Apple’s App Store and Other Digital Marketplaces
ANALYSIS GROUP
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Second, we reviewed examples of brick-and-mortar distribution of physical products.
We included marketplaces that connect buyers and sellers and charge commissions,
such as auction houses and consignment stores. Although these marketplaces are very
different from online platforms like the Apple App Store, their business models have some
resemblance to those of digital marketplaces. We also included more traditional examples
of brick-and-mortar distribution, such as car dealerships and retail stores, reviewing costs
and fees associated with selling via such physical distribution channels.
˿ Art auction houses, such as Sotheby’s, Christie’s, and Bonhams, charge various
types of fees, including a buyer fee of 20–25% for amounts under $4 million and a
seller fee estimated at 10% on average. The sellers receive the rest.
˿ Consignment stores oen charge commissions ranging between 50% and 75%.
˿ Car dealerships oen serve as intermediaries that sell used cars from old to new
owners, with margins reported to be at least 20%. This means that the former car
owners typically receive approximately 80% of the eventual resale price upfront.
Just as in online markets for digital goods, trust is oen difficult to ensure in used
car markets. As a result, certain dealerships offer car certifications programs, which
include car inspections and certain warranties.
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˿ Food manufacturers pay fees to retailers for store placement, as well as other
promotional fees, known as trade fees. These trade fees are estimated to account
for 15–20% of the manufacturer’s total sales revenue.
Digital marketplaces need rules and governance to thrive
It is widely recognized that the success of digital marketplaces depends on their ability
to connect buyers and sellers and generate valuable interactions.
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Because trust and
integrity are central to making buyers and sellers comfortable trading on the platform,
digital marketplaces oen employ common rules and enforcement strategies to foster
such an environment. A lack of adequate policing and governance can undermine such
trust and integrity, leading to an unsuccessful platform.
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Ridesharing apps perform
background checks on drivers and use rating systems for drivers and riders. Apple, as
mentioned above, uses a strict veing process to review the apps, ensuring that they are
safe, reliable, and bring value to customers.
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16 “Certified Pre-Owned Pros and Cons,” Kelley Blue Book (2018).
17 See, e.g., Annabelle Gawer and Michael Cusumano, “How Companies Become Platform Leaders,” MIT Sloan
Management Review (January 2008); Avi Goldfarb and Catherine Tucker, “Digital Economics,” Journal of
Economic Literature (March 2019).
18 For example, in 1983, the video game industry crashed, causing more than 90% of game developers to go
bankrupt. That collapse was linked to a proliferation of unreliable, low-quality games. However, Nintendo was
able to resurrect the market a few years later, thanks to rules and policies aimed at expelling unauthorized
games. These rules and policies were key to its success. See Kevin Boudreau and Andrei Hagiu, “Platform Rules:
Multi-Sided Platforms As Regulators,” in Annabelle Gawer (ed.) Platforms, Markets and Innovation (2009).
Similarly, buyers are wary of using marketplaces riddled with scams.
19 Apple’s App Store Review Guidelines include rules addressing (among other things) the security of apps, their
performance and compatibility, their business model, and their design.