Start a Marketplace Development Company: As the founders of SDLC, we’ve seen our fair share of online marketplaces start with a good idea, fail to gain traction, and shut down soon after. The reasons are all over the place: there wasn’t a need in the market, the business model wasn’t sustainable, the software choices weren’t good, there wasn’t enough marketing, etc.
This guide will teach you how to start a marketplace business (Everything You Need To Know Concerning The NFT Marketplace), from researching the market and picking the suitable business model to mastering operations, choosing software, and building, launching, and growing your marketplace platform. Before we start, I want to warn you that there is no easy way to start a marketplace and make it successful. Even if you have a good plan and know the best ways to do things, you still need to be ready to put in a lot of hard work to help your community grow and thrive.
What Exactly are Online Marketplaces?
Multi-vendor marketplaces (also known as two-sided, peer-to-peer, or just online markets) are online eCommerce platforms in:
• Third-party sellers (or vendors) sell their goods.
• Buyers buy products from many different sellers.
• The market takes care of payments and makes money through fees.
Why Start an Online Marketplace in 2023?
Why Not? Customers spent $1.47 TRILLION on online marketplaces in 2017. That’s almost half of all online sales in the world. It costs a lot of money!
There’s a good chance you bought, booked, or sold something through a marketplace platform without thinking about it this month. Amazon, AliExpress, Airbnb, Eventbrite, Upwork, TaskRabbit, digital software and asset marketplaces, gaming and music venues, and more.
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What Makes Marketplaces so Popular?
The main reason is that the marketplace model has a built-in network effect that brings the two sides of a transaction together. This is also why they’re called “two-sided marketplaces.” The network effect lets you build a scalable business with multiple ways to make money without dealing with your inventory and logistics, which can be a hassle.
Because of this, marketplaces are different from regular online stores. To grow a traditional e-commerce business sustainably, you need to be in the “Goldilocks zone,” where your free cash flow, operating costs, and inventory all match up. You might get too big to stay in business if you don’t. As a marketplace owner, you’ll face various problems, but growing too quickly won’t usually be the biggest.
For example, if you have an online guitar shop, you can grow faster if you switch to a marketplace model and let other people sell guitar accessories on your site. You just increased your business without hiring new people or buying new products.
Another advantage of a marketplace business over a regular e-commerce business is that the platform is built to encourage loyalty and a sense of community. But, again, this is because of the network effects at work. Often, the community will self-organize and build its ecosystem around your marketplace. For example, consider Amazon seller forums, Uber driver clubs, and Aliexpress buyer forums. To sum up, starting a marketplace is a great way to take advantage of network effects and create a thriving e-commerce ecosystem or quickly grow your business without needing much extra money, workers, or inventory.
1. Find Out About Your Target Market
Starting a marketplace website from scratch or converting traditional e-commerce to marketplace commerce requires market research.
CBInsights says that “no market need” is the number one reason startups fail in 42% of the cases they looked at. Starting an online marketplace with a clear understanding of your users’ target market and needs is a great way to learn a hard lesson, but there are better ways to start a business. Market research comes into play here.
To build a successful marketplace business, you need to know the market, your users, their needs, and the solution they want.
Assess the market
You need to know what you’re getting into before you do it.
How does the business world look? Check the size and volume of the market to see if the way you want to run your business makes sense. For example, it might seem easier to get into a smaller market, but you’ll need a different business model if you want to charge selling fees and there need to be more transactions. Are there precise niches in the market you want to reach? The more you know about the different market parts, the more likely you will choose the most exciting place.
Businesses that are big in the market today started in small niches:
• Amazon started as a small online store.
• Etsy started as a place for crafters to talk to each other.
• Eventbrite was first focused on the tech world.
• No matter your business, you will have direct or indirect competition. Find out who your rivals are and how long they’ve been in business.
By looking into the competition, you can learn about the typical marketing strategies and business models in your target market and the strengths and weaknesses you can use to your advantage.
Watch how the market is moving. Is it going up or down? Is it growing or shrinking?
If you can spot significant changes or trends, like new technologies, rules, or changes in how customers act, you can use them to your advantage.
Identify Your Users
You’re not making your marketplace for yourself; you’re making it for the people who will use it. So you need to know who your users are to be able to solve their problems as well as you can.
Start with the basic ones:
• Who are the people you want to use your product, and what are their primary goals and problems?
• Where do they shop, why, and from whom do they shop?
• What drives them, and what makes them act the way they do?
You can make a few simple buyer personas to learn more about your target market. Since you’re making a two-sided market, you’ll have at least two different types of customers: Both your buyers and sellers have their own goals, challenges, and reasons for doing what they do. Make sure you know what both sides are saying.
Recognize the Problems and Solutions
Now that you know the market and the users, it’s time to find out what they want and how you can give it to them. Here, you want to discover your users’ most significant problems and how they can be fixed. Do your target clients shop online? If so, where, how, and why do they do it? Are they happy with how their shopping trip went? How could it get any better? How are your sellers doing? It would help if you now had a good idea who will sell their goods on your marketplace. Talk to them! Ask them how they sell their products directly, what other channels they use, and what makes them happy or sad. How can you improve their time with you? If you ask these questions, you’ll learn more about what your users want and what your competitors do well and poorly, which will help you build a better solution.
It would help to get a clear picture of your target market and the people you want to serve from your market research. By doing this, you’ll be able to choose a good niche for your marketplace platform, come up with a solution that solves your users’ problems, come up with a business model that makes sense, and Plan a marketing strategy that will set your new platform apart from the competition.
2. Pick the Right Way to Run your Business
We already know that most startups fail because they try to make things that no one wants. Do you know the second reason why you failed? No more money.
That’s right—not enough to make a helpful product people want. It would be best if you had a way to make money from it and keep making money from it over time. Here are some interesting facts. In the fourth quarter of 2001, more than six years after it was founded, Amazon made its first quarterly profit. It took Etsy five years to start making money in 2010. On the other hand, eBay has been making money since the beginning, thanks to listing and selling fees.
My point is that, no matter what industry or background you come from, It’s best to create a solid business plan BEFORE launching your online marketplace rather than after you’ve already established it. Now, how exactly your marketplace will make money depends on a lot of things. Here are a few ways to run a business in a marketplace that you should consider.
A sign-up fee is a flat fee you charge sellers when they join (well, duh!) your marketplace platform. Sign-up fees are fantastic because you can charge them even before your marketplace is booming as long as you can persuade new sellers of your vision. Sign-up fees are also easy to collect since you can use any standard payment gateway or even ask for payments by hand (e.g., via PayPal, bank transfer, or in person).
The main problem is that sign-up fees don’t scale, so you’ll need other ways to make money once you’ve got the seller on your platform. To charge sellers an upfront fee to join your platform, you must show that it is worth it. Because of the need to be able to grow, the big marketplace players rarely use sign-up fees as a way to make money. But you can also charge a fee to join to get rid of sellers who need to be more serious.
For example, it costs $25 to become a Google Play vendor, and it’s clear that Google doesn’t make much money off these fees.
You already know that subscription is king. The global sharing economy is driven by businesses that make money from subscriptions regularly. Gartner thinks that by 2020, all new software companies will use subscription-based business models, and 80% of the old ones. Charging your sellers a set amount regularly is a great way to make the recurring income that will keep your marketplace running.
Here’s the number one rule of subscriptions: ensure your sellers get more value from your platform than it costs them to stay subscribed. If they make $220.99 a month in profit, they won’t mind paying $20.99 a month.
From a technical point of view, subscriptions are more complex. Like Stripe, you will also need a payment gateway that supports subscription payments. You can do manual invoices while building your MVP, but it will take a lot of work to scale this way. But it’s worth it. Combine the idea with different levels that give sellers access to more features (like advanced selling tools) or lower their selling fees, and you have a steady source of recurring income.
For example, Amazon has two plans: one for individuals that cost an extra $0.99 per item sold and another for larger sellers that costs $39.99 per month.
Listing or Inserting Fees
When your sellers list items for sale on your platform, you can charge them a fee to do so. Listing fees can be fixed amounts or amounts that change based on the product’s price, the category it is put in, and other factors. Like with subscriptions, most sellers will be okay with paying a small insertion fee to list their item as long as they can make money from it. And just like sign-up fees, listing fees are easy to get, but they can be collected on a much larger scale.
To make things easier, you should charge after the product has been sold instead of when it is published. Etsy, for example, charges a $0.20 insertion fee but only collects the listing fee once an item has sold in multiple quantities. Selling fees Selling fees are standard, and there’s a good reason for that. It’s a great way to make money. You’ll charge a selling fee to your sellers whenever they get a new order on your platform and handle it. So the more orders you get on your marketplace, the more you make from sales fees.
Doesn’t it sound great? The problem is that selling fees are much harder to set up than other expenses. For starters, you’ll need a payment gateway that can split buyer payments so you can collect your commission at the time of sale (unless you want to collect sales commissions manually, which you probably don’t want to do for legal and other reasons). And it would help if you had a steady flow of new orders for small sales fees to bring in enough money. It can be hard when you are just starting. It does, however, scale well. If enough people use your platform and you can automatically collect fees for sales, you have a good business going.
There are examples of selling fees on some of today’s most popular marketplaces:
• Amazon charges selling fees based on the item’s category.
• For example, there is a 5% “transaction fee” on Etsy.
• Envato charges sellers between 12.5% and 55% of their sales.
• Airbnb hosts must pay a “service fee” of at least 3%.
3. Plan Your Business in the Market
Making a website for an online market is one thing. However, managing a marketplace business well is an entirely different thing. Even a simple e-commerce business can get hard to run because there are so many things you have to deal with every day. Due to the way two-sided platforms work, it can be harder to run a marketplace than that. Here are some of the things you’ll have to deal with every day as a marketplace owner:
Since sellers are essential to your marketplace, you will work with them a lot. This includes getting new sellers and helping them get started, as well as ensuring that current sellers are happy and doing well.
First, you’ll have to get your sellers to sign up for your platform. Then, write down your unique value proposition during your market research and planning. Now, you need to make landing pages that tell sellers how your marketplace works and why they should join. Next, you’ll need an easy way for people to sign up. First, decide who can apply and what information you need from them, and then design your registration process with this in mind. Will you let anyone sign up, or will you only accept sellers who have been checked out? If you want to keep freeloaders out, make sure you have a way to look over the applications.
If you’re charging fees to sign up or for subscriptions, you’ll need to make sure you can either add payment processing to the registration process or have a way to manually collect the fees by talking to the sellers. You must also decide how much authority your sellers will have over their stores, how their stores should look, and how customers will find them. You’ll want to make it as simple as possible for the new seller to add their product catalog to your platform when they sign up.
As the owner of a market, you won’t usually have to take care of your stock. But you’ll still need ways to keep track of the products your sellers sell. Your product catalog can be set up in two different ways: On sites like Etsy and eBay, there is only one seller for each item. On sites like Amazon, several other people can sell the same product.
Organizing the catalog will affect how you choose software, how your marketplace pages are laid out, and how your sellers add and manage their products. You now want to make it simple for new sellers to start selling on your platform. You can do this by letting them import a lot of their already-made products or by offering an onboarding service where you do it for them.
If most of your sellers already have online stores, it’s a good idea to give them a way to import their catalogs from Amazon or Shopify, where they already sell. Optimize your product listing forms by taking out the extra information. This will make it easier for sellers to list items for sale. If you want to sell more than one product, remember that different products may need various fields. You may require a product moderation system or content to keep scammers off your site as you grow.
Payment processing in a marketplace is always more complicated than in a regular online store. First, you’ll need unique payment gateways for marketplaces so that customers can buy from multiple sellers at once and split their payments at checkout. More payment solutions now support marketplace payments, but they can take time to set up. Second, you’ll be taking care of different kinds of payments.
Here are a few examples of how payments on a typical marketplace platform are made:
• Customers order payments to be made to sellers
• The sellers will pay you fees and subscriptions to use your platform.
• Payouts to the sellers from your platform
Other implementation requirements apply to different payment flows. So, think about which payment gateways you’ll use and how you’ll use them. You’re in trouble if you need help finding a good gateway and making it work with your marketplace software.
Lastly, keep in mind that as the owner of a marketplace platform, you may be responsible for paying taxes, invoicing, and reporting. These rules will depend on where you live and what you do for a living.
Logistics and Shipping Configuration
You are not responsible for the inventory, but your sellers are, and your platform has to support that. You must first decide whether you want sellers to ship your items for you or if you want to do it yourself (like Amazon FBA). If you ship yourself, getting the inventory from your sellers, storing it, and sending it to the buyer will be more complicated. In this case, it will take more work to figure out shipping costs and times and keep track of the item at every step. If you require sellers to pay for shipping, they’ll need an easy way to keep track of shipping rules and tell customers about them. You can use flat-rate laws, regulations based on price or weight, or rules specific to each product. Make sure your sellers can easily set shipping rules for locations using other carriers.
No matter what shipping flow you use, you should ask yourself the following:
• How are you going to deal with tracking numbers?
• Do you need shipping APIs or other tools from a third party?
• How will you set shipping SLAs and make sure they are followed?
Shipping cost and speed affect how many people buy something on a marketplace, so getting this right is very important.
The first step is to get people to buy from your platform. The following step is to confirm that your sellers deliver. The sooner the seller knows they have a new order, the sooner they can send it out and keep the customer happy and willing to buy from them again. So, your platform will need to let sellers know when they have new orders and make it easy for them to see, manage, and process the orders. And if you let customers buy from more than one seller simultaneously, you should clarify how different items in the same order are shipped.
You can give your sellers a way to share the tracking number with the customer, so they always know where their order is. Lastly, delays and problems will happen, so have the plan to deal with them. At the very least, you want to give the customer and the seller a way to talk to each other so they can figure out a solution. As you expand, you can develop buyer and seller protection programs similar to eBay’s Money Back Guarantee or Airbnb’s Host Protection Insurance. If you don’t do this, you could be in the middle of disputes, refund requests, or lawsuits.
Marketing and Content Management
Even though network effects will help your platform gain some traction, you still need to promote it, especially in the beginning actively.
How do you begin? When you’re just starting, the first question that comes to mind is how you’ll get new sellers and customers to join and stick with you. This will be covered later in this guide. Once you’re up and running, you’ll have to figure out how to keep your market growth over time. Again, search engine optimization, organic and paid marketing campaigns, and other business development efforts will be used to accomplish this.
Why do SEO? Because organic search still brings in more than half of the traffic that can be tracked on average. Make sure the software you use is made with SEO, so you can do less work to make your marketplace search engine friendly. This means that seller stores, product listings, and other pages on the marketplace should be easy for search engines to find and share. Most regular sellers will only take the time to optimize each listing for search engines, so you have to make it easy for them to do so, or you’ll end up with a platform that could be better optimized.
Now, a typical marketplace platform has more user content than just products. You’ll have user reviews, questions and answers, featured seller stores, blogs, and more, which is excellent for you as the platform owner! Make it simple for your users to create great content on your platform and encourage and promote it.
But you’ll also need to put in place ways to stop low-quality UGC: Long-term, organic marketing is excellent, but pay attention to paid acquisition. The value of paid marketing campaigns will increase as more content is made daily. So make sure you have a paid promotion plan for your marketplace to bring in new users and raise awareness of your brand.
Seller and Customer Relationship Management
More is needed to get new users; you must keep them happy, loyal, and using your marketplace often. You’ll be talking to your users daily and helping them answer questions and solve problems, so have a plan.
Some of the problems you’ll have to solve are:
• new sellers on board and answer their questions
• giving technical help and making sure the rules are followed
• answering questions about the order
• helping the seller and the buyer work out their differences
To do less, let buyers ask sellers questions about their products and talk to them before and after they place an order. The more ways you give people to speak to you, the more likely problems will be solved without your help. Some of our customers are interested in a method to monitor buyer and seller communications to prevent negotiations from being diverted elsewhere. So instead of worrying about it, you should focus on making your platform the best it can be for both sides so that going around isn’t worth it.
It’s also important to talk to a lot of people. For example, you’ll want to be able to let your sellers know about policy changes and new features or let your customers know that this month you’re running a discount campaign for the whole marketplace. And remember post-transaction communication. Let it happen, encourage people to buy from you again, get reviews, and build trust among your platform’s sellers and buyers. This will assist you in transforming your marketplace from a place where only transactions take place into a place where people want to return.
4. Highlight the Key Features of the Marketplace
First and foremost, let me state the obvious: When developing an online marketplace, the simplest way to waste time, money, and effort is to include features your users do not require. I’ve seen several marketplace initiatives take too long to create, never launch, or discover users need a different set of features a week after launch.
I’ve also seen marketplace platforms launch in weeks with only the bare minimum of functionality – and then evolve as they grow. In the long run, this has worked much better. I advise marketplace entrepreneurs to start with the basics and launch an MVP as soon as possible, then improve the platform as the business grows and the requirements become more apparent.
What exactly are the essential marketplace features? Some of this will depend on your business, but I like to put the features into three broad groups: features for sellers, features for buyers, and features for the platform.
Essential Buyer Features
What is your goal when you shop on Amazon? To quickly and easily locate, purchase, and receive the products you seek. Make it as simple as possible for buyers to search for products and browse categories. What makes it simple? A functional search bar (with a low bar), faceted product filters, and information-rich product pages are all excellent places to start. The next step is a simple checkout. The simpler it is to place an order on your platform, the more likely the buyer will complete the transaction. Therefore, a modern checkout process is required, which allows you to buy from multiple sellers with a single payment.
You want to provide payment options that are convenient for your customers. For example, a stripe is excellent but useless if customers prefer to pay cash for delivery. This question should have been answered during your market research because it usually depends on your region and industry. A split payment gateway and a manual processor, such as cash on delivery, are required in most cases. Order management is now just as crucial for the buyer as it is for the seller. Allow your buyers to easily view and track their orders and receive notifications when the status changes.
Communication is also essential. Allow your customers to ask sellers pre-sales questions, contact them with order-related inquiries, and leave feedback. This ensures that your platform provides a positive buyer experience and aids in retention.
Essential Marketplace Platform Features
Your platform aims to connect buyers and sellers while generating revenue to keep your business running. As a result, you will require the appropriate tools to support your marketplace operations and business model. Aside from everything I’ve already mentioned, you’ll need a way to monitor, manage, and moderate everything that happens on your platform.
As a marketplace operator, you will assist sellers in setting up and maintaining their stores, approving and updating individual products, and looking up and managing orders. You’ll also want to change the look and feel of the marketplace without touching any code. This will allow you to make seasonal changes, introduce new products and categories, run marketplace-wide promotions, and highlight your best sellers and products.
Of course, I mentioned payment processing earlier. Depending on your business model, you may be required to process buyer-to-seller payments and seller fees, manual vendor payouts, and other types of payments. The same is true of shipping and logistics. Your platform should allow sellers to manage shipping methods and make it clear to buyers where they ship to and how much it costs.
This does not necessitate direct integration with third-party shipping services and APIs; automation can be added later. However, your sellers must be able to specify their delivery costs manually.
Advanced Marketplace Features
These are the most important things you need to get your market up and to run. You can give your users a lot more in the future:
• Tools for reporting
• New ways to sell and market products
• Integrations with eCommerce services from other companies
• Own apps for mobile devices and more
5. Choose a Payment Method for a Marketplace
Your business will last if your marketplace platform can process payments safely, securely, and reliably. McKinsey says that the volume of digital commerce worldwide will double by 2022, from $3 trillion in 2017 to $6 trillion. Your marketplace is a part of the global payment ecosystem, but when it comes to processing payments, marketplace businesses face some challenges that other eCommerce businesses need to overcome.
You already know what kinds of payments you’ll be taking as the owner of a marketplace platform:
• client payments (customers purchasing products)
• prices from sellers (signup, listing, subscription fees, promotions
• seller payments (payouts)
additional charges (third-party advertisers)
Processing customer payments is probably the hardest for marketplace owners since it involves the buyer, the seller, and the platform. There are three ways for customers to pay sellers for orders on your marketplace:
With direct payments from buyer to seller, your platform has nothing to do with the deal. Direct payments are the easiest for your platform, but they also have a few big problems. Since your platform doesn’t own the transaction, you have limited ways to collect transaction fees and handle returns and refunds.
Also, if your customers use direct payments, they can only buy products from one seller at a time. So instead, they’ll have to go through the checkout process for each seller. They are also less safe for everyone involved and make it easier for people who can’t be trusted to use your platform to make money for themselves.
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With aggregated payments, your platform collects the money from buyers and then pays it out to sellers. Aggregated payments make it possible to have a single checkout and give you control over the transaction. However, you must keep track of your sellers’ finances and make regular payouts on your platform, which is more work. And as the payment industry becomes more regulated, payment aggregation as a marketplace payment flow will only get more complicated.
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NFT Marketplace Explained: Believe you have one dollar and decide to exchange it with a friend. After the
Split or Parallel Payments
This leads to parallel (or marketplace) payment processing, where a customer’s payment is split instantly at checkout and between all sellers and your platform by the payment processor. This removes all the problems with direct and grouped payments and puts the liability and compliance burden on the payment processing company instead of your business. The biggest problems with parallel payment processing are how hard it is to set up and how few processors are available on the market.
But it’s getting better. In the 2000s, PayPal Adaptive was one of the few payment options for marketplaces that allowed for split payments. As a result, there are now dozens of payment processors that work with marketplace payments all over the world. Stripe Connect, PayPal for Marketplaces, Adyen Marketpay, and Mangopay are some of the most popular.
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How do You Choose a Payment Method for a Marketplace?
It is crucial to choose the correct payment method for your marketplace. It would help if you thought about the features you need, whether the payment provider is available in your area, and, of course, the costs. So, before you start building your market, make sure to ask yourself these questions:
As the owner of a marketplace platform, what kinds of payments will I have to deal with? What types of payment options in my area meet my needs? How much will it cost me to process payments? How do I figure this into my business plan?
Just as important as the first two questions are the third one. You don’t want to end up with no payment processing at all, but you also don’t want to rely on a business model that charges your sellers a 5% selling fee only to find that it costs you the same amount in payment processing fees.
6. Pick the Right Marketplace Software
At this point, you have a good business model and an operations plan. You also know which payment gateway you’ll use and what features your marketplace platform needs. Now is the right time to choose the software that will run your marketplace platform. I divide marketplace platform software into a cloud or hosted platforms, stand-alone solutions, and multi-vendor CMS extensions.
Note that when I say this, I talk about something other than starting from scratch. It is possible, but most small and medium-sized businesses can’t do it because of how complicated it is. Most of the time, if you’re a new marketplace entrepreneur, the first thing you should think about is going with a popular marketplace SaaS. Cloud marketplace solutions are the easiest and don’t require much technical knowledge. Most of them also offer free trials, so you can play around with the platform for a while to make sure it meets your needs.
Here are a few popular SaaS solutions for the market that you can look into:
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The biggest problem with cloud marketplace platforms is that you can only change them a little. So if it doesn’t work for you out of the box, you can’t change it because you don’t have access to the code. Stand-alone marketplace software is a better option if you want something that can be changed more.
Multi-Vendor CMS Extensions
Lastly, you can add a multi-vendor extension to a regular CMS like WordPress, Magento, or OpenCart. Sounds like a good idea? You might think this will give you all the benefits of free and open-source CMS while also powering your marketplace. But, unfortunately, in real life, things rarely turn out this way.
Content management systems are made for regular websites and e-commerce as it is today. However, two-sided marketplaces are different by nature, and turning a typical content management system (CMS) into a marketplace platform is complex, time-consuming, and error-prone.
If you decide to go for it, you can use the following software combinations:
• WordPress + WooCommerce + Dokan, WCFM, WC Vendors, or YITH
• OpenCart + MultiMerch, PurpleTree, or Waabay
• PrestaShop + KnowBand or Advanced Marketplace
• Magento + CreativeMinds, NextBits, Webkul, or Apptha
In this situation, you need a developer on your team who has worked with the underlying system and two-sided marketplaces. Therefore, you will have much more technical work than with SaaS or Standalone marketplace software. We’ve had the SDLC multi-vendor OpenCart extension for a long time, and it’s always been a struggle to work around the CMS’s limitations and issues with third-party themes and plugins. But, of course, any CMS will give you the same problems.
How do You Pick the Right Marketplace Software?
There are a lot of options. Before you choose your new marketplace software, you should figure out if you want cloud, standalone, or CMS software.
Here are some general rules I use to choose one of the three groups:
• Start with a cloud-based or Software as a Service (SaaS) marketplace platform if you want to get your marketplace up and running as soon as possible but need to learn how to do it technically.
• Go with stand-alone marketplace software to get the most for your money and own your platform outright.
• Try multi-vendor CMS extensions if you’re already using the underlying system (like running a Magento store) or if you’re willing to spend a lot on custom development and have a team that can do it.
Now, here are some things to think about when choosing software: Start with what kind of market you want to build. For example, do you sell goods, services, or reservations? Software made for selling products will only work well in a marketplace for marketing services and vice versa. Know what your platform needs to have. Then, ensure that the solution meets your business’s needs, not just the basics but also payment processing, logistics, and other essential features. And if it doesn’t have the quality you need, can your team change it, so it does?
Look closely at how easy it is to use and how reliable it is. New store owners often need to remember this, but it’s just as important as everything else. Make sure that the solution not only has the features you need but also gives you a great experience as a user. If your marketplace is hard to use, it doesn’t matter what else you do because people will leave as soon as a better option comes. Find out who is working on the solution. Who is in charge, and what technical support and code quality can you expect? Growing a marketplace business will take a lot of time and work, so you want to ensure you get all the help and software updates you need over the years. Can you consider the company more than just a software provider and treat it as a partner?
Last but not least, here’s your budget. The budget shouldn’t be the most important thing when choosing marketplace software. Over the years, you’ll spend a lot of time building your marketplace. So it’s not worth saving a few hundred dollars on software that runs your business.
7. Assemble a Great Team
Software is all you need to start a market platform. Nope. You will need a great team to help you do it most of the time. Here are some of the essential skills you’ll need to run a business on an online marketplace:
Design and Development Skills
You’ll need technical skills to set up, build, customize, and maintain your marketplace platform, no matter the software.
Different types of marketplace software require different levels of technical skill.
• Cloud platforms will require little coding.
• Self-hosted marketplaces require technological know-how.
• Multi-vendor CMS extensions require custom development.
Does a marketplace website require a developer? No, but a developer will simplify your life. Design is simple. In 2019, you needed a modern, responsive platform, but most marketplace solutions offer ready-made layouts. You’ll need design expertise and resources to modify your platform and generate marketing materials. Investing in a UX designer will help your market’s user experience, acquisition, retention, and conversion.
Marketing and Sales Skills
Customers and sellers will join your new market on their own. To get your new marketplace platform off the ground, you will need to promote it actively. So, sales and marketing come into play. To get your marketplace going, you must find the first sellers and buyers and convince them to join you. Then, you’ll need to spread the word about your brand to get people interested in your new platform and help it grow.
At the very least, this means knowing the basics of getting new users and growing your business, such as:
• free and paid ways to get something
• social media and community management
• email marketing partnerships and advertising
As an aside, you are copywriting is also an excellent skill for marketing. To get people to join you, you must be convincing on your website and in your ads. You may also need to know how to write good copy to help your sellers write product descriptions that sell. In reality, this means learning everything you need to know to keep your business going and growing.
You should already know what it takes to run a marketplace daily. We talked about this in the section on operations.
• monitoring users, products, and orders and making sure sellers are happy
• solving technical problems and customer service questions
• managing payments, doing the paperwork, managing your team
As the founder of a marketplace, you will be in charge of the business from the start. Even though you can let others handle most of the design and development and some of the marketing, you are still in charge of running your marketplace. So, you are in order of how things work. It would help if you had a lot of skills like these to run a market. So how do you manage it?
There are several options:
Doing it Yourself
DIY is the most transparent approach unless you have an existing team, especially when starting. This works best with fully managed marketplace solutions. For example, you can focus on marketing and operations if you run your marketplace in the cloud. If you DIY, have the time and tenacity to run a marketplace. It’s hard work, so employ tools, services, mentorship, and consultancy.
Hiring Individual Freelancers
Hiring a freelancer is a terrific method to add skills without significant investment or long-term commitment. Freelancers come in many forms. You’ll find long-term and one-time collaborators, experts, interns, teams, and individuals. Hire a freelancer when you need something done quickly without learning your expertise. Scalable. Well? More freelancers? Diminish.
Check Big freelance websites like Upwork and Fiverr specialized platforms like CloudPeeps Slack, Facebook, and LinkedIn groups. Freelancers can be costly if you don’t precisely outline your needs. In addition, more detail is needed for larger projects.
Hiring Full-Time Employees
When hiring, look for familiarity with two-sided platforms and marketplace trade. Freelancers, workers, and agencies are affected. More experience with similar firms and platforms will help your project. Generic recruits may be cheaper yet perform worse than market specialists. Ensure your coworkers believe in your project and aren’t just after the money.
Hiring is difficult. As your organization expands, you’ll hire full-time employees. Employees provide consistency, which is vital for customer-facing jobs and operations. They’ll work 40+ hours weekly and become part of your company’s culture and success.
Cost, management effort, and flexibility are negatives. In addition, full-time staff is hard to expand, and recruiting may be complex and time-consuming, especially for technical roles. If you have a restricted budget, hire generalists like a marketer or business development, then add freelancers or agencies for specialized tasks and projects.
What to Look for When Hiring People?
8. Create Your Marketplace Platform
You can now design your marketplace website. How do you launch your marketplace after buying software? Getting a marketplace platform ready can take a day (for hosted SaaS) or months for custom developments.
Here are several ways to simplify:
Create a Specification
Complexity increases implementation difficulty. E-commerce marketplaces are complex. To avoid disaster (e.g., going broke owing to cost and schedule overruns), write a preliminary functional specification outlining your project goals, requirements, and implementation timeline. If your project is technical, write a precise specification. An accurate specification can save you months of wasted effort if you work with freelance developers or agencies.
Track project milestones to keep yourself and others accountable. Specify your MVP and launch requirements. This includes launch features, including deployment and launch dates. A more clear timeline is better. We need the initial MVP ready and placed on staging by June 1, a soft launch with early users by July 1, and a full launch by September 1. Make sure everyone on your project understands the criteria and timeline.
Master Project Management
To successfully start your marketplace, you’ll require fundamental project management abilities. Understanding the basics won’t make you a project manager but it will help you keep organized. An agency’s project manager will inform you if you work with them. You’re your project manager if you use freelancers.
When making adjustments to a project, examine the technical specification and timeframe and negotiate with all partners. Changing a milestone affects the entire chronology. Have a backup plan since things will go wrong. The more individuals participating in your project, the more probable something may go wrong, from inattentive freelancers to intricate features taking longer than intended.
Follow the Best Development Practices
Good development and operational processes save time and ensure project completion. You don’t need a top-notch development team but use testing, version control, and issue tracking. Use separate servers for development, staging, and production, and only roll out software changes with testing. Not breaking things is more accessible than fixing them.
Always keep backups and a mechanism to recover them. You want to restore operations fast if something goes wrong. KISS is an excellent platform-building principle. Keep your marketplace software straightforward.
Know when to Launch
Markets take time to develop. Amazon was built over time. To improve your new marketplace, you’ll need genuine consumers and input. New marketplace owners often launch too soon or need more time, with the latter being worse. Start testing with real people early to iron out early bugs before your marketplace’s grand opening.
9. Launch Your Marketplace
It is not enough to create a marketplace website; it must also be launched successfully. How do you get your marketplace up and running? It’s a good idea to launch the new marketplace in two stages: soft and hard.
Start Planning Your Launch Early
If you start planning early, you’ll have more time to talk to people, receive feedback, and improve your product and messaging. Define your launch timeframe, marketing messaging, and significant channels. Different sectors, geographies, and markets demand other launch methods. Choose the best one. Start developing anticipation for your marketplace while it’s in development. If you’ve done market research, you know your users. Now, talk to them personally via social media and commercials.
Before the launch, start a mailing list to measure interest and find early adopters. When your MVP is ready for testing, you should have a group of willing users.
Roll out a Limited Beta Version First
No matter how comprehensive your specification or well-designed your solution is, you may encounter obstacles, from software errors to usability concerns to missing features. Before your central opening, do a limited release to ensure everything functions as expected.
Do a soft launch as soon as your MVP is ready, if not sooner. Use your mailing list and talk to users to find a few dedicated vendors, then assist them in setting up their stores on your platform. Invite a few early customers to your beta marketplace so it looks like something other than a ghost town.
Gather Feedback, Iterate, and Improve
Now, collect as much input as possible. Talk to early buyers and sellers and record their feedback. Arrange in-person meetings or record and transcribe user interviews. Listen, don’t speak. This will give you lots of platform-improvement ideas. Iterate and improve based on soft launch feedback. Don’t just employ early adopters as test subjects; form meaningful relationships with them. This trust will help you promote and increase your business’s market.
Launch Your Improved Platform
It’s time to make your new marketplace website public. Make sure everything works by running final tests. Things tend to shatter when you least expect them to. Make your launch an event, whatever your market. Then, bring your launch to your target users via webinar, Q&A, or AmA. Keep the enthusiasm going—your launch is just the beginning.
10. Grow your Marketplace Business
Hopefully, your new marketplace is being used. Now, focus on growth and retention. Growing a marketplace differs from standard e-commerce, yet they share many similarities. Online markets are two-sided; therefore, you must build your seller and client base. In the early days of your new marketplace firm, you’ll want to grow your supply side, so establish a pipeline of new sellers and keep them.
Getting Your First Sellers
Ever visited a website with 50 empty categories, four dusty products, and one old blog post? You want to avoid that when fresh buyers and sellers arrive. Find new sellers in the early stages of your marketplace business before and after launch. You can get new sellers by directly inviting them and by advertising.
Since you’ve done your market research and chosen a niche, you know where to find your sellers. Because you’ll be denied, contact every vendor interested in your marketplace. Instead of spamming, build relationships and deliver value. Offer them feedback on their products and free onboarding to your platform. Let your first merchants sell for free so that they can evaluate your platform. Fees will come later.
Paid Facebook, Instagram, or Google Ads advertising is another fantastic alternative. You can run advertisements against a landing page that outlines your initiative and invites sellers to participate. If you’re developing a local marketplace, focus ads on local sellers. Combine regular adverts, remarketing, and personal outreach to attract new merchants.
Generating Brand Awareness and Growing the Customer Base
When you have sellers and a good product catalog, attract customers. This is similar to running a typical eCommerce firm, but marketplace owners have more options. Like merchants, you’ll use social media and paid marketing to attract new customers. Instagram or Facebook. Despite declining organic social media reach, eCommerce firms should still use it. Set aside a small budget for sponsored advertising and test several outlets. Instagram’s graphic ads work well. Showcase your handcrafted products if you manage a marketplace.
SEO will be your long-term growth catalyst. You’ve chosen SEO-friendly platform software. If so, your categories, product pages, and seller stores should rank quickly and bring in visitors. Introduce new sellers, products, and features via your mailing list. Keep your newsletter list healthy by inviting new customers and sellers to sign up. Measure your marketing efforts using Google Analytics or Ahrefs.
Focusing on Retention by Keeping Your Users Happy
After launching your marketplace and acquiring new users, focus on retention. Why invest money to recruit new users if they never return? You must ensure that your sellers and buyers are delighted with the platform. Keep improving your market. Identify the most active users and interview them for discounts or other offers. Fix problems immediately.
Create a knowledge library for buyers and sellers to answer frequently asked questions. Create a guide or tutorials to help your vendors sell on your platform. Create case studies and success stories to highlight your most significant sales. Etsy’s blog promotes user stories well, for example.
This will bring in new clients and boost your SEO. Learn sophisticated analytics and conversion rate optimization to make your improvement efforts data-driven. Keep your marketplace software updated to ensure security and efficiency.
Hopefully, this guide has made the prospect of starting your own marketplace business more manageable. Now I’d like to hear your thoughts on everything: How did you get to running a booming online marketplace today? Those of you who are just getting started, where are you at, and how do you feel? I’d also like to hear if you provide services to marketplace entrepreneurs! In any case, please share your thoughts in the comments section below.