What does it take to build a successful online marketplace?

What does it take to build a successful online marketplace?
Online marketplaces are booming now. We have many examples of such solutions in different niches - from real estate to veterinary services and home clinging. If you decide to build your own marketplace, you need to do a lot of homework before its launch. In this article, we will explain to you how to prepare for the development of your successful online marketplace website.

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An idea to create a marketplace website sounds quite promising because of the unprecedented rise in eCommerce caused by the pandemic. However, there are still a lot of things to take into account if you want to build a marketplace that will be able to generate profit. This article provides an overview of the features of a successful marketplace startup from technical and marketing perspectives.

What is an online marketplace?

An online marketplace is a solution that allows buyers and sellers of goods and services to meet on a single platform. Creating a marketplace website is a promising idea for the owner and for target users since the marketplace owner doesn’t have to store goods or provide services of their own. Sellers can get in touch with the customers who are interested in a particular purchase, and buyers can choose from a wide range of offers from different sellers.

What niches are suitable for this solution?

You can create an online marketplace for a variety of different niches since this business model is quite flexible. For example, there are already very familiar online shopping marketplaces like Amazon and eBay. There are also B2B online marketplaces or eProcurement solutions that allow businesses to act as sellers and buyers of goods or services.

The marketplace business model is quite suitable for everyday services like food delivery or taxis. You can also build an online marketplace for the financial sphere (P2P lending solutions) or dating. The list of the niches to enter with your internet marketplace is almost limitless.

What makes a good marketplace?

Before proceeding with the list of features you need to create a multi-vendor marketplace website, let’s find out what makes a marketplace promising and potentially profitable.

  • Good design. The first impression your users get is still visual so the design of your online marketplace matters for motivating them to start an interaction with the platform.
  • An intuitive User Interface (UI). The process of interacting with your e-commerce marketplace website should also be seamless so you need to carefully think through your UI, test it with potential users and match it to your design solutions.
  • Clear value proposition. There are a lot of top online marketplaces from different niches that you will compete with. That’s why your value proposition should be clear for both buyers and sellers that may use it. The marketplace solution should solve any problems they experience in other apps, and it should have something unique to make the solution competitive.
  • The right monetization strategy. Are online marketplaces profitable? Yes, they can be quite profitable, but only when they have the right monetization strategy. There are a lot of approaches you can follow (find them in our Marketplace Business Models Guide) and each of them is suitable for different types of niches. Make sure to research how online marketplaces make money, and take the expectations of your target audience into account when deciding how to monetize the marketplace.
  • An equal share of sellers and buyers. One of the secrets to the best online marketplace’s success is in the equal or almost equal share of buyers and sellers who operate on the platform. Otherwise, your marketplace will not be engaging and valuable for one of these parties.
  • Seller’s rating system. Quality assurance is also important, even for free online marketplaces. One of the best ways to create that is to allow the buyers to rate sellers and share feedback.

How to create a marketplace website: The main features to be successful

What features do you need to create your own online marketplace? Below is a list of the most important ones.

  • User/seller profiles. This is one of the getting-started features, however, the profiles of sellers and buyers should each be developed differently. The buyers should have sections for tracking their orders and history and updating their wishlists, while the sellers should have inventory management, customer relationship tools, and analytical features.
  • Social connections. Many users like to share a successful online shopping experience with their family, friends, and followers so you should give them an opportunity via social media integration.
  • Product or service listings. This is a core feature that opens up access to offers available in the marketplace. The top slots on the list can be paid for by sellers to boost their visibility.
  • Advanced search. This feature is necessary to improve the user experience and let them search for the exact product or service according to specific parameters. For example, this feature is realized by the Booking travel site on its platform which lets a consumer filter hotel accommodations by a wide set of parameters, including hotel features, suitability for certain groups of tourists, payment options, and guest ratings.
  • Ratings and reviews. As we noted, this feature is essential for quality assurance. With its help, you can filter out sellers who can’t provide a sufficient level of quality and customer service.
  • Order system. This is a core feature of an online marketplace since it helps buyers finalize transactions for which you may get a commission, depending on the monetization model you choose.
  • Payment options. Having multiple payment options is a good choice since modern buyers prefer to pay via mobile wallets or even cryptos.
  • Shipping services. Shipping abilities are essential for any e-commerce marketplace selling goods. You have to develop a flexible shipping system that will deliver to the locations where your buyers reside, or it may allow sellers to provide shipping services of their own. In this case, be attentive to user feedback since shipping issues may ruin or improve the overall shopping experience.
  • Messaging and notifications. Buyers should be able to get in touch with sellers if they have questions, and you can use personalized push notifications to share relevant offers from different sellers.
  • Mobile-friendliness. Mobile shopping is on the rise, so you should build your marketplace website with mobile device compatibility in mind. Mobile marketplace apps may also be a good idea to supplement the website experience and get an additional channel for sales.
  • Analytics and reports. The data your marketplace will generate is important for your marketing and business growth strategies so. you should have visual analytics and reporting dashboards in the admin panel.

How to build a marketplace website in 10 steps

Below are 10 steps you should take.

  • 1. Conduct market research

The development of any startup begins with thorough research, according to the Lean development methodology. At this step, you should take a look at the market dynamics and specifics, your target audience, and the existing solutions to get an idea of the environment you are planning to enter.

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How to evaluate potential market penetration rate, and why your startup should care
  • 2. Create business value

Having data-driven insights about the market will help you create value that will suit the needs of both groups of your target audience — the sellers and buyers. The easiest way to come up with a unique value proposition is to review the value provided by competitors, and brainstorm approaches to create something better and more cost-effective.

  • 3. Find your audience

Next, you need to figure out who your target users are and how you can get in touch with them. Pay-per-click (PPC) and social media advertising are some of the most effective ways which also allow for deep market segmentation of target users.

  • 4. Select a suitable business model

Since marketplaces are quite flexible, you have a lot of business models to choose from, and each of them corresponds to a particular type of marketplace. For example, a commission-based fee model is good when you have a lot of users from both sides attracting new users is relatively easy. For example, this kind of model may be suitable for retail or fashion marketplaces.

  • 5. Draw up a requirements list

The next stage is to create a list of requirements that will cover the specifics of your brand, the design solutions you want to embed, the list of features according to the business model you have chosen, payment options, and perhaps some insights into your marketing and business development strategies that should also be considered at the technical implementation stage.

  • 6. Find a reliable tech partner

The IT market provides a wide range of opportunities to choose from. You can hire an in-house team, work with freelancers or outsource your task offshore to a development vendor with experience in marketplace creation. The last strategy is the most cost-effective and value-oriented since you can get started with the development process quite quickly, and use the technical expertise and experience of those who have already dealt with marketplace startup creation, which is a large part of your development budget.

  • 7. Create a prototype

Your development vendor will create the first prototype of your solution guided by your requirement list, which you can then test with users to find possible areas for improvement before the technical realization of your solution.

  • 8. Build your minimum viable product (MVP)

Creating an MVP is essential for any startup since this is the first working solution that can be tested by users. Creating an MVP is also a time-saving and cost-effective approach. Its goal is to help you find out which features are necessary for a seamless user experience, and which will overload the final product.

  • 9. Test and improve the idea

After your MVP is tested with potential users, it’s time to improve it based on their feedback.

  • 10. Make your Minimum Lovable Product (MLP) and launch it

The data you get after testing your MVP will allow you to create an MLP. This solution comes with a set of features your users love. After this stage, your marketplace will be able to operate successfully with loyalty from both groups of target users. However, you still have to listen to their desires and complaints, improve and adjust your marketplace accordingly.

How much does it cost to create an online marketplace?

The cost to start your own online marketplace largely depends on the way you intend to do it. For example, using an online marketplace website builder will allow you to save significant amounts of money, however, you will likely get a templated solution with limited opportunities for marketing and scaling. On the other hand, if you want to create an online marketplace website using custom development services, the final price can be quite high and reach $70,000-100,000. Outsourcing the task to build a marketplace website is an opportunity to save nearly half of the development budget while taking advantage of custom development and design.

Conclusion

Archer Software is here to help you with your marketplace solution. In addition to the software development services, we can also help you with business analysis, the creation of a value proposition, and estimate the cost to create an online marketplace platform.

Let’s discuss your marketplace idea today since the competition in this field is growing rapidly with the expansion of e-commerce, and one of the keys to marketplace success is entering the right niche at the right time!

Contact us at info@archer-soft.com.

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