How To Start An Online Marketplace Platform

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More and more entrepreneurs come to an idea to start a marketplace website and the number of them increases every day. In today’s reality online marketplaces dominate over traditional offline stores. Definitely, online interaction is convenient and time-efficient for both consumers and suppliers. But what entrepreneurs should know before starting their business? Let’s discuss the main steps from idea to launch and to success.

What is an online marketplace?

An online marketplace is a website or mobile app that brings together sellers and customers.  The platform allows them to find each other and make transactions in a way that generates revenue. Leading online platforms are worldwide famous websites such as Airbnb, Etsy, Uber, and eBay. 

There are several different types of online marketplaces, and although they all run similarly. Nowadays, these digital platforms can be categorized according to customer type, core focus, niche, and others. Let’s clarify some of them.

Types of marketplaces according to offers

There are two types of online platforms by their offers: services marketplaces and product marketplaces. Their main idea is connecting customers with sellers directly. 

In a service marketplace, the seller is providing the service like renting a home on Airbnb or driving a car on Uber. 

When we’re talking about a product marketplace, the seller offers a product as a distributor or producer to a customer. For example, you can produce unique handmade things and sell them on Etsy.

Types of marketplaces according to target audience

Marketplaces are divided into three categories by their target audience: 

Which type is the most suitable for you? It depends on what you’re interested in. Consider your goals and focus on one particular niche. For example, today’s marketplace giant Amazon was created just as an online platform for booksellers. Airbnb started with renting rooms in San Francisco. And you know where both companies are now. 

Generally centering around one niche for your online marketplace is a key to success. When you become a go-to place for specific queries, it will be much easier to expand your services.

Why are online marketplaces great businesses?

Online marketplaces are a young industry with great growth potential. The size of the industry is expected to grow from around $15 billion in 2015 to $335 billion by 2025. The sharing economy is a new and popular way of doing business and getting what we need — it’s better to get products from one another rather than shops. Launching an online marketplace website is a win-win situation for everyone. You create a convenient platform where users can sell goods or services without website setup and managing cost. Customers can enjoy a cheaper price and better quality. And as a result, the marketplace owner can earn a good amount of commission from the vendors and advertising.

An important reason why it’s worth creating an online marketplace is that you don’t have to make large investments. Platform owners usually don’t offer any products or services by themselves, which can be a huge relief off of the startup budget. The main task is to provide a platform where marketplace participants interact.

One more benefit is that often the community is self-organized and creates its ecosystem around your marketplace. For example, it is worth mentioning hundreds of unofficial Amazon seller forums and Aliexpress buyer forums on different social media. People share their experience and impressions about the sellers and products helping others to earn money or find nice deals. This keeps the popularity of the marketplace growing.

How to build an online marketplace app?

Building an online marketplace website takes time (a lot of time). If you’re interested in creating a successful online marketplace, be prepared to have patience with it as it slowly builds and grows into the online platform you want it to be. We created a guide on how to build your successful marketplace:

Step 1. Choose the focus of your future marketplace

The first and the most important step is to consider for whom you want to create a digital platform and define the thematic category. Depending on products that will be traded on e-commerce platforms, creators turn to think about the platform parties like B2B, B2C, C2C. It’s important for making decisions on marketing campaigns, planning, monetization strategies.

As we said before, consider your niche for the beginning. Today’s reality allows us to launch almost everything online – food delivery, language courses, rent service, selling handmade treats, platforms for freelancers, etc.


Step 2. Outline the essential marketplace features.

Creating features your users don’t need is the easiest way to waste your time, effort, and budget. Of course, depending on your marketplace type, size, and niche, all these things may vary. While developing the marketplace you have to consider authorization and security, registration for vendors, managing profile, the ordering process for clients, payment system, and reviews. Make it easy for your users to create great content on your platform and encourage them with different suggestions.

Step 3. Consider a monetization strategy.

Of course, an entrepreneur should consider how to monetize his business. An online marketplace platform allows you to get great profit by using different ways. Let’s clarify about the most popular of earning ways:

  • Commission –  it’s the most popular way to monetize your platform. Charge your sellers a selling fee each time they receive and process a new order on your platform. The more orders your marketplace receives – the more revenue you get. A lot of successful marketplace companies, like Airbnb, Etsy, eBay, and Uber make extensive use of this business model.
  • Membership or subscription fee – also is a good choice for your business. If users get a lot of value from your marketplace, charging them a monthly or a yearly fee can be convenient for all. For example, Love Home Swap – a popular home exchange site uses this model.
  • Listing fees – a way of generating revenue by charging your vendors for listing on your site. Many classifieds sites like Etsy follow this system (sometimes some categories are free and others are paid).
  • Premium subscribers – this function allows making vendors’ offerings more visible, most often by ranking them higher in search results. This is the main monetization strategy behind most classifieds platforms, like OLX. 
  • Featured listings and ads – big platforms, like Facebook, LinkedIn, Snap, and Twitter monetize only with ads. Promotion at your users can also be a successful way to monetize your business. 

Step 4. Platform development

Initially, you need to choose the marketplace software. It is important to build accurate business logic that you want your customers to follow. Are you going to sell products, services, or bookings? Software designed for products won’t be a great fit for a service marketplace and vice versa. You need to know the features of your platform. Make sure the solution fits your business requirements – in terms of the basics, payment processing, logistics, and other crucial features.

Step 5. Building a marketplace platform

After choosing the right marketplace software for your project you need to assemble a great team of professionals. Putting together the right mix of developers is a really big deal. The best way to start your marketplace business is to build the first version with the minimum required features. Creating a platform with only basic functionality is a great start and you will improve it as the business grows and the requirements get more clear. Try to launch MVP as fast as possible, which helps you focus on what matters most for business.


Step 6. Launch your business.

Keep in mind – your launch isn’t the end, it’s just the beginning.

Build trust within each user that enters your website as soon as you launch. Then it wouldn’t be hard to find vendors who are looking for ways to promote their products and services through different channels.

Final words

To sum up, to start an online marketplace website is a great way to expand your operations rapidly without requiring lots of extra investments and workforce. Nowadays, marketplace software has great potential and it only increases. Have a good online marketplace idea? Get started!

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