Reprint: R1303J
Lured by the success of marketplaces such as eBay, many companies have tried operating as multisided platforms, which let buyers and sellers transact directly with one another. But resellers—which acquire and then resell products and services—often fare better.
To determine the right position on the continuum between pure reseller and pure multisided platform, companies must consider four factors:
Amazon draws on its formidable scale economies as a reseller for high-demand items but serves as a multisided platform for low-demand products.
Resellers can extract value from buyers by bundling products and exploiting complementary relationships between them, as Apple has with its iTunes-iPod combination.
As Zappos realized in its early days as a multisided platform, some buyers do not want to deal with multiple sellers. And individual sellers might have a better experience selling to a reseller than to a buyer in a marketplace.
Many multisided platforms have avoided collapse by using mechanisms that keep buyers and sellers honest.
It can take more than one move for a company to reach its optimal position: Companies that should ultimately be multisided platforms sometimes need to start out as resellers and vice versa. And as the competitive landscape changes, managers must be diligent about reevaluating their positioning.
Most companies that serve as intermediaries between buyers and sellers face a fundamental strategy decision: Should they be resellers (like supermarkets), acquiring and then reselling products or services? Should they operate as multisided platforms (like eBay), connecting buyers and sellers without controlling or owning the offerings being sold? Or should they blend the two models?
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