Everything you need to know before starting an online marketplace
In the olden days, people were selling and buying goods at the open-air marketplaces. The ancient Greeks called their outstanding marketplaces “agoras,” while in oriental countries they were referred to as “bazaars”.
Sellers showcased their products trying to attract as many buyers as possible, and buyers, in their turn, had the only desire – to purchase a high-quality product for a minimum price. Times, as you know, they are a-changing fast. And though the very marketplace conception has remained the same, open-air marketplaces are very likely to become part of history in the nearest future. Presently, as trade goes online, the virtual marketplace has gradually replaced their traditional, brick-and-mortar counterparts.
It’s hard to deny the fact that such platforms as eBay, Amazon, and Uber have made selling and purchasing products and services much more convenient. Moreover, by bringing together sellers and buyers in one place, marketplace platforms allow traders from the four corners of the world to make their businesses more flexible and profitable.
No wonder, more and more people start developing their own peer-to-peer online marketplace platforms, which can be viable and profitable business models. It’s about time you also started making money from your online marketplace website which you’ll be able to develop with our help.
A marketplace or an online store?
Very often beginner entrepreneurs confuse online stores with marketplace platforms. But in fact, these two forms of electronic commerce have considerable differences that will be further discussed in this section.
Let’s take a closer look at an online store. In a nutshell, it represents a retail outlet which allows customers to select and purchase a product of interest from a seller. You can buy a desired item simply by clicking on it and adding it to the cart on a preferred retailer’s website. The majority of online store owners make use of dedicated online store builders such as BigCommerce, Shopify, Wix, and WooCommerce. These tools help millions of people set up and promote their eCommerce business without spending a fortune on web professionals’ services.
As for online marketplaces, they represent peer-to-peer platforms whose operation relies on multiple third parties which act as mediators for sellers and buyers rather than direct providers of goods or services. All business deals made on such platforms are processed by marketplace operators which ensure security and successful execution of all transactions. All successful marketplaces have been created from scratch by professional web designers, developers, and marketers. Therefore, if you’ve resolved to build an online ecommerce marketplace that will be no inferior to Uber or AliExpress, you should be ready to fork out for your business venture. Of course, you can save your hard-earned dollars and take advantage of website building tools, the ones we’ve discussed earlier. But it this case you’ll be unable to create a truly unique platform that will stand out from the crowd.
Models of online marketplaces
Once you decide to create an online marketplace platform, you need to decide on its model you want to deal with.
The reason why customers give preference to marketplace platforms is that they offer a wide array of goods and services. Plus, an online marketplace allows customers to choose among different vendors, which is very convenient. Even though online marketplaces are designed to accommodate both buyers and sellers, not all of them allow for equal party interaction. We suggest that you familiarize yourself with basic marketplace models and decide which one is the best fit for you.
Customer-to-customer (C2C). It’s a marketplace environment where there are no retailers or wholesalers. Only private individuals, who are not entrepreneurs in the legal sense of the word, can make deals on such platforms. As a rule, a third party is involved in this type of commercial relationships and acts as an intermediary managing a trading platform and a guarantor of payments. It also may participate in dispute resolution. Also, the intermediary does not participate in the promotion of the goods. The seller does this independently. Among the benefits of the C2C model are low transaction costs and lower prices for goods. On the downside, the possibility of fraud is considerably higher in this business model. Nonetheless, this can be tackled by introducing the rating system which will help buyers evaluate the trustworthiness of this or that vendor.
Business-to-customer (B2C). This scheme involves transactions between entrepreneurs and private individuals, which are end consumers of their products or services. This model allows for minimizing of intermediaries and establishing competitive prices for certain goods, which naturally facilitates margin trading.
Business-to-business (B2B). B2B model of marketplace involves transactions between businesses. B2B business owners don’t sell directly to individual customers, but help other businesses get the products necessary for their business operations. You can opt for the given business model if you want to support other enterprises by providing them with raw materials or services that will be subsequently used for creating their own goods of services.
Tips on building a profitable marketplace platform
It’s a rare business owner who doesn’t dream of becoming a giant in their industry. You also may want to rock the eCommerce market with your newly developed platform and start making profits right from the start. But we recommend that you don’t make hasty decisions and refrain from scaling your business venture at the initial stage of your business’ lifecycle. Don’t aim to build a top-notch global business from the get-go. Hone in on a particular niche and tailor your platform’s functions to meet your users’ needs within this very niche. Come up with an effective strategy that will help you build your ideas to fruition without going overboard. For starters, make your product popular with a few dozens of users. Take note of their feedback and constructive criticism and grow from there.
Just like any eCommerce venture, setting up an online marketplace is impossible without startup capital. There are some realistic ways to get funding for your startup you may find helpful. But if you’ve already raised the sufficient amount of money to get your venture off the ground, you need to plan your budget wisely. First, make sure to allocate enough money for building your platform. You can save here if you take advantage of hosted online marketplaces you can use as your own eCommerce platform. It will spare you much bother and money you’d otherwise spend on professional web developers’ services. Also, you need to factor in the cost of advertising for both merchants and customers. That having been said, there’s no need to invest too much in marketing until your venture starts bringing in its own revenue.
The secret to any successful long-term eCommerce business is ensuring that it provides useful services. In other words, you should cater to the needs and solve real problems of your users. Therefore, you need to validate the viability of your business idea prior to putting it into practice. Create and outstanding user experience and invest time and funds into improving it! Be transparent, creative, and honest. Thus, you’ll be able to retain your current users and win over the new ones.
