proofing for Change: Consumer preferences are evolving rapidly. The hybrid model provides the ability to adapt to these changes. Platforms can easily expand or contract their vertical offerings, add new features, or adjust their overall focus based on market trends and user feedback. This adaptability ensures their relevance in a dynamic e-commerce landscape.
One most famous example of a hybrid marketplace in India is that of Tata Cliq, a venture by the Tata Group – While it boasts a diverse product range like a horizontal marketplace, it also incorporates vertical elements to cater to specific needs and interests. Its horizontal breadth includes features like a wide range of categories and multi brand selections while vertically it offers a curated selection of products, expert advice & content and also targeted features for certain product categories. This approach caters to diverse customer needs, fosters engagement, and strengthens brand image. While challenges exist, continuous adaptation and innovation will be key for Tata Cliq to capitalize on its unique position in the evolving Indian e-commerce landscape.
Of course, the hybrid model isn’t without its challenges. Striking the right balance between breadth and depth, attracting both niche and mainstream buyers, and ensuring a seamless user experience across various categories require careful planning and execution.
However, with its unique blend of features and the potential to cater to diverse buyer needs, the hybrid marketplace presents an exciting opportunity in the evolving world of online shopping. As consumers seek personalization, community, and expert guidance, this model might just offer the best of both worlds, redefining the online shopping experience for years to come.
