According to Statista, in 2020 e-commerce sales worldwide amounted to $2.5 trillion. Moreover, this number will slightly grow every year, which means that a large part of consumers and business owners is constantly online. That’s why marketplaces have become the best platforms to offer more opportunities for both of them. New marketplaces are working alongside enormous platforms like Amazon, Aliexpress, and eBay and it gives them a chance to make good money and get a unique experience. In this guide, we will focus on the benefits of the marketplace model for large businesses.
Taking into account that so many spheres are left untouched or not fully explored, a marketplace can be a unique solution for business owners.
Marketplace owners can choose any suitable monetization strategy or a few of them depending on their niche and business goals. The most popular monetization models are commissions, listing fees, subscriptions, lead generation fees, advertising, etc. The commission model is the most widespread (e.g. eBay, Booking.com, Uber).
With a marketplace, you don’t need any investments in a physical store. And on the contrary to the online brands selling only their products, the marketplace has a larger audience that includes both sellers and buyers. At the initial stages, you can offer lower fees for suppliers and provide a better customer experience than your competitors. It will make your brand more visible and attract an audience quicker.
Usually, it’s quite easy to scale a marketplace but as the traffic grows, you should add more high-quality vendors to increase the customer base. However, the biggest challenge for a marketplace owner is to make a balance between supply and demand.
The majority of the risk is not your concern (e.g. delivery, warehousing, logistics, or return policy). The marketplace owner is focused on developing the platform, trying out new features, and connecting sellers and buyers.
Wider product range
Unlike traditional business models, marketplaces provide a larger number of goods, and as a result, demand is higher. So, the possibility that the client will go to another online store is lower. The purpose of the marketplace is to have everything on one platform.
What do you need to have to create a marketplace?
1. Research your target market
If you are creating a marketplace from scratch, you need to conduct market research in order to clearly understand the needs of your target audience. Without it, you won’t be able to propose to them a unique solution. Clearly define niches in your target market. In fact, the biggest marketplaces like Amazon and Etsy have grown from small niches. Pay attention to market trends and customer behavior.
2. Marketplace operations
Managing the marketplace requires doing a complex of tasks on a regular basis such as managing sellers, choosing monetization strategy and collecting fees, managing products, and organizing product catalog, payment processing.
3. Purchasing software
A marketplace is primarily a technological infrastructure that consists of a combination of different IT systems. Marketplaces are the most complex eCommerce systems and require a lot of technical work. Choose the specification of your marketplace and define an MVP. It is important to have a backup plan if something goes wrong. Start testing your platform with real users as soon as possible.
Developing a marketplace from scratch can require quite a lot of time and investments but a custom marketplace has the advantage of being unique. Anytime, you are not sure how to move forward, ask yourself a few simple questions: what is your target audience, what are the goals and problems of your customers? where do they buy, why do they buy and who do they buy from? what are their motivations and what influences them? It is necessary to understand the goals both of buyers and sellers and offer them the right solution. Also, these questions will help to understand the strengths and weaknesses of your competitors.
To summarize, here are the main benefits of the marketplace for your business:
- an additional channel to market and sell your products
- reduced marketing costs
- overseas sales
- popular and convenient for customers
- new trading partnerships
- greater transparency
These have been the basics of how to start a marketplace. Evercode Lab can offer you a customized solution for creating a marketplace. Our company operates since 2011. During this time, we launched several successful e-commerce products, including a fast-food delivery service – FoodFox (now Yandex.Food), Atomic wallet – a multi-currency crypto wallet, CRM system for Cadfem CIS, etc. 70% of our projects are focused on the international market. To learn more about how to choose the right marketplace software, please leave your contacts.