Today I am going to show you how you can build your own online marketplace, not just that, I will also explain how to attract customers, make money, and scale your marketplace. This is a step-by-step guide and no matter how hard and overwhelming it seems to you, developing an online marketplace and succeeding can be relatively easy if with correct instructions and the right team.
The Definition Of A Marketplace
A marketplace is essentially a place where buyers and sellers connect. For example - your local market where you may purchase groceries. Now, if you take it online from a physical place, it is called an online marketplace. In the modern day, you can buy almost anything online from a pen to a private jet. You commonly have two options when it comes to purchasing a product. Either you go around looking for a shop/seller or buy it online. The former used to be the most common way earlier but in the past couple of decades, with the rise of online marketplaces like Amazon and Flipkart, buying online is transforming into the new normal.
What is a digital marketplace?
A digital marketplace or online marketplace is typically a website or mobile app that serves as an independent platform for buyers and sellers to trade goods. The responsibility of an online marketplace is to moderate the platform, collect payment from buyers, and deliver items in a timely manner.
What Are The Benefits of an Online Marketplace?
As we go along in this article, you will find many new awesome updates about the online marketplace. But for now here are the benefits:
The trend of purchasing products online is growing rapidly.
A channel to market and sell your product alongside others.
Requires less marketing budget to grow.
Online marketplaces work day and night so buyers can buy anytime.
You can sell products to anyone in the world with internet access.
It improves your brand and thus, customer loyalty.
It provides buyers the convenience to shop anytime, anywhere.
Transparent reviews to judge any product.
What is the Difference Between an Online Marketplace and an eCommerce Store?
Do both of these seem similar to you? Many people do, but they are not. They do feel like one and the same. But there are fundamental differences that you will need to understand. An ecommerce store represents an online store of a single seller. Whereas an online marketplace is where multiple sellers can sell their own goods. This table will show you more differences between them.
It requires advanced programming knowledge to develop an app like this.
Appeals to a wider audience because of more products.
Sellers are likely to assist in promoting your marketplace.
Takes longer to develop.
It is easier to develop. There are even DIY options for you to build e-commerce stores like Shopify and WooCommerce.
Smaller audience since the product range is small.
You need to market and promote the online store.
Takes less time to develop.
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If you are thinking of this type of online soltuion for your business, you need to understand that online marketplaces have the upper hand when it comes to business potential. Here are a factors that make the online marketplace a better choice: -
Better system in place
When you start an online store, you have to worry about everything like maintaining an inventory, selling, marketing, shipping, payment, returns, etc. But with an online marketplace, you need to maitaining a good functinal portal for the vendors to list their products and ensure customers are able to buy the products with ease.
More sources of revenue
There is a single primary source of income for an e-commerce store - selling goods online. A marketplace has multiple sources like selling your own products, sponsored ads, and commissions from other sellers.
With the online marketplace being a one-stop shop to buy almost anything, it enjoys a bigger scale of customers and revenue.
It is human nature for customres to share details about their good deal on social media networks. With an online marketpace there will me more customers, thus your marketplace is more likely to enjoy this snowball effect where your customers become part of your promotion strategy.
It is a lower financial risk and also easier to maintain. It is also simpler to set up, configure and manage.
What are The Good eCommerce Business Models?
Do you know your online marketplace can take advantage of many popular existing eCommerce business models? You can try one or a combination of many to get your desired results. Let’s have a look at each one of them.
In this model, the online marketplace charges a fixed commission for each transaction that happens between a buyer and a seller. The online marketplace takes care of everything from platform management to delivery. Whereas a seller gets to easily sell products online. eBay and Etsy are common examples of marketplaces using this model.
The subscription model charges sellers for using the platform to sell their products regardless of how many they can sell. The challenge with this model is that the sellers need to trust the platform to turn profitable for them or else they won’t subscribe to it. Thus, you need to attract a large enough audience to make it a win-win for all.
Freemium means a combination of free and paid versions of what you offer. So the ones who are new to your marketplace can try out its free basic features. But if the demand exceeds, they have the option to try out the premium features. You need to take care of what you offer for free and paid plans so both can find the appropriate value.
Listings are popular in the real estate industry. Here you can find many online websites that allow you to put your property on their websites for sale, either for free or with a charge. For the paid listing websites, you can charge to facilitate the sale of their product by putting up an ad on your platform. You can charge further by boosting their ad to get more targeted viewers. This model can be applied to other industries as well.
Featured ad placement
This isn’t a standalone business model but a complementary one to the models above. Featured ad is like skipping the cue to be shown to the audience first. But first, you need a big enough audience so that sellers find it worth it to spend money for featured ads on your website.
Online Marketplaces Ecosystem: Types And Examples
Online marketplaces are growing at such a pace that we see niche e-commerce websites starting out every day. You can find many types of e-commerce websites these days - B2B, B2C, D2C, etc. that serve different sections of the economy.
Earlier, there used to be that the focus was only on a certain section of people which left many underserved. However, online marketplaces have taken giant steps to fulfill these gaps. Now, let’s take a look at various types of marketplaces: -
Horizontal marketplaces are the ones that offer a wide variety of products. As the name suggests, “Horizontal” refers to the width of the number of products offered. Thus, these kinds of marketplaces don’t focus on a particular niche and target a group of niches. Let’s break it down further.
B2B stands for business-to-business. Here the focus is to sell goods wholesale to businesses at a cheaper price than to the end customers. This business model was popularized online by Alibaba.
Here businesses target the end consumers and this is the most popular way of doing business. Your B2B marketplace needs the power to sustain and handle a large amount of audience if you want to succeed at this. The most common example of this is a business owner with an eCommerce website that stocks prodcucts they sell direcly to consumers.
C2C or customer-to-customer business model is when an end consumer sell a products to other consumer. Classified sites like OLX an Craigs List are perfect examples of this.
B2B2C is an interesting model where a company focusing on serving other businesses develops a marketplace for other businesses whose primary focus is end consumers. Amazon is an example of B2B2C as it empowers other businesses to serve the end customers.
Vertical marketplaces are the ones that focus on a particular industry or a niche as opposed to a wide variety of products in horizontal marketplaces. Vertical marketplaces instead provide product options from a variety of sellers. A classic example of this is a theme market that sells woolen clothes by establishing a dedicated market for it.
Uber is a classic example of a transportation service at work. Basically, it just congregates taxi drivers at a place and connects them to the end users to get transportation at their own convenience.
Professional services and skills
Here you can find professionals to get your work done. You can find professinals for everyday services like a haircut, cleaning, etc. 'The Urban company' is a perfect example of this. Another example for such platform is the freelancing platform Upwork, where you can hire skilled professionals working remotely for your project.
A handy solution to book hotel accommodation for a short stay. Airbnb is a good example of this.
The online fashion industry is growing like a charm thanks to marketplaces like Myntra. Here fashion sellers from all over a region come over to sell the latest fashion that is hard to find locally.
A common man is inclined to buy a used car as it is hard to afford a new one. With this insight, many marketplaces have come up to bridge this gap and provide quality-assured used cars. Example - Cars24.
Healthcare marketplaces may provide medical supplies, doctor’s appointments, and even health insurance. These connect doctors and medical stores with patients so they can get their medicine on time or book an appointment from their place.
Travel can include a lot of things like travel tickets, hotel bookings, tour packages, etc. Thus, the travel marketplace is a congregation of transport authorities, hotels, and travel agents to give you a complete trip experience.
As the name suggests, this group provides businesses with seeds, fertilizers, tools, etc. for the production of quality crops. Some may even focus on trading the grains as well. An example of an Agricultural marketplace is Agrimp.
Many companies are looking for talent to hire whereas many people are also looking for employment. Recruitment marketplaces connect them both to facilitate the recruitment process. Indeed is a great example of this.
Furniture and handmade goods
Buying furniture and handmade products online is a growing trend where people buy decorations and utilities for their homes from various sellers. An example of an online store for handmade products is Etsy.
Real estate and prop tech
Real estate marketplaces help buyers find properties they like so they can connect with its owner to discuss further. Zillow is a place where you can buy or sell a property by filtering from thousands of listings.
For innovative ideas
Do you know that there are marketplaces for innovative ideas as well? If people find your idea fascinating, they will put up their money into your cause. Kickstarter is the most common website for innovative ideas.
With the rise of purchasing stuff online, you can find dedicated marketplaces for virtually anything. Games, tea, customized clothes - you name it, and there potentially is someone serving that product.
Other marketplace models
Apart from connecting buyers and sellers, managed marketplaces also provide both parties with additional services on their own to facilitate the sale. For example - some used car selling marketplace provides buyers a guarantee of the car for a certain period.
These kinds of marketplaces are built on a sense of community where apart from selling and purchasing people also interact with each other to spread the word about the theme of the website.
Steps to take before starting your own marketplace
Developing an online marketplace is a huge deal as you will be taking on a risk. There are many other marketplaces out there. Thus, you need to stand out from the rest and give yourself the best possible chance to succeed and get returns on your investment. Here are a few things you need to check before you move on to get your online marketplace developed.
Validate your idea
Validating your ideas means checking their feasibility. Is it actually something that you can build and is feasible? Can your business be profitable? To validate your idea, you need to see if your idea solves any problem that is faced by many people and if they will be willing to pay to get it solved. If yes, this is a green signal.
Ask for feedback
Nothing beats asking your target audience about the online marketplace. However, here having an MVP will really help you to get more accurate feedback. Thus, I recommend you look for an MVP development company that can provide you with an affordable MVP for your online marketplace.
Examine your target audience
Not understanding their target audience is a mistake that many startups make and thus, suffer. So don’t let that happen to you. Examining your target audience requires you to define it first, find their needs or pain points, understand their purchasing behavior, etc. This will help you craft your online marketplace according to their needs.
Analyze with SWOT
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This is a very common method used to understand any given scenario. It will help you to play by your strengths and opportunities with a focus on minimizing or nullifying weaknesses and threats.
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Understanding the market is like understanding the playground. It is very important to know what is currently working, the gaps in the market, how you can make your place in it, etc. Also, see how your competitors are underserving their customers and how you can take advantage of it by providing better services.
Running out of money is one of the main reasons why startups go out of business. So secure finance so you can run your marketplace till it starts making money that you can reinvest in it. Seeking investors is a common way to go. A validated idea with good future potential is more likely to make them invest in you. So here, a quality MVP can really help you. Have a look at some costs you need to be prepared to pay for the growth of your online marketplace.
Hosting and operations costs
A reliable hosting and domain name forms the base of your online marketplace. You just cannot ignore these both. Apart from them, you need to be subscribed to various services for the growth of your business. Some common examples are email marketing services, plugins, etc.
The cost of acquiring a merchant
Your online marketplace consists of two most important components - merchants and customers. And you need to acquire them both to get going. How? At least for merchants, they need to make sure that being in your marketplace will be profitable for them. So in the beginning, you may offer your services for free so they don’t have anything to lose.
The cost of acquiring a customer
Another crucial key is acquiring customers so that the merchants find the worth being in your marketplace. Advertising is one of the most common ways to do this. Determine the cost you will be willing to pay to acquire each customer and plan accordingly to hunt them out. The good news is modern advertising has got very effective when it comes to finding the right people.
What Are The Top Features to Include in a Marketplace Website Development?
At this stage, it is necessary to not stuff up your marketplace with unnecessary features as they will make it slow and costlier to develop. So here are the features I recommend you to have in your online marketplace: -
This helps customers find other products that they may like to purchase based on their preferences.
Discounts and offers
Designing a special section for products on sale, loyalty or rewards points and other types of discounts is an effective way of gaining a good customer base.
Integration with common payment options
Different people have different payment preferences. So it is imperative to integrate all common online payment methods into your website.
Online support and documentation
At times your customers or merchants may need help with some feature or issue. Online support and good documentation will go a long way to serve them better.
Easily create pages, content, and forms
This is a handy feature if you offer your merchants an individual e-commerce store to handle on their own.
Your merchants want their websites to grow and thrive. So, facilitate growth with supporting features.
Site security is very important as online buyers like to buy only from websites that keep their information safe.
Customizable design options
The ability to easily customize their (merchants’) websites can really help them stand out from the others.
Creating user accounts is a must-have feature as it helps you get your customers’ and merchants’ information in order.
Personal messages help the buyers connect with the merchants to ask about any queries they may have before making the purchase.
A wish list is a great way to store a product a buyer wants to buy soon.
An attractive product catalog goes a long way to help potential buyers scan through products.
Customer reviews give other potential buyers a push to trust a product purchase.
These were some features that you may need to have on your online marketplace depending on what you offer to both - merchants and buyers. Now let us shift the focus to compare the difference between a marketplace and an online store so you can understand each one better.
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Need to build policies to protect the interests of everyone.
Customer trust is hard to build
You have to do everything by yourself
Lesser revenue options
You need to stock inventory
Developing an Online Marketplace Platform
Now there are many ways to build an online marketplace platform. And each one has its pros and cons and serves various needs. So let’s have a look at how each one of them will help you based on ease of development, quality of development, cost incurred to you, scalability, and customizations.
Write your own code
This is the simplest yet hardest of all. Writing your own code can be a feasible option if you know how to code well and have the time to do so. This is how many entrepreneurs have built their startups as they cannot afford to hire other developers from the start. The problem with this approach is that it is very time-consuming and is also prone to have a lot of bugs and other functioning issues. However, on the other side, it will save you money upfront while giving you a fully customized online marketplace as per your needs.
Build a marketplace using an open-source framework
This is very much similar to the first option. But the difference is that instead of writing your code from scratch, you use an open-source framework like Laravel Bagisto to build your own online marketplace. Here you can find pre-built code written so you can use it in your project however you like. This way you can save a lot of your development time by reusing the code. But sometimes it may be complicated to understand the documentation of other frameworks.
Use a website builder
There are many website builders out there who can assist you in building your own marketplace. The most popular ones are Shopify, Wix, WordPress using WooCommerce, etc. Here you can take advantage of the easy customizations these platforms allow you to make and complete your project faster. But remember that everything comes at a price. These options are usually not reliable to provide you with an optimized code. Plus, the customization options are also limited.
Using a no-code marketplace builder
There are many SaaS software and marketplace builders you can find out there which do not require you to write code. This is a great option to try out if you want to create your marketplace fast. Usually, they provide you with a drag-and-drop builder so you can move the required parts to design your website just the way you like. But if you are looking to build a highly scalable platform, this isn’t the way to go. The customization options are very limited. Also, you will have to be too dependent on the service provider.
Build a marketplace website by using a set of no-code tools
If not a complete package of a no-code marketplace builder, you can use various tools and combine their power to develop your own online marketplace. However, don’t be mistaken that anyone can use this method. You still need a bit of technical prowess to understand the tools you are likely to use. Jeetboost, Airfold, Parabola, etc. are some of the tools which will help you with this. But just like the other similar options, you will face limitations in customization and scalability.
Create on top of an API-based marketplace SaaS tool
This method requires you to have some technical skills. But if you do have them, it can be a great option for you. You can find many API-based tools to build your online marketplace where you can build a quality website for your business. This path offers you more flexibility at the expense of more development time. If you are not confident to do this yourself, you can always hire remote developers from a web development agency like us to get it done at an affordable price.
Technology stacks for building a marketplace
You need to choose the technology wisely. Because if you don’t, you may regret the decision as your tech stack may not be reliable and scalable. Now, if you go for no-code options to build your marketplace like Wix, WordPress, etc. you may get your project developed faster and cheaply but you may not get the required customizations you would have liked.
Thus, with a long-term focus, I recommend you develop your online marketplace with expert developers in any of the following technologies: -
How much does it cost to build an online marketplace website?
Well, it depends upon the path you take to develop your online marketplace. You have many options like coding it yourself, using no-code builders and hiring developers to do it for you.
Coding it yourself and no-code builders are cheap options but can be either time-consuming or limiting. But when it comes to creating this big a project, hiring expert developers is the best way to go as per the scalability, customizations, and quality this option provides you. So have a look at the price range for which you can hire remote developers.
6 things you should consider while developing your online marketplace
Now that you have an idea about developing an online marketplace and the path you need to take to develop it, consider for a while these six things to do first before you move on to the development part. This will give you a lot of clarity and help you save a lot of time and money later on.
Research and SWOT analysis
Market research is very important to conduct as it gives you an idea about what’s working and what’s not, how you can differentiate from the rest, your business model, etc. On the other hand, SWOT analysis is an analysis of self as compared to the market. It empowers you to play by your strengths and work towards minimizing your weaknesses.
Validate your idea
Many entrepreneurs make the mistake of going with little information about their idea or concept and later fail. Validating your idea will save you countless hours and a boatload of money. To validate your idea, you can talk to your target audience to see if they face the issue you are trying to solve. Having competitors is also a good sign as it shows that there is a market out there.
You need to spend some time planning ahead. However, if you have done market research and SWOT analysis, you have already put many puzzles in their place. Now decide on the development path you should take as per your strengths and weaknesses. Ideally, you should go for remote developers to help you with your online marketplace development.
Form your team of reliable developers
Your team of developers is the foundation of your project. The better quality developers you hire, the faster and better project you will get. So hire them wisely. Here an experienced marketplace development company can really come to your aid as they can start working on your project immediately with the quality developers they have already hired for you.
In the beginning, focus on developing an MVP (Minimum Viable Product). Why? Because you might be having a grand idea for your marketplace. But at this stage, you must focus only on the utmost required features. Developing an MVP helps you start your business faster and reduces your risk. Check out our MVP development services for more information.
Form your marketing strategy
Your marketing strategy determines how to stand out from the rest of your competitors, what advantage merchants will have in joining you over the other marketplaces, and how you will promote the services and attract new customers. Content marketing and paid ads are common ways startups use to market themselves.
What to do after developing an online marketplace?
Once your MVP for your online marketplace is ready, you will be tempted to launch immediately. However, first, you need to gather the initial merchants who will be willing to sell their products on your platform. Try to attract as many as and as wide as possible. This will help you put a wide variety of products to sell on your marketplace. Here is what you can do: -
Create a pre-launch landing page with a great copy to attract merchants.
Collect the emails of interested sellers so you can stay in contact
Write on relevant communities and groups to spread the word about your startup.
Use content marketing and social media to promote your business.
With time, you will be able to attract the early birds who will be willing to place a bet on you. However, you need to make sure to remove as much risk from them as possible to make the offer more lucrative to them and attract more sellers.
Using a proper promotional and marketing strategy, you also need to bring in potential buyers to kickstart your online marketplace.
How to grow, scale, and maintain your marketplace?
Of course, you invested in your online marketplace so it can grow and scale to serve the widest possible audience. So once after the initial kickstart, you just can’t wait and watch and imagine everything will happen itself. Try out various ways to grow and scale your marketplace.
Grow your marketplace
Initially, things are going to be tough for you to get going with a zero-brand name. However, that’s the fun part. You need to think about both the parties - sellers and buyers. Try to give them enough incentives to move to your services and stay loyal to you. How? You can offer boast-worthy discounts to the buyers while providing enough profit opportunities to the sellers. Have a look at these examples.
Find cabs at your convenience with transparent fares.
Easily find people looking to book a cab.
Find affordable courses you can access for the lifetime
Create courses once and sell them for a lifetime.
Get anything done by professionals
Get access to a worldwide pool of people looking for your services.
So what is the selling point of your online marketplace which attracts both - buyers and sellers - to your platform? Define these selling points for each group and it will help you in each of your promotional and marketing strategies.
Once the selling point is defined, you need to find promotional channels which are effective to find you, interested buyers and sellers.
Scaling up your marketplace
What does scaling up your marketplace mean? It isn’t about being “Me too” and just being like everyone else of your competitor out there. You need to better understand your market and your target audience (both buyers and sellers) better than anyone else and exploit it. This will give you an edge over others.
For example - Indian startups like Swiggy and Zomato started out as food delivery platforms. But as the situation demanded, they also started providing fast-delivering groceries.
Our client Elite is another example of an online marketplace that is doing very well. They provide merchants with their own customized websites to sell goods online. The quality service they offer has attracted a lot of vendors.
What to do to scale up your marketplace?
After your MVP is developed and you have got your initial patrons of buyers and sellers, it is time to scale up. So first of all, you need to smoothen your system. Your MVP won’t be the best version of your service. Find the loopholes and errors on your website and solve each of them for a smooth and reliable experience.
You can also create a loyalty program for your buyers and sellers and reward them with a higher status on your platform. People love it when they feel special. Here are some suggestions: -
Give your loyal sellers premium access to promotional tools.
Offer special discounts to your repeat buyers.
Create videos around them and show how your platform has changed their lives.
Marketing and promotion of the marketplace
Marketing and promotion are key components in the success of your online marketplace. So you need to integrate them at the heart of all your efforts. Here are some of the things you need to do: -
SEO and SEM
Here you optimize the pages of your website, especially the product pages, as per the SEO practices so they rank higher when potential buyers search for your target keyword. If your budget allows, you can use paid ads to promote your products.
Capture the email of your buyers and use it to keep them in the loop of whatever you do. You can suggest personalized recommendations based on their interests or wish lists.
Educating your sellers will help you a lot in creating a permanent impression in their minds. So create educational videos about using your platform and growing their business.
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What are the most common challenges with digital marketplaces?
You are bound to face challenges while taking your marketplace to success. Have a look at the most common challenges so you can prepare for them beforehand.
Finding and keeping alive your unique essence is a challenge. Branding is the impression that your buyers and sellers have of you regarding the quality of service you provide or the price at which you provide. However, there is more to branding.
Keeping it profitable
In the beginning, you are likely to lose money as you have to provide your services at a low cost to acquire buyers and sellers. From there on, you need to up your game to break out of your losses and make a profit.
Security is a prime concern for all website owners out there as cyber-attacks are on the rise. For this, you need to have high-quality code which is free from bugs and is loaded with common security features.
Keeping it up-to-date
Developing your MVP is just the beginning. You need to constantly evolve to hold your ground in this wild sea. So find ways to better your services all the time and implement as many of them as possible.
I have just started to scratch the surface of the challenges you will find in your journey and discussing them would be out of the scope of this article. But these were the most fundamental ones to give you an idea of your journey ahead.
Our expertise in online marketplace development
It is time to take up what you have learned and start implementing it. As per my recommendation, it is the best option for you to find a marketplace development company and hire remote developers to build your platform. This way you can save on your development cost while getting a high-quality project done.
But choose your development partner wisely. A reliable development company like ours would go a long way to make a difference in your project. Acquaint Softtech has experience of 9+ years in developing quality projects for clients all over the world. Have a look at our expertise in online marketplace development.
An advanced white-label customization engine
A complex payment framework that supports over 20 payment systems
Cart and wish list
Roles and permissions for users
Virtual money support
Reporting and sales analytics
Single sign-on integration with a client website
Fraud prevention and detection functionality
Integration of subscription and email services
A wide range of loyalty functionality, promotional campaigns, affiliate programs, etc.
Automated discount, coupons, and sales programs
A custom framework for cross-client product sales
It depends upon the scale of your project. Building an online store is very easy. WordPress and Shopify are great DIY options for you. However, you should consult with marketplace development experts if you want a full-scale e-commerce website.
Hiring remote developers is the best way to go as it provides you with more scalability along with better customization options. This will cost you more than any DIY tools but if done right, you will find it worth it.
Yes. To build a quality and customized marketplace, it is better to go with expert developers.
There are many ways for marketplaces to make money: -
Selling own products
Charging a commission from merchants
Sponsored ads to boost a sale on your platform
Extra services for merchants
A multi-vendor marketplace is a huge project. Thus, go with a marketplace development company to help you in developing a customized marketplace.
Focus on how you can be different from the rest. How can you be better than your competitors? Find a small gap to fulfill it and then expand on it. Do consult marketing experts.
Time and cost depend upon the scope of your project and the technologies you choose to build it. If you go for frameworks like Laravel, you can develop it relatively faster and at a lesser cost. On the other hand, developing from scratch will cost you more time and money.
I have tried to cover almost every aspect of marketplace development. But our web development experts are always available to you for a free consultation. Whether you need to hire a team of developers or have any doubts, just contact us and our team will reach out to you quickly. I wish you all the best in your journey of marketplace development.
Founder and CEO, Acquaint Softtech
I love to make a difference. Thus, I started Acquaint Softtech with the vision of making developers easily accessible and affordable to all. Me and my beloved team have been fulfilling this vision for over 15 years now and will continue to get even bigger and better.