Over the years, marketplace apps have boomed the software development industry. Marketplace business models like Amazon, Airbnb, Rakuten, Urban Clap, Uber have been significantly popular. Pandemic has played a vital role in changing people’s approach to the e-commerce marketplace. In recent years, buyer’s are more inclined towards opting for services through marketplace apps.
According to the survey, Etsy’s annual income in 2017 was 81.8 million US dollars which incremented to 349.25 million US dollars in 2020. Brands get immense recognition through the e-commerce marketplace.
According to US marketing professionals, 50% share respondents stated that they grew their business by taking advantage of compelling user reviews derived from the marketplace apps while 75% of respondents stated benefits obtained when selling through a marketplace and evitable increase in the brand recognition.
Before we explore essential steps for starting a marketplace business, let’s have a quick understanding of what a marketplace is,
An online marketplace is an application that performs as a bridge between numerous vendors and buyers. The owner of the marketplace does not manage any inventory, their prime business is to bring different vendors and present them to the customers. eBay, Rakuten, IndiaMart are significant examples of an online marketplace.
8 Things you must know when launching a marketplace.
1. Market Research
There are many giant brands already established as the biggest online marketplaces. Brands like Alibaba, Airbnb, Amazon, Rakuten, Uber are well-grounded and doing wonders. Establishing your marketplace from scratch will require strong market research. You should have a thorough knowledge of the market’s latest trends and competitors.
2. Know your target audiences
When you develop a marketplace from scratch it is very vital to understand who your target audiences will be. Without thorough research and understanding of your target audience, your product would likely fail.
To build a viable and successful product you need to have a clear understanding of the current market trends, users, user’s requirements, and solutions they are seeking for.
Start your journey by asking yourself these basic questions:
- Who will be your audience?
- What are their major challenges?
- Why would they prefer your service?
You should also keep in mind that you are building a two-sided marketplace. You need to think and understand both the perspectives – the buyer side and the seller side.
3. Outline the essential marketplace features
If you invest your time, budget, and efforts in developing features that users are never going to use, your product will be a disaster. Before building an online marketplace platform you should outline the essential features for the marketplace.
Entrepreneurs should initially start with essential features and launch a MVP version. MVP helps you to recognize feature requirements from the early users and helps you to grow your product gradually and also budget-friendly.
You should initially focus on seller-side and buyer-side features. Your main aim should be to connect buyers and sellers. You will need a well-designed user-friendly model for a profitable marketplace.
4. Choose the right business model
One of the primary reasons for marketplace failure is not making enough revenue. It is very evitable to choose the right marketplace business model which can be profitable for the long run. Here are the few popular models you can consider:
Fees for seller’s sign up
Fees for sign-ups are pretty straightforward. Sellers will have a clear idea about payment terms in the initial stage so that there will be no chaos further.
Subscription-based model
For this model, your main aim should be to provide more value out of your marketplace than the cost to stay subscribed. This model can be the most profitable one amongst them all as it generates recurring revenues on a regular interval which can keep your marketplace growing.
Listing Fees
You can charge your sellers based on their listing products. To list their product, the seller has to pay a nominal fee. Etsy is a great example of this model. As Etsy charges a $0.20 insertion fee.
Selling Fees
The most convenient model of all is the selling fee model. If your platform is getting enough selling and transaction you can collect selling fees from the sellers. A popular example of this model is Amazon. It charges per-time category-based selling fees.
5. Payment solution for marketplace
One of the very crucial aspects of the marketplace is the payment solution. Processing a safe payment system is very essential for your marketplace as it is a part of the global payment ecosystem.
There are different payment types you’ll be processing as a marketplace:
- Payment from customers
- Payment from Sellers
- Payment to sellers
- Third-party payments
Major ways to manage your marketplace payments are direct payment, Aggregated payments, and split or parallel payment.
6. Plan your business operations correctly
Managing business operations for marketplace applications is one different game. You need to be a master of all jacks. To smoothly manage business operations you should take care of the following aspects:
- Managing Sellers
- Managing Products
- Payment Processing
- Logistics & Shipping
- Order Management
- Marketing & Content Management
7. Launch your marketplace
No matter how detailed your specifications have been, there will be some issues when you launch your marketplace. It is highly advisable to launch the MVP version of your marketplace. Launch a limited beta version first. You can invite a few early members to test your marketplace. Now, gather feedback from your early members and improve accordingly.
8. How to grow your marketplace business
Now when your marketplace has established it’s time to up your game and market your product and have a wide reach to audiences. Generating brand awareness and a growing customer base should be your focus. Just regular growth won’t help you. To stand with competitors you have to experiment with strategic partnership and other competitive advantages.
No matter what- just keep on experimenting, growing, and getting better!
Takeaway
There are many aspects which are very important to develop a marketplace. To develop a successful marketplace model, powerful marketing strategies also play an important role. Hopefully this guide has provided you the basic idea of things you should keep in mind before building an online marketplace platform.
