In the present information age, mode of value creation is one of the important criteria, and this value creation becomes the basic aspect of the difference between marketspace and marketplace. For an exchange or transaction to occur between a buyer and a seller, information availability and access to information are important. Due to technological advancements, information can be separated from the actual product or the service offered, and it becomes as critical as the product or service itself. Further, the place of value creation depends on this aspect. The place of the transaction and the place of the exchange can differ due to this aspect. These elements altogether make the difference between a marketspace and a marketplace. The key elements of the difference between marketspace and marketplace are the physical presence and the value creation modes. Let’s elaborate on these differences further by first understanding the meaning of these two terms.
What is Marketplace?
Marketplace is a physical location of buyer and seller interaction. At the marketplace, the seller and buyer meet each other individually and share information. Thereafter, negotiations take place and exchange of product or service occurs. Examples of marketplace are retail stores, outlets, supermarkets, etc. A marketplace would have a physical address and the buyers may routinely visit a marketplace to have a look around of what’s in store.
Also, at a given single marketplace, the number of buyers and sellers are limited due to demographics factors, which relate to physical presence. For example, Manchester city will most probably have only their residents as sellers and buyers. Other city inhabitants such as that of London or Sheffield might not visit Manchester for their purchasing requirements. So, the demand and supply factors are decided by less number of people.
In a marketplace, brand equity is created by manipulating the content, context, and infrastructure, using the traditional marketing mix. These three elements are usually interconnected and inseparable if the buyer is to access the product or service. Customer perceived value is a combination of product or service, pricing, communication, and supply chain activity related to the product or service. For example, a furniture is an aggregated collection of content (raw material, product design), context (organization, logo, style), and infrastructure (production plant, physical distribution system). In order to create value to customers, producers should aggregate all three into a single value proposition. Customers cannot access the furniture without it interacting with context and infrastructure.
What is Marketspace?
At the marketspace, the traditional marketplace transaction is eliminated. Marketspace can be defined as the information and communication technology based electronic or online exchange environment. Physical boundaries do not possess any interference for such transactions. The buyers and sellers interact and transact in a virtual environment where direct physical communication is not required. The sellers may exhibit their products on their own websites or dedicated sales engines such as eBay® while buyers can perform a targeted search query to find their relevant requirements.
For an online selling platform, the numbers of buyers and sellers are not decided by demographic factors as no any physical boundaries exist. The world itself can sell and buy through a single platform. So, the demand and supply is decided by a large number of people. If supply is limited, an auction will be an ideal choice to fetch a higher price in the marketspace.
In a marketspace environment, value creation and value proposition are revolutionized. In the marketspace, the content, context, and the infrastructure can be disaggregated to create new ways of value additions, lowering costs, buildings relationships, and rethinking ownership. These three elements of content, context, and infrastructure can be easily separated in a marketspace. For example, the same furniture sold via eBay® has different content as large number of sellers will be exhibiting their products (variety) while, context would be that of eBay® itself such as prominent sellers listed prominently or allows customizations. The infrastructure is not fully company owned; it also belongs to customers such as PC, modem, and telephone also, eBay® infrastructure facilitates the transaction. Here, though the transaction occurs at eBay®, the delivery is the responsibility of the seller. Therefore, the value dynamics are varied and can be managed in different ways.
What is the difference between Marketspace and Marketplace?
As we have now understood the two elements individually, we will compare the two to find the differences in between them based on a variety of factors.
Definition of Marketspace and Marketplace:
Marketplace: Marketplace is a physical location where the buyer and seller meet each other individually and share information.
Marketspace: Marketspace is an information and communication technology based electronic or online exchange environment where the buyers and sellers interact and transact in a virtual environment.
Characteristics of a Marketspace and a Marketplace:
Physical Presence
Marketplace: The marketplace has a physical location, physical buyers, and physical sellers. The transaction occurs by direct negotiations.
Marketspace: The marketspace is not required to have a physical location nor physical buyers or sellers. All are electronic based on information and technology infrastructure.
Cost / Investment
Marketplace: At the marketplace, the cost can be marginally higher due to the infrastructure and possibility of less number of customers. Spending on buildings, maintenance, and staff would incur overheads into the product pricing.
Marketspace: At the marketspace, the cost can be lowered by ingenious ways of thinking by reducing the overheads, shared ownership (infrastructure owned by different parties of the transaction), online money transfer, etc.
Supply & Demand
Marketplace: At the marketplace, the supply and demand are decided by less number of people as it’s limited to a locality of a city or a country. Even if the seller identifies a supply inadequacy, the response or the price he can collect will be limited due to the less number of buyers.
Marketspace: At the marketspace, the supply and demand are decided by a more number of buyers, and sometimes, in a global scale. So, if the seller senses supply inadequacy, an online auction would be preferred choice to capture the highest possible rate.
Value Creation
Marketplace: At the marketplace, the content, context, and infrastructure are aggregated and inseparable to have a transaction. Brand equity and value proposition is based on the total of these factors.
Marketspace: At the marketspace, the content, context, and infrastructure can be separated and can become the basis for perceived customer value.
We have attempted to understand the terms marketplace and marketspace in this article followed by a comparison to find the key elements differentiating them in between. The basic difference is the physical elements and value creation modes.
References: Rayport, J. F. and Sviokla, J. (1994). Managing Market Space. Harvard Business Review. November –December issue. Image Courtesy: Hawaiian Marketplace, Las Vegas By Curimedia [CC BY 2.0], via Wikimedia Commons