Two statistics that speak better than any epithet about the importance of marketplaces in today's world:
It is the marketplaces that account for half of online sales worldwide. It is a huge market. Of course, it is very difficult to repeat the success of Amazon, Ebay, Etsy and Alibaba. It is virtually impossible to compete with the international one-stop marketplaces. You need a huge budget and a team of the best specialists in the market.
But competition for local markets (within a country or region) or in a particular niche (the example of Etsy and handmade goods) is quite realistic. These are still huge markets and even a small part of them is a success.
There is a clear trend in the market to reduce the share of the biggest players and to strengthen the smaller niche platforms. So it is at this time of this mini market redistribution that it is possible to take your small share of the giant market. In this article we would like to share with you our experience of developing and launching a marketplace.
Before we get into the article itself, just a couple of lines about why we are confident in what we say and why we should be trusted in the first place.
We specialise specifically in developing and launching startups. Sophisticated commercial web services that are businesses in their own right and make a profit. At the same time, we launch startups literally on a turnkey basis: from project documentation and team building, to MVP, optimization and launch of the main product.
For us, startups, including marketplaces, are not a one-off experience, but a systematic one. In different niches, themes and formats.
If you are reading this article with a specific idea for a marketplace or other IT startup, you may get free consultation from our experts on how best to implement it.
The marketplace is no different from any other business in this respect. The more detailed planning goes into launching it, and the more deeply the market is analysed, the greater the chance of success.
As we noted above, this is the period of niche marketplaces. The startup needs to be clear:
The answers to these questions already describe the project implementation plan quite accurately. Market research can be conducted in different formats to get the answers and once the basic skeleton of the marketplace is ready, it needs to be tested in a real-world setting.
Once the concept of the marketplace is ready and described in the project documentation, you need to proceed to the first version of its implementation. MVP (Minimum Viable Product) is the best way to both get started with the project and test the idea.
MVP is usually made on a template solution for a CMS, mostly Wordpress. This greatly speeds up and reduces the cost of launching the MVP project. The task is to make the minimal, but sufficient functionality for the first users and test how successful the concept is.
Once the MVP is developed and launched, it will need to attract the first visitors and get useful information from them before the main launch. The MVP answers the following questions:
This information gives a holistic picture of whether the idea is viable and worth developing further.
The peculiarity of MVP marketplaces is that before launching a test project you will need to negotiate with several vendors who will provide a range for the first stages of sales. For their help in testing the concept you may offer these sellers premium working conditions.
For a marketplace, the set of specialists needed to launch a project will be standard. The minimum configuration of the team should include: a project manager, a programmer designer/ coder (ideally one person, but you can find two part-time people), and a tester. To this standard set must be added e-commerce specialist and support managers (in the case of online sales they are always needed).
The number of specialists for each position may vary depending on the volume of work (different marketplaces require different volumes of work and the number of people in the team).
This is another sticking point when launching a startup. Because if the project gets stuck at the MVP stage and it is unsustainable to continue (quite a realistic scenario), the team will have to be disbanded. Plus, the workload for individual positions can rise or fall dramatically in the initial stages. So hiring staff formally is not very convenient. There are two solutions here:
By the way, we can organize such a team for your tasks. One more minute of self-promotion.
Even before you launch MVP you need to think about the main points of the future project.
It is important to work out the payment system before the launch of MVP to enable first time sellers to fully work with the platform. Marketplaces differ from regular shops in terms of financial flows. Not only should there be an automatic system for settlements with sellers and the acquirer, but also, for example, a "hold" system - a withholding of money for a period in which the purchaser can make a return. Therefore a person specialising in e-commerce and with experience of working specifically with marketplaces should definitely be in the team. The models for working with finances here will be quite different. Ideally, this person should be a development project manager.
The Marketplace will inevitably have to operate with personal and payment data. Therefore, it is very important to consider the security of the information on the platform. In addition to the standard OWASP Top 10 recommendations, you may want to consider custom security measures for your particular project (based on the overall concept, planned load and platform specifics).
Marketplaces typically operate under two delivery models:
The issue of logistics is very important; organising the system for storing and dispatching goods is a very complex and costly matter. At the stage of testing the idea through MVP you may arrange with the first sellers to place and send orders themselves. But at the very beginning you need to have a plan of logistics which will be implemented in the main version of the service.
Most importantly. The business has to be profitable, so the question of monetization is very important. The most obvious way for a marketplace to make a profit is through a commission on user sales, but this is far from the only way.
The marketplace may provide additional services to sellers on the platform, for example:
As well as other methods of monetization up to advertising third-party offers. Specific recommendations can only be made after analyzing a particular project, there may well be unique methods of monetization, which are suitable for a particular theme and format of the marketplace.
Marketplaces are among the types of businesses that are highly susceptible to economies of scale. Each additional user makes the project more interesting to others. It does not matter if it is a buyer or a seller. New registrations from both sides make the service more interesting for the other. It's a long audience growth funnel: more sellers - more buyers - more sellers - more buyers, and so on.
Therefore, it is equally important to think through separate strategies to attract both sellers and buyers. In the process, you need to constantly measure the effectiveness of your marketing channels and optimise your engagement strategy, leaving only the most effective methods.
If the marketplace is planned for more than one country, but in an international format, all three main points: payment acceptance, logistics, marketing and monetization methods need to be thought through with a view to operating in several countries.
Once you've tested the idea and the concept through MVPs and have seen good results, you can launch the main project. It is usually made visually similar to MVP, so existing users can continue to work in peace.
When launching the main version, it is important to predict the future workload. This is necessary to choose the technology to implement the main version. For small projects with a small load, it is more logical to leave the project on a CMS, such as Wordpress. And if you are planning a large-scale project (or need a unique functional solution), the main version should be developed from scratch in a programming language. It's a longer and more expensive solution, but more flexible and functional.
It's important to understand that in this case the main version is a separate product and needs to be thoroughly tested before launching it. If users encounter too many bugs when upgrading from MVP to the core version, it may result in the loss of loyal users.
Of course, it is very difficult to talk about all the specifics of developing and launching a marketplace in a single article. All the more so since depending on the geographic location, format and product segment on the marketplace, the methods used for development, marketing and monetization may differ quite dramatically.
If you are planning to launch a marketplace (or any other IT startup) right now you may get free consultation with our experts on how we can help you and what part of the project we should undertake. All you need to do is leave a request in the feedback form on the home page.