Online marketplaces are growing globally. The world’s largest 75 online retail marketplaces generated $1.5 trillion in 2017 (or nearly half of all global online shopping) and grew by 30%. PactSafe Chief Product Officer Eric Prugh answers some questions about what’s driving this growth and the liability that poses a potential threat on the horizon.
What is an online marketplace?
An online marketplace is a place where two sides of a transaction -- buyer and seller, service provider and client, etc. -- are connected via a third party’s technology. This third party may not own any assets, but owns the technology that facilitates the relationship. Some examples of online marketplaces are Uber, TaskRabbit, Upwork, AirBnB, and Instacart. All act as third parties facilitating a relationship between two interested parties. Even Facebook is a marketplace. They don’t own the content they produce.
Why are online marketplaces so popular?
Online marketplaces are democratic, impartial, and provide easy access to things traditionally difficult to access or purchase.
Take Angie’s List* as an example. Historically, it’s been difficult to obtain impartial reviews on service providers like plumbers, roofers, electricians, etc. Angie’s List has democratized access to these providers and made it easy for consumers to make an informed decision on which provider to work with. Angie’s List acts as a third-party facilitating the relationship between consumers and service providers, making them an online marketplace.
(* Full disclosure: Angie’s List is a PactSafe client.)
For consumers, it’s all about convenience. Nowadays, people are used to everything being convenient and accessible via their phones or computers.
Why do online marketplaces face increased legal risk?
There’s increased legal risk because there’s liability on each and every transaction the marketplace facilitates. Who’s responsible if a consumer orders dinner from a restaurant on a marketplace and that consumer gets food poisoning? Who pays the damage if a plumber booked through a marketplace does damage to a consumer’s home? From a legal perspective, there are still no standardized best practices for managing risk at each of these touchpoints.
Is clickthrough a valid way to minimize risk these online marketplaces are exposed to?
Yes! Marketplaces have started to adopt clickthrough agreements and will continue to do so because there’s no other way to mitigate legal risk without impacting conversion. Marketplaces are onboarding new consumers and providers at an accelerated rate, and clickthrough offers a scalable, standardized, and frictionless experience that reduces their risk and liability exposure.
How does PactSafe help?
Firstly, we've worked with these companies to develop best practices for managing risk. Secondly, we help them keep up with changes in the legal landscape. Using clickthrough agreements, we create transparent interactions that define the start and stop points of the relationship. Ultimately, all of this is about helping marketplaces protect themselves against increased risk and liability.