Leveraging 5G To Build the Marketplace of the Future

With widespread 5G adoption looming on the horizon, digital marketplaces are set to gather even more momentum going into 2023.

Slowly but steadily, businesses and customers are realizing the potential of platform business models and digital marketplaces. Digital Commerce 360 reports that online marketplaces accounted for a revenue of over $3.24 trillion in 2022 indicating significant growth and opportunities in this vertical. With widespread 5G adoption looming on the horizon, digital marketplaces are set to gather even more momentum going into 2023. In this article, we’ll explore how enterprises can best leverage platform business models to unlock alternate revenue streams.

Setting up for Success with the Network Effect

Marshall Van Alstyne, Geoffrey Parker, and Sangeet Paul Choudary first described the network effect in their book ‘Platform Revolution - How Networked Markets Are Transforming the Economy--And How to Make Them Work for You’. The network effect is a phenomenon where platforms with more participants outperform their competitors simply because a larger network is beneficial to both buyers and sellers. Regardless of whether the platform directly provides a service or simply connects buyers with sellers, the network effect remains one of the biggest drivers of marketplace success.

However, this does not speak to an early mover’s advantage entirely; businesses can use the 5G opportunity to digitalize and connect discrete business components beginning with the customer experience. Amazon’s evolution from an online bookseller to a top cloud hyperscaler perfectly demonstrates the potential of platform-based marketplaces.

5G-enabled network slicing is going to allow connectivity providers to facilitate and automate the delivery of a wide range of services over a standard software-defined infrastructure. As a result, 5G will considerably ease the delivery of different characteristics and requirements. We can foresee its impact across five key areas.

1.  Consumer Financial Services: Platform trends in this area are primarily going to disrupt services related to payments, lending, and digital currencies.

2. Energy Transformation: Interest in electric vehicles is driving the development of digital ecosystems attracting companies across automotive, energy, logistics and financial services verticals

3. Metaverse: Recent developments in artificial intelligence and 5G connectivity will drive interest in the Metaverse, creating more realistic and immersive virtual spaces.

4. Mobility/Delivery Services: Retail delivery ecosystems have continued their growth post-pandemic. With a greater focus on omnichannel fulfillment, the retail delivery economy looks best positioned to take advantage of platform-based models and expand into newer territories.

5. Healthcare: The pandemic has also fundamentally changed healthcare, giving rise to digital ecosystems focusing on tele-health and health-care related services.

What makes a Digital Marketplace tick?

At a very rudimentary level, a marketplace needs three key components to function: 5G, cloud technology, and APIs. However, the value of digital marketplaces comes from the ability to nurture and strengthen relationships with customers. With this thought, let’s take a deeper look at what makes a marketplace successful.

The unique selling point of a digital marketplace is its ability to generate value for all its participants. Both the customers and partners must be successful for a marketplace to be ‘valuable’. For example, Vodafone is developing an all-in-one marketplace for drones where they can sell the devices along with connectivity services and related capabilities.

This brings us to our next point – trust in the marketplace. As a trusted seller, Vodafone’s marketplace will have better odds of success as compared to an unknown marketplace platform. Rob Chesnut, former chief ethics officer at Airbnb sums it up neatly, “I think if you are operating a platform, you are in the trust business, you’re in the business of helping people trust each other on your platform.”

Your marketplace must deliver value beyond a simple meet-and-match to increase the stickiness of the platform. Otherwise, what’s stopping your partners and customers from taking their next transaction off the platform?

Let’s take a healthcare ecosystem for example – other than simply connecting users to pharmacies, diagnostic labs, doctors, and more, you can instead offer a booking system or a digital record room to store all records etc., to boot. The additional convenience on offer might become the key differentiator, securing repeat business transactions for your platform.

Nine out of 10 times, marketplace companies fail because they struggle to add value to their consumers and partners.

Author: Shuba Sridhar, Vice President – Strategic Initiatives, Torry Harris Integration Solutions