The design of a particular marketplace should provide safety and reliability that can convince the customers secure transactions. Of course, digital marketplace comes with its drawbacks where both sellers and buyers could face risks in anonymous transactions. For instance, there could be issues where sellers are not being paid after an order has been secured, damaging of assets as well as negotiating with demanding or unpleasant customers. As for buyers, they could be exposed to the risks of not getting the expected products or services and the disappearing of seller when payment has been made. The usual solutions to combat this problem involve the combination of firms building reputable brands and having the meddling of government instructing the sellers to comply with the regulations.
By utilizing the advancement of digital technology such as digital reputation systems, insurance, fraud detection algorithm, identity and credential verification, dispute resolute procedures and customer service, this allows a safer transaction to be made. Firstly, reputation systems, which are currently being used by many online marketplaces, operate by pursuing the transactions of a party and enabling the other party to give a rate or review once completing the transaction. Although reviews are made available to the public, negative reviews could be painting a bad image on behalf of the sellers (Dellarocas, 2003; Cabral and Hortacsu, 2010; Luca, 2013; Pallais, 2014). On the other hand, marketplaces namely eBay and Airbnb could not be made possible without the prevalence of reputation systems. This means that reputation systems should be properly designed despite the effects that arise.
Reviews are often affecting consumer demand and they have the ability to reduce moral hazard on sellers’ behalf. In a two-sided review systems, both sellers and buyers could be exposed to the risk of retaliation when one of the parties gives a negative review. This is evident especially if we are familiar with the application, Carousell, where potential buyers or sellers are given the privilege to do a checking before pursuing with the transaction. Therefore, the system should be regulated by having the reviews to be revealed at the same time after both parties have submitted the reviews or once the submission period has ended.
Meanwhile, online marketplaces that relate to supply of services to consumers are taking the issue of making fairer marketplaces in a serious manner. Airbnb and Uber require identification based on government issued documents as well as social media account to ensure the marketplaces are safe and can be trusted by the customers. Furthermore, when customers need a trusted driver to take them somewhere or wish to hire a professional to carry out a certain job, they shall not be worried since other marketplaces such as Lyft and Thumbtack which are widely visited by the people in the US, perform a thorough formal background checks and double-check professional certifications and licenses. Moreover, by relying on its cloud-based machine learning fraud detection, services offered by Sift Science allow companies to detect fake accounts, malicious content and credit card fraud, thus creating faster, smoother and safer online experiences.
Marketplaces are also focusing on customer service and dispute resolution since it is a meaningful competitive advantage to have a strong reputation of reliable customer service operation. 65% of the respondents claimed that an excellent customer support is the key to a company’s success in winning the customer’s loyalty and trust (KPMG, 2017). Buyers or sellers are given a compensation with a proper management in the case of unexpected events occurred during a transaction. Plus, marketplaces are also providing insurance contracts. For instance, in case of property damage such as accidents which occur during a transaction, Airbnb and Uber should cover the insurance on behalf of the sellers.
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