Are you wondering how to create an online marketplace? This post highlights the most important steps you must take in order to build a successful online marketplace.
What is an Online Marketplace?
In an online marketplace, buyers and sellers do transactions through a centralized platform. These kind of markets have two distinct user groups that rely on one another for goods and services. The process of developing such marketplaces is generally tedious and difficult to maintain.
The first and the foremost challenge of creating this kind of marketplace is to understand and meet the needs of two completely different communities. Further bring enough members of both of them to give your marketplace enough liquidity. In order to build a successful two-sided marketplace, you have to identify the needs of both these groups, streamline the choices to ensure uniqueness, and carve a niche for yourself.
Let’s look at each of the following 7 steps to build a successful online marketplace.
Step 1: Ideation
A great idea is always the first step in getting started with an online marketplace business. Your idea should be able to solve some real problem of the consumers to succeed.
Do you think you have a great idea for a marketplace but feel there’s already a lot of competition in the market. One solution to this is to narrow your focus, both in terms of geography and your product or service offerings. You can always broaden your focus later on, once you succeed in your niche.
Step 2: Market Research
After coming up with a great idea, the next step is to do market research. You need to find out about the competitors who are doing the same thing as yours.
Even if your idea is already taken, you can win over your competitors by your way of execution. It is important to take a look at how the market has implemented the idea you are working on. Therefore research on the similar initiatives and potential customers and their strategies and pivots.
Step 3: Revenue Model
To build a sustainable and successful marketplace, you need to find a revenue model that can finance your operations. Below are some of the monetization options to help you choose the right model for your idea.
A) Commission based
The most popular business model for modern marketplaces is to charge a commission from each transaction. When a customer pays a host, the marketplace facilitates the payment and charges a specific percentage as the commission.
This model is quite popular and lucrative as it gives share to the marketplace in all the transactions through their platform. The best known marketplace platforms include TaskRabbit, Flippa, Airbnb etc. who use commissions as their main business model.
B) Featured listings and ads
Featured listings help the hosts or the providers to buy more visibility for their offerings by paying a specific amount to the marketplace owners. It will get their listing to be featured on the homepage of the site or at the top of a certain category.
C) Google AdSense
Google AdSense is pure advertising model gets you paid for displaying ads. Ad-based models work best when you have a really specific niche. Besides, there are commercial providers interested in selling their products or services to specific audience.
You can try out multiple business models to choose the best option for your marketplace.
Step 4: Website
After deciding on the revenue model, you need to build a website to get your business going.
Think what do clients want from an online marketplace and what service providers want. Think of how intermediary companies fulfill the needs of users on both the sides of the spectrum. For example, TaskRabbit connects people who need help with their everyday chores such as cleaning, delivery, moving, and handyman services with a network of individuals. These individuals are pre-approved and background-checked professionals. They posses the time and coding skills test needed to complete the listed task..
Anticipating both parties’ needs would mean providing a fully functional website to easily meet the needs of both the parties. Website clones can easily meet your business requirements, if you wish to start a business similar to an already established marketplace. MintTM can help you kick-start an online marketplace similar to Flippa, TaskRabbit and Thumbtack easily and quickly through its feature-rich marketplace script.
Step 5: Building Supply
A marketplace has two sides customers and providers. When launching a marketplace, you need to solve the chicken and the egg problem i.e. how to get customers with less suppliers on the board and how to get suppliers with only a few number of customers.
As Boris Wertz and Angela Tran Kingyens explain in their comprehensive guide to marketplaces, providers are more interested in joining a marketplace than customers as it is a major source of revenue for them.
Due to this reason, the best way to solve the chicken and the egg problem is to focus on signing up your providers. Some of the strategies include:
- Contacting providers who are active in other marketplaces. You however need to be able to offer them something that is way better than their existing marketplace
- Using Google or business directories to find professional service providers to create a completely unique marketplace
- Finding people through online forums and Facebook to build a peer-to-peer marketplace
You can convince the providers to list in your marketplace by meeting them in person. Afterwards explain them the unique value proposition of your marketplace and receiving feedback on your offerings. You need to convince them about why your offering is better than the others by focusing on the trust factor between the host and the customers, or by offering discounts on signing up, providing exclusivity, communicating why you can bring them new customers and offering them benefits even when there are no customers.
Step 6: Finding Customers
While you are working on getting your providers on the board it is even important to communicate with your potential customers to give them access to your marketplace. You can create a simple email list to collect subscribers.
You can reach your target customers through Facebook groups, bulletin board or other channels. Think about who the major influencers of your target customers are and contact them, trying to make them your ambassadors.
You can build your own community through blogs, or by being active on social media sites, starting a forum, hosting offline events or a mix of all of these. Additionally, you can even use content marketing to attract customers by using SEO techniques. Subsequently sharing the content on social media platforms. Further get in touch with bloggers and influencers in the same field and offer to do guest post on their blogs.
Step 7: Launch
As an entrepreneur your launch date is crucial for you. Moreover, you feel that it is really important to launch with a bang. It is however preferable to let only a small group of customers use your marketplace at first, and test your process with them. Only when you are sure that your concept is working fine you should go on to a bigger marketing launch.
The goal of a marketplace’s marketing launch is to get customers and providers onboard. Later, facilitate as many transactions as possible during their initial days.
You can do your marketing launch through press, by having a good story and pitching it to the right journalists, writing for your specific target audience. Another way is to use the marquee strategy, i.e. getting influencers for building credibility with your customers. Online communities that are specifically dedicated to launching can also be used like Product Hunt.
Two sided marketplace businesses are very attractive because they can scale with a clear repeatable business model. But, they are recognized as difficult to get to post-traction with a potentially lucrative opportunity.
When beginning to create an online marketplace, your main focus should be to solve a specific problem of the customers. By keeping your clients’ and providers’ needs in mind and a strong brand, your online marketplace can easily succeed amidst high level of competition!