The article was updated on July 15, 2020.
The concept of online shopping is not new – electronic commerce appeared as soon as people got access to the Internet. Since then, this market has been growing and sparking innovative ways of thinking in the minds of entrepreneurs all over the world.
Creating an online marketplace is a very beneficial business today. For many brands and vendors it is a great and inexpensive way to create awareness and attract customers. With the convenience and increased use in technology, clients are able to easily browse through your products and services from the comfort of their homes.
You probably have heard about some of the online marketplace leaders such as Amazon, Ebay, Airbnb and Etsy. They are all great services that prove that going online can be very attractive and successful as they stretch across many areas in business. But you should stop at this point and think carefully. Does your idea have a target audience? Will your business survive in a severe competition? You will get the answers by developing an MVP for your marketplace.
Small but confident steps are important when you enter a highly competitive e-commerce market. In this article, we explain how to start right and what you need for that.
In simple words, an online marketplace is a platform that connects buyers with multiple brands and handles money transactions between them. Nowadays, online purchases are becoming a norm for people of any generation – this is one of the main reasons to consider starting your business in this niche. But it is not the only one.
Why creating an online marketplace is a good idea
Online shopping gives opportunities that offline stores cannot provide. It sets a completely different tone for the shopping experience, and here is why.
- A growing audience
People realize the benefits of online shopping with time, so the number of digital buyers is growing every year and is expected to reach 2.14 billion people in 2021.
And do not forget that these customers can be anywhere – you can target way more people having an online marketplace platform than a multi-brand physical store.
- The widest variety of products and services
E-commerce platforms offer more products than any offline store, especially if it is a multi-vendor marketplace. No need to roam around the shelves or look for perfect shoes at the mall – it sounds like heaven for many shoppers. Any time, with any device – the shopping world is extremely accessible.
- No worries about the product itself
As a marketplace owner, you do not need to worry about where to store the products and how to deliver them to the buyer – marketplace vendors will do that for you. You play the role of the mediator, so the main task is to provide a smooth user experience and secure transactions.
Not all marketplaces are similar. As market relations evolve, people can buy and sell almost anything online. There are four types of marketplaces depending on the sale’s subject, and each of these types has its leading representatives.
- Product marketplaces: only physical products are in the spotlight (Amazon, AliExpress, Walmart).
- Service marketplaces: people buy and sell services. These are often services of a certain type: taxi, renting, home improvement, etc. (Uber, LiquidSpace, Airbnb).
- Hybrid marketplaces: customers can find both products and services here (Houzz, OLX, Oodle).
- Project marketplaces: fundraising platforms for startups. Any individual can invest some money into a new business and get benefits in return (Kickstarter, Fundly, Crowdfunder).
Amazon or Airbnb are those great marketplace examples that appear in a marketer’s dreams. But let’s be real: building a global e-commerce project and making money right away is not realistic. First, you should have the product’s model that provides its main value and features.
An MVP (Minimum Viable Product) for a marketplace is a fully operational version of your product that includes the most important features and can be offered to early adopters.
What you will get with an MVP:
- deciding whether you have chosen the vital features correctly,
- figuring out which features have the potential to become more popular than others,
- making sure that the target audience is interested in your offer,
- getting the database of potential clients for the start,
- finding out the project’s flaws and imperfections.
An MVP and a full-fledged marketplace are not the same things – an MVP is one of the steps to the finished result. However, you should treat a minimum viable product seriously because it will define the direction of your business progress.
1. Find out what the market has to offer
At this point, it does not matter whether you will research your local or national market. You should get the big picture of what is going on. Your idea does not exist on its own – it is surrounded by several external factors that have an influence on every business.
The two main research points:
- The number of companies on the market, their size, market share, and success stories. These are your direct competitors which are setting the tone to the niche you are going to enter.
- Who their users are and what they are looking for. These people can potentially become your loyal customers, so you should learn as much as you can about them. Gender, age, needs, and preferences – everything is important.
2. Decide on the value of your idea
In other words, now decide what you can offer to the customers. First, you should figure out what type of online marketplace you are going to build. In the beginning, it is better to choose either physical products or services – do not push forward too diligently trying to seize all at once.
Then, create a unique value. With time, there will be more and more competitors appearing on the e-commerce market, and you should be ready. What is one unique thing or experience that is hard to duplicate? This is the main value that will make vendors and buyers happy and will bring you success.
- online transactions will be safe and sound;
- a broad range of products/services for different prices gathered in one place;
- a smooth user experience: buyers know exactly what button to click next to finish their purchase;
- the offering of discounts and coupons for the products they usually buy.
- find more customers and increase their market share;
- get a full package of services in one place instead of building their own digital solution;
- cut marketing costs;
- are given an additional option to promote their business.
3. Choose a business model
Next thing, you should pick a monetization model, i.e., how your marketplace will bring you income. These are the most popular methods:
- Commission. A platform would get the money from each closed deal. Buyers can use the platform for free, while vendors have to share a part of their income. In exchange, they easily get access to their target audience and a big client database.
- Payment for a listing. A seller should pay for placing a listing on the website. Usually, this revenue model is a good match for big deals, such as selling a car or an apartment. In this case, marketplaces do not handle the transactions, so they have to choose another option. The marketer’s task is to drive lots of traffic to the marketplace so the expenses would be justified.
- Freemium. It is a widely-used model where all users have free options on the platform, but they should buy a premium account to enjoy the full range of features and opportunities. In the case of marketplaces, it can be the offer of several products for free (like photos in the photo stock).
- Subscription. Usually, both buyers and sellers should pay a certain amount of money per month to get the full range of features. This one is tricky. You should offer a unique experience to the users so they are ready to pay regularly.
- Ad placement. This option is often paired with another business model as an additional revenue source. It works this way: a vendor places their listing and can pay a little extra for it to be shown at the top of the list. Sellers would be ready to pay for the ads if they are sure your platform has enough potential customers.
4. End up with a list of features
And finally, what features do you think are essential for an MVP? At this stage, you will probably need a piece of advice from developers, but before that, check out these popular features and collate them with your primary marketplace idea.
The following MVP features are what we consider to be the core of your future product:
- Personal profile (with basic settings facility)
- User’s profile: Your MVP can include a more simplified version of a user’s profile. When the profile is complete, it will contain useful information about the user and help to define the customer’s preferences.
- Vendor’s profile: It’s better to represent a full-functioning vendor’s profile in your MVP. This is the vendor’s chance to showcase their product or service and to introduce it to its potential customers.
- Activity history
- For a user: Allowing your users to access their activity history can help them to easily navigate across products that they have viewed in the past and might have decided to buy.
- For a vendor: Being able to track all the activity on your web page is important in understanding your target users’ interests and needs.
- Messaging system
- For a user: A messaging system allows your users to interact with you and to give them the opportunity to share their thoughts or to ask questions about your products.
- For a vendor: You will establish a sense of trust from your users and directly discuss about resolving any issues.
- Searching feature
- For a user: A searching feature allows users to navigate easily and conveniently through the pages of website.
- For a vendor: This feature can save you time by searching for specific products or links instead of browsing for long periods of time.
- Reviews and a reference system
- For a user: Having a section for reviews provides the users with a sense of reliability about your product. Your users will be comfortable knowing that others have tried and tested your product or service.
- For a vendor: This section can give yourself the opportunity to voice your experiences with your customers and to create more online presence and build a trusted buyer-seller relationship.
- Payment system
- For a user: A secure payment system will allow your users to handle the exchange right then and there, all in one place.
- For a vendor: Having a secure payment system will save you time and give you a breakdown of all transactions and receipts.
- Back-office reports, metrics, and statistics
- For a vendor: Keeping an eye on the breakdown of your back-office reports can give you an upper hand when it comes to understanding your areas of strengths and weaknesses.Your online marketplace MVP must include this feature.
What additional features can be added later?
- Product Comparison. Opportunity to compare products alongside each other can be very attractive for the users. Having a good comparison system on your online marketplace is a great competitive advantage over other e-commerce platforms.
- Sharing on Social Networks options. Allowing your users to share and post links directly from your site can promote your business by connecting to their network.
- Pop-up notifications. Users may not always be aware of all the functionalities of your site. Having pop-up notifications can help bring attention to certain areas and create reminders.
- Wish list. Having a wish list can remind users of what they want or need. You can incorporate this information to cater your web page to meet some of their needs.
- B2B interface. Having a B2B interface will improve efficiency and enable you to grow and scale to meet market demands and vendor’s needs.
- Comprehensive reports and forecasts. You will be able to easily measure and evaluate your campaigns, effectiveness of sales, inventory, customer sales and customer engagement. A lot of this behind-the-scene data can add great value for future insights.
- Version for mobile devices. It can be implemented through creating a mobile app, responsive web design or other options.
- Rating system. You also can create a rating sytem for vendors and users to encourage the most active ones. The policy of the ranking is up to you but remember that rating system can be a great tool to increase user engagement.
5. Visualize the сoncept
Now you should see how the initial idea will look. This is the stage of design and prototyping. A prototype is not an MVP yet, but it demonstrates the concept behind every page.
It is important to see the platform’s visual representation and user flow. The color scheme and visual elements should match your initial requirements and the list of features you approved with developers.
As a result, you get a live demo version which includes:
- UX/UI design;
- Microinteractions (what users do to accomplish one task on the platform);
- User flow (what steps users make to finish the purchase).
Then, you should share the demo with partners, stakeholders, or even friends and family. This is a testing step before development starts, which can save you from having to rework the code in the future.
6. Develop and test
Creating an online marketplace MVP surely takes less time than building a full-fledged platform from scratch. While the development team is busy writing code, you should form a group of early adopters and test an MVP with them.
This focus group is a checkpoint of your idea: how many right and wrong decisions have you made? Figuring it out at the MVP stage will save you from lots of mistakes and extra spending in the future.
- Keep your expenses low. Give yourself some time to grow. Start off small and keep your spendings to a minimum so that you can develop your marketplace after getting some feedback and attention from customers. There’s no need to spend big and rush into it before knowing if your idea will sell.
- Tighten your focus. Since you will be limited in resources at the beginning, you should narrow your business efforts. You can begin building traction in smaller segments and then continue to expand into bigger markets once you’ve accumulated safe feedback.
- Engage your users. In order to create a lasting impression, you need to interact with your users through your product or website. What can you offer them? How will you make their lives better? Why do they need your product and what good reason do they have to tell their friends about it? Properly engaging your users will help market itself.
- Take your time but know when to adjust. It should take around six to nine months to pick up some speed after establishing your marketplace. Sometimes even this can be too quick and it could take much longer. You need to develop both buyer and seller communities, and we all know this cannot happen overnight. However, if a lot of time passes and you still do not get the results you’re looking for, it could be time to reassess your model or business plan.
“And they lived happily ever after” is a good ending for a fairy tale, but in the digital business, the story only begins after the product’s launch. So, we have an MVP tested by potential users. What is next?
Attract new users
Right after the launch or one year later – this point is always vital for your market presence. But getting off the ground might be the hardest step for a marketplace. Here are several ideas to grow your user base:
- Use content to your benefit: create your company’s blog or share analytical insights from your daily work. It is important to share truly valuable information so the readers could trust your expertise and share your articles through social media;
- Start referral programs: one happy customer can bring more people to your platform. These newcomers already got an invitation from a friend, i.e., a person they trust. If they get some benefits with a referral discount, you will grow your audience faster.
- Go offline: take part in the offline events where your potential customers might appear. Even Etsy started this way: they went to the local markets where people were selling their hand-crafted pieces and offered them to try out online sales.
Use marketing wisely
Strictly speaking, any effort you make to find vendors or buyers is your marketing activity. The world of marketing is too broad for the section of this article, but we will list some of the major key points.
- Use email marketing to strengthen up relations with existing buyers. These people are likely to buy more because they already had a positive experience.
- Never underestimate the power of a good (and a bad) review. The more reviews you get, the clearer your reputation becomes.
- Do not sell directly – the market is overloaded with that. In your blog, tell stories that matter to your audience. You should know trends, needs, and demands to respond respectively through your content.
- Connect emotionally with your customers. In this case, social media is the best helper. Create an image of your business by sharing your values, elements of the corporate culture, and engaging in conversations with followers. This way, you show that there are people behind your company and not only low prices or a wide variety of products.
- Use SEO (Search Engine Optimization). Your business exists only online, so it is crucial to be found on Google. First of all, you should be sure that the listing pages are well-optimized and provide detailed product descriptions. This way, you can be found through a product page on your website.
Starting your own online marketplace is both easy and difficult these days. On the one hand, you have plenty of opportunities to explore the market and quickly come up with a minimum viable product. On the other, the online market is growing every year, giving way to new shopping platforms, i.e., your potential competitors.
An MVP is a valuable asset that can save you from many strategic mistakes. You can test your idea, design, its elements, and user flow – and all that with early adopters who will give you valuable insights.
Building up an online marketplace is a task for brave ones, but you can handle it with a reliable team. What features can help you conquer the market? Let’s figure it out together – just leave us a message.
- How to Build an Online Presence and Expand Your Local Business
- How to Develop a Freelance Marketplace like Upwork and Keep It Competitive
- Apps like Instacart: How to Jump-Start Your Local Delivery App
- Real Estate App Development: All the Answers to Your How To’s
- Doctor-on-Demand: A Practical Guide to Creating a Telemedicine App