Ever since the 2020 Global Coronavirus pandemic, we are living in a challenging time. The continuously growing digital transformation, the lockdown restrictions, the transition to cashless payments, and many other key factors made more and more people shift to shopping online instead of going to brick-and-mortar stores.
Thus, moving your retail business online and building an online marketplace has become the need of the hour for all eCommerce merchants. In 2020, Forrester stated that one-third of all business in the USA was through eCommerce, out of which 63% was through marketplace websites. In 2021, online marketplaces, like Amazon and eBay, sold $3.23 trillion worth of goods, and this sale figure is projected to reach $27.15 trillion by 2027.
Even with massive competition, the new marketplace trend opens tremendous opportunities to fill a niche, build a great customer base, and increase sales.
What is an online marketplace?
A marketplace act as an independent online platform that connect buyers and sellers directly. It is an eCommerce platform where sellers or third parties offer their products for sale and buyers around the world can purchase products from multiple vendors. This makes marketplaces different from regular online stores where the buyer directly buys products from the store owner. The marketplace handles payments and generates revenue via listing fees.
Benefits of online marketplace
The main advantages of marketplaces are:
- You will get an alternative source of revenue with huge scaling potential and an added channel to advertise and sell your goods/ services.
- Marketplaces need lower marketing costs as compared to other sales channels.
- Wider scope opportunities for international trade.
- Marketplaces are very convenient and are loved by customers as it offers them multiple product choices from various brands with different pricing.
- It improves brand image and builds client loyalty.
- It’s beneficial for buyers who can pick the best offer, and sellers who get great exposure to their goods.
- The marketplace owners don’t need to store their own stock. Thus, they don’t have to do inventory management, rent warehouses, and hire courier services.
- There are plenty of revenue streams where a marketplace owner can effectively increase the platform’s revenue like a fixed commission on every sold item, subscription fees, various advertising services, loyal customer database, and many more.
How to build an online marketplace
Phase 1. Discovery
The first and essential step is to have a basic idea. Validate it and ensure its worth the efforts during the discovery phase.
Let’s analyse the steps of the discovery phase.
Step 1. Graph your business model
The marketplace business models graph will summarise all the information about your platform, its users, expenses, and the sources of revenue from your startup. For an ideal marketplace model, conduct market research and brainstorm with your co-founders or external consultants to answer the questions like:
What is your value proposition?
What are your resources?
Who are your target customers?
What are the channels, devices, social media channels, news websites, and online streaming services where you can reach your users?
What is the possible cost structure of your company?
and what are the revenue streams for your company?
Step 2. Research your competitors
It’s very important to understand your competitors as this will help you to create an online marketplace that can beat them. Thus, identify various marketplaces that deliver similar goods/services, analyse their websites, check out the features and user reviews, find ways to overcome their weaknesses, and conduct a SWOT analysis of your product to identify its strengths, weaknesses, and threats.
Step 3. Prove the project’s technical feasibility and plan its implementation
During the discovery phase, your engineering team should create a prototype that gathers information about the prices, features, and quality of similar products in other popular online stores in your region or country.
Technology stack
Make the right choice of the technology stack as it defines the whole development process for years ahead. We recommend you consider one of the JavaScript-based stacks: MEAN, MERN, or MEVN.
Integrations
Some of the app’s features require integrations with external services like the payment gateways on your platform. During the discovery phase, compare various payment gateways and choose the one that best caters to your needs.
Define all necessary integrations that are important for making a reliable marketplace website development cost estimate.
Architecture development
To build an online SaaS marketplace properly, you have to think through its structure in advance, build thorough desired functionality for different user profiles viz. suppliers, buyers, and admins, and note the future scaling.
Step 4. Estimate the development costs and development time
Depending on the type of product you plan to build, the market you target, the scaling plans, and others, at the very beginning, get a time and money required estimate.
Define all the features, the software architecture, the technology stack, the specialist team needed to build the app, etc. Instead of coding from scratch, you can even opt for a ready eCommerce app from Adobe Commerce and other others.
Phase 2. Product development
Step 1. Find and hire a development team
Based on your research start the product development by hiring the right people. You can either develop the website with internal existing software engineers, hire freelancers, or hire an outsourcing product development team.
Create a Marketplace MVP development team structure that includes a Product Owner, Business analyst, Project manager, UI/UX designer, Software development team/ engineers, and Quality assurance engineers.
Step 2. Build your MVP
The primary idea to build an MVP is to start an online marketplace with just minimal functionality to attract early adopters. An MVP helps to validate your idea, find potential users, receive feedback on the product you build, and constantly improvise on it.
In addition, an MVP of an online marketplace will also help you attract your first users, and your first payments, and also make you attractive to initial investors.
Step 3. Research and SWOT analysis
Research thoroughly and figure out what actual problem your marketplace will solve. Focus on making a simple, yet essential platform that will provide a clear value for your client. After you have the right vision, analyse all the competition in your niche, and evaluate your chances.
Phase 3. Planning stage
At the planning phase, it’s vital to gather the requirements, complete market research, create specification documentation, design the wireframes, estimate the exact delivery time, and finalise the marketplace startup costs.
Phase 4. Forming a team
Based on your budget and the scale of the project, you will know your requirement for a wide variety of specialists such as Back-end and Front-end Engineers, Quality Assurance/Automation Engineers, UI/UX Designers, and others. And for the online marketplace development process management, you may need Project Managers, Product Managers, and Business Analysis Specialists.
Phase 5. MVP/Development stage
This is the most important phase of a project and is the time in your project life cycle when you need an expert team to rely on. The team must have enough experience and knowledge to build the right continuous delivery process, develop the MVP, and provide complete support until the project is completed.
Phase 6. Forming the right marketing strategy
After the release of your marketplace, it’s very important to have a marketing strategy that will prove to be a winning strategy. Thus, it will be nice to get in touch with sellers in your niche on your competitors’ marketplaces and business directories. And for customer acquisition strategies, there are a lot of ways like — setting up a landing page to collect emails before the launch of your marketplace; advertising your startup on various online communities, collaborating with influencers of your target audiences, advertising on other media platforms, or starting your blog.
The key features of a successful marketplace app
Have a look at a standard list of features that your marketplace app should have.
- Simple Login/Sign-up Process
Today’s users want fast and easy signing-up options from Facebook, Google, or any other social media accounts. This feature is a must for a great user experience.
- Appropriate Buyers Page
For maximum user experience, it is important to have a simple yet fully functional buyers page with complete details on price, delivery, payment methods, and special offers and discounts if any.
- Customisable Vendor Page
The vendors on your marketplace must have access to complete customisation to update the list of products, and edit fonts, colors, payment options, and company details.
- Multiple Payment Gateway
Implement easy, quick, safe, and secure payment gateway to your marketplace and offer other payment options too.
While operating payments and transactions, SSL certificates and PCI compliance are the mandatory features that help ensure complete safety of your customers.
- Translucent Ratings and Reviews
These are the main drivers of sales on modern marketplaces that give your users convenient rating systems. Both vendors and customers will enjoy using your app with transparent ratings and reviews.
- Engage with social media
For growing your marketplace, the option of sharing on social media is another key driver to sales and is an expected feature on any online portal in 2023.
- Quick and simple Support
Having a quick chat support system or AI-powered chatbots with 24/7 support is considered a standard feature today as it is very important for customer experience and engagement.
The Most Successful Online Marketplace Platforms
As per Statista, the total number of online buyers will exceed the 2.1 billion mark in 2023. Let’s know the top players of 2022.
Amazon
Amazon was the biggest and the most successful marketplace worldwide in 2022. This multi-billion-dollar corporation with 11 marketplaces across the globe, enjoys a customer database from 180 countries.
eBay
eBay is the second biggest marketplace in the world that operates in B2C, B2B, and C2C sectors.
eBay currently has more than 180 billion active users and more than 350 million sale items. It had 10.8 billion US dollars in revenue in 2019.
Etsy
Etsy focuses only on handmade and vintage (20 years plus) goods. Its annual revenue exceeded $600 million in 2021. Etsy has 95% of its users in over 80 countries with 50 million views monthly and sells more than 50 million items monthly.
Summing things up
The dynamic statistics have made it clear; Online marketplaces are probably the future of the rising retail industry. According to Statista, 75% of marketers believe that marketplaces provide the best opportunity to reach customers in the right places with the right product choice. Online marketplaces can be horizontal like Amazon or Alibaba, that offer a wide range of goods from multiple vendors, and vertical like Airbnb or Etsy that focus on specific products or services.
With the right web development company like Adobe Commerce and Big commerce, it is possible to create a great customised online marketplace platform that will give your business prospering wings.
References:
Vide Infra. (2022, August 29). Rock-solid marketplace development. what you need to know. Rock-Solid Marketplace Development. What You Need to Know | Vide Infra. Retrieved January 6, 2023, from https://videinfra.com/blog/how-to-build-an-online-marketplace-a-complete-guide
Merenych, S. (2018, February 21). How to build an online marketplace in 2022: Core Steps & Cost Estimate – clockwise software. How to Build an Online Marketplace in 2022: Core Steps & Cost Estimate – Clockwise Software. Retrieved January 6, 2023, from https://clockwise.software/blog/how-to-build-an-online-marketplace/
Boyko, O. (2022, December 15). How to build a marketplace in 2022 – SPD group blog. Full-cycle Software Development Solutions. Retrieved January 6, 2023, from https://spd.group/ecommerce-devleopment/how-to-build-a-marketplace/
