Problems with centralized marketplaces

Decentralized marketplaces aren’t ready for widespread adoption yet, but there are reasons that the status quo may not stand. There are problems with centralized marketplace platforms. From Roger Allen in the post What’s The Future Of Online Marketplaces & Blockchain’s Technology Impact? at Forbes in October 2017:

Yet, whether it is Amazon, Upwork, or Project4Hire, each of these platforms have something in common – they run off of centralized platforms. There is one internal system that matches buyer and seller together, whether based upon algorithms, search criteria or other proprietary methods.

But oftentimes what is lacking from these platforms are two key elements, namely transparency and social interactions. These twin pillars of commerce – whether online or in person – reflect the most important aspect of making a sale, and that is trust.

Traditional online marketplaces can change their internal fee structure as they choose. Many times the result is an ever changing fee structure that hurts buyers and sellers alike.(Note: For the fees of various online marketplaces see this list).

Additionally, there is a lack of transparency with these centralized platforms. There is no sure way to know who is behind the “anonymous” username, and there is not an easy way to identify previous transactions. This results in growing amounts of online marketplace fraud.

Allen goes on to describe the benefits of decentralized marketplaces:

The greatest advantage of these decentralized platforms is the blockchain technology itself. As a blockchain – think of a ledger or database that contains a history of all transactions that take place on the platform – the platforms are completely auditable by all participants.

The real opportunity to me is open community ownership of the platform, rather than being owned by a single entity that can govern as they see fit, including changing rules, fees, etc. It’s certainly tied to blockchain, though the execution so far doesn’t make me think Amazon has anything to worry about.

Andrew @ EcomLoop
Are you looking to start or grow a standalone ecommerce shop? I help independent businesses achieve success on the Shopify and WooCommerce platforms. As the owner of multiple ecommerce businesses, I've had the opportunity to get experience with nearly every aspect of the ecommerce industry. I started EcomLoop to help other quality independent businesses using my knowledge and experience. To stay on top of new ecommerce developments, I publish The EcomLoop Weekly Loop, a blog and email newsletter with original thoughts and curated links to help independent businesses improve their businesses.