A managed marketplace refers to an online marketplace that's owned and operated by a single entity, which controls the rules and regulations governing the platform. This includes everything from the products and services offered to the fees that are charged to both buyers and sellers. 

Managed marketplaces are designed to be self-contained ecosystems that control the buying and selling experience at every level, even providing intermediary services such as connecting users directly with service providers, as Uber does between drivers and customers. This increased control helps managed marketplaces ensure a higher quality and consistency of service, and they’re often seen as being more efficient and streamlined. 

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Learn more about managed marketplaces: 

• The characteristics of a managed marketplace
• The pros and cons of managed marketplaces
• Managed marketplace examples

Characteristics of a managed marketplace

Like most things, managed marketplaces exist on a spectrum: some marketplaces have no management whatsoever, while others are highly managed. 

For example, Craigslist is the epitome of an unmanaged marketplace. It takes no active role in guiding buyer-seller exchanges. On the other hand, ThredUP, a second-hand clothing marketplace, is highly managed — they handle pick-up, quality checks, listings, delivery, and payments of all of the products sold on their platform.

Below are the main factors that differentiate a managed marketplace.

Focus on customer experience

A strong emphasis on customer experience is a hallmark of managed marketplaces. They invest in building trust with customers by enforcing reliable quality checks, regulating their product pricing, and providing effective customer support. When customers know that they can rely on a specific marketplace to provide a high quality, consistent experience, they’re more likely to return. 

Product curation

Managed marketplaces often handpick the products or services offered on their platform. This curation process ensures that only high-quality items are available, creating a more reliable and appealing experience for consumers. For instance, Goody is a managed marketplace that carefully tailors its selection of products for corporate gift-giving. 

“We’ve asked ourselves if the ceiling we’ve put on ourselves through curation makes sense,” says Katy Carrigan, CEO of Goody. “But time and time again we come back to our brand — what we stand for and the types of products we want to have — and curation is a big part of that.” 

Quality control

To maintain trust and satisfaction, managed marketplaces implement quality control measures. This could involve regular quality checks, customer feedback systems, and stringent guidelines for sellers. The measures ensure consistency and reliability in the products or services provided, which is helpful for customer retention and satisfaction.

Pricing management

Unlike open marketplaces where sellers set their own prices, managed marketplaces often have a say in pricing to ensure competitiveness and fairness. This can involve setting price floors or ceilings, offering dynamic pricing based on demand, or providing guidance to sellers on optimal pricing strategies. This helps to maintain a balanced market and can prevent price gouging or undercutting.

Higher take rates

Managed marketplaces typically charge higher commission fees compared to traditional marketplaces. This is justified by the added value they provide through services like marketing, customer support, quality control, and curation. These higher take rates help sustain the operations and continued improvement of the marketplace.

The pros of managed marketplaces 

More trust and security for buyers

Building trust on your multi-vendor marketplace isn’t easy. Managed marketplaces have the advantage of improving trust and security by carefully vetting sellers and products, ensuring high standards of quality and reliability. This reduces the risk for buyers, which leads to a smoother and more predictable shopping experience.

Hipo is an example of a managed marketplace that connects job candidates with open roles, thoroughly vetting candidates before they join the platform. This degree of rigorousness helps Hipo build trust with their customers — hiring managers — by offering them only skill-matched candidates of consistently higher quality than on traditional job boards.

“For us, quality means that we have a very closed network where you have to continually prove your quality,” says Adam Gellert, Hipo’s founder and CEO. “We want to be the opposite of the experience that both companies and candidates get on LinkedIn and Indeed, where it's a volume game.”

More control for operators

Whether you’re operating a managed marketplace or an unmanaged marketplace, a lot of liability falls on the operator. Exerting more control over your marketplace can help you mitigate those risks. Operators of managed marketplaces do so by curating their listings, managing prices, and enforcing quality standards. 

This control also allows managed marketplaces to create a consistent and high-quality user experience, which is essential for maintaining a platform’s good reputation and operational efficiency.

Better branding

By maintaining high standards and offering a curated selection of products or services, managed marketplaces can establish a strong, recognizable brand associated with quality and reliability. This strong branding helps attract and retain customers who are looking for a trustworthy and premium marketplace experience.

The cons of a managed marketplace 

More resource intensive

Managed marketplaces require significant resources to maintain high standards of quality and service. This can include investments in technology, staff for vetting and customer support, and ongoing quality assurance processes. These resources are necessary to ensure the marketplace runs smoothly and meets the expectations of both buyers and sellers, but the costs can quickly add up.

Reduced scalability 

With a more hands-on approach, the intensive resource requirements can limit the scalability of managed marketplaces. As the marketplace grows, the need for meticulous curation, quality control, and customer support increases, which can slow down expansion and add complexity to operations.

It’s helpful to have top marketplace software in place to help automate tasks, such as streamlining the onboarding and vetting process, implementing efficient quality control checks and monitoring systems, using dynamic pricing algorithms that respond to real-time market conditions, and providing AI-driven customer support.

Examples of managed marketplaces 

These well-known managed marketplaces illustrate how taking more control over various aspects of the transaction process can enhance trust, ensure quality, and improve the overall customer experience.

Uber

Uber revolutionized the ride-hailing industry by creating a managed marketplace that connects riders with drivers through a user-friendly app. Uber standardizes prices, ensures quality control through driver ratings and feedback, and manages the entire payment process, which enhances trust and security for users. This added layer of management is particularly important for ride-sharing apps, when customers need to trust the system before getting into strangers’ cars.

Uber also invests in driver incentives to ensure a consistent supply of drivers, which is crucial for maintaining service quality and availability.

ThredUp

ThredUp manages the entire transaction process for second-hand clothing from sellers to buyers by offering services like item inspection, pricing, and shipping. 

ThredUp ensures the quality of items by rigorously screening the tons of second-hand items that sellers send in, and manages the entire shopping experience for buyers by curating products and standardizing prices. This reduces friction in the buying process and builds trust among consumers, who always know what to expect when they visit the marketplace despite the diversity of donations.

Airbnb

Airbnb is an extremely popular managed marketplace in the accommodation sector. It connects hosts offering lodging with travelers looking for a place to stay. Airbnb ensures trust and safety through detailed user profiles, reviews, and a secure payment system. It also provides customer support and guarantees, which help in managing disputes and maintaining service quality. This high level of management has attracted many new people to the concept of house-sharing, who otherwise might have been too nervous to consider staying with and opening their homes to strangers.

Etsy

Etsy is a marketplace for handmade and vintage goods. It helps ensure a high standard of quality through seller ratings and reviews. Etsy allows sellers to set their prices but provides guidance and support to maintain market competitiveness. The platform also focuses heavily on the customer experience, keeping the shopping experience​ cohesive across the site by providing tools for sellers to manage their shops efficiently (and with a specific style). This degree of management means that customers can confidently buy products from private, often pseudonymous sellers with little to no risk. 

This is all to say

Managed marketplaces allow operators greater control over various aspects of the online sales process to create a more reliable and premium marketplace environment. They can achieve this by curating their product selections, maintaining strict quality control, managing prices, and guiding the overall customer experience. 

While these provide significant benefits, like increased trust from customers, better branding, and greater operator control, they can also introduce challenges like being more resource-intensive and reducing scalability.