Create an online marketplace. Today there are about a hundred marketplaces. The experts of online commerce predict that the market for sites will only grow due to the constantly growing demand for online purchases, the globalization of Internet technologies, and other factors. That is why a business idea to create a marketplace website doesn't sound so bad.
A Statista report shows us that Amazon's marketplace revenue is increasing every year. In addition, more and more people want to get their piece of this pie, as creating a marketplace is a very profitable business.
However, despite modern technologies, creating a trading platform is not an easy task. For a marketplace to be popular, it takes a little more than just developing it. In this article, you will find helpful tips from our Fulcrum rocks team on how to create a marketplace, its pros and cons, must-have features, and its cost.
A marketplace is an online platform that connects sellers and buyers, allowing them to transact through it. Such a website contains information about sellers' goods or services, and buyers get the opportunity to place an order.
In other words, the marketplace business model involves the sale of goods and services that do not belong to the website owner. Simultaneously, the marketplace owner provides traffic and marketing support to increase sales of companies that have posted information about their product in the catalog. As a rule, a marketplace specializes in a specific niche, be it logistics, organizing weddings, or selling goods.
Monetization usually occurs at the expense of a commission in the form of a percentage of the transaction. In that case, a platform should provide the technical ability to place and pay for the order. The popular accommodation booking service Airbnb.com and the taxi service Uber work according to this scheme.
Other monetization options are also possible, for example paid placement of an ad in a catalog. Many marketplaces offer additional services for a fee - publishing an offer on the first page of the site, getting a product in the TOP in the catalog, etc. If there is a lot of competition on the platform, companies are willing to pay more to stand out among others on the website.
First of all, I decided to divide marketplaces into four types by topic:
Product. Internet sites that sell goods. For example, Google Play, Apple Store, Etsy, as well as all other online stores offering products from different vendors and brands for purchase;
Service. Sites where a person can order a service. For example, book a hotel room on Booking.com, or call an Uber taxi. This also includes freelance exchanges;
Informational. Marketplaces where people go for content. For example, educational or entertainment: YouTube, Twitch, Spotify, etc. TripAdvisor is also an example of an information marketplace;
Investment and crowdfunding. Web resources that invite users to invest in something of value. However, it is not always stocks or cryptocurrencies.
Now let’s classify marketplaces by the method of communication and motitization.
This is the simplest classification since there are only two ways: online and offline.
O2O or online to offline - the user pays attention to the marketplace on the Internet and receives the product or service offline.
An example is the Asos online store, where people can order things with fitting and the ability to refuse them.
Bolt or Uber also works according to the O2O method. A car is picked up and issued online, and then it comes for a person in real life.
Groupon. Another striking example: various coupon services.
Online commerce - everything is online only. An example of a marketplace that works in this way is Envato Market. The user selects, buys, and uses the application exclusively on the Internet.
There is also a monetization model classification, but we will look at it closer in the section How Do Online Marketplaces Make Money.
Here I will list the most popular revenue models for marketplaces. According to BigCommerce source, 9 out of 10 people check prices on Amazon before making a purchase. That is why we can assume that people usually make online purchases not in online stores but on marketplaces.
As you may already understand, the marketplace market is not limited exclusively to goods. It affects various areas of services: finding a nanny, taxi service, apartment rental, etc.
Commonly, a commission is a fairest and most common way to monetize a marketplace. It's simple: the seller pays only if he earned himself. The marketplaces Uber, eBay, Airbnb work according to this principle.
There are three options for paying commission:
When the seller pays.
When the buyer pays.
When both pay.
The key question in this model is, what is the optimal commission size. There are no hard and fast rules, but keep a balance between earning suppliers and keeping the price low. Commission is usually 5% -15%.
This monetization model works best with small transaction receipts. Car or real estate marketplaces should, of course, choose a different revenue model.
Unlike the first option, this monetization model is independent of sales volume. Users pay a certain amount once a month or for the entire year.
The nuance is that users with both high turnovers and low ones pay the same amount. There is a problem of non-monetization or re-monetization. Therefore, subscription marketplaces try to balance the scheme and offer several price packages.
Examples of marketplaces that operate on a subscription model:
Skillshare training courses,
Workaway job search service,
The LinkedIn professional network.
This monetization model provides for the paid placement of certain positions on the marketplace.
The site's interest is in the high price for the ad, and the user wants the best reaction to his offer. For example, you can place many ads free of charge on OLX, but you must pay for vacancies.
Not every marketplace can afford this, but only the one where there is already enough content.
This is a common monetization model when it comes to a service marketplace. There is a fee to contact a customer, while no one guarantees a successful transaction. In this case, the contractor relies on long-term cooperation with the customer.
The American marketplaces of the service have successfully introduced payment for contact in their YouDo and Thumbtack projects.
Another scheme for monetizing the marketplace is a pay-per-action revenue model.
For example, when a user books a table in a restaurant through the marketplace, the institution pays the site a fixed amount. It is something similar to Booking.
This model offers free basic functionality and premium features at an additional cost. An example is dating service Tinder. In the free version, the search criteria for a partner is limited to a radius of 160 kilometers, and in the premium account, the whole world opens up. Or when it is possible to search your product for an additional charge on the Avito.
The problem here is to establish a fair value for premium access - since, in such models, most users are okay with the free version.
Many marketplaces use a mixed monetization model that uses a combination of multiple payment methods.
The advantage of mixed models is that they create additional value for some marketplace users while not interfering with everyone else's work.
The sale of other people's goods and services. This relieves the owner of the need for purchases, warehouse maintenance, order formation, transportation, and labor costs for a large number of performers. Thanks to this, costs are reduced, and there are no risks associated with fulfilling orders. The responsibility for errors to consumers takes the companies themselves.
Cheap development. Starting a business on a marketplace model requires less money in development than, for example, SaaS. An owner's main task is to create a marketplace website and carry out its search engine optimization.
Broad opportunities for business scaling and rapid multiple growths. This business model allows the most comprehensive coverage of the market since there are no geographic restrictions for it, and there can be as many products and deals on the "showcase" of the marketplace as you like.
Marketability. In general, marketplaces are more competitive than typical online stores. Due to lower transaction and customer acquisition costs and internal competition in the marketplace, sellers often lower their goods' value. In turn, buyers get access to a large number of products and services in one place with the ability to choose a supplier based on their preferences. For example, they can compare prices, seller ratings, reviews, etc.
You need to attract two types of users at once: sellers and buyers. The absence of a sufficient number of one of the parties on the site proportionally reduces the value of the marketplace for the other party and entails users' departure. The marketplace owner constantly has to find a balance between buyers and sellers.
Constantly monitoring. The complexity of the marketplace business model lies in the need to check transactions and the buyer's likelihood of leaving directly to the seller after the first purchase.
Highly competitive business. The market includes such giants as eBay and AliExpress, which are difficult to compete with. But small marketplaces can benefit from narrow specialization in certain products or services and become leaders in this niche.
Quality of fulfilling orders. The service of companies from the marketplace forms the reputation of the entire trading platform. If counterparties violate their obligations to consumers, this can reduce user confidence in the marketplace.
User-friendly interface. Users choose sites with an intuitive interface and a large selection of products or services. But developing a powerful, well-designed platform is costly. Sometimes it is more profitable to buy a ready-made online platform than to create from scratch.
I hope you are not bored yet because the fun is just beginning! Building a marketplace, like any other business, starts with setting goals and objectives. The creators of the site should know already at the beginning of the journey answer three main questions:
Why am I making this type of marketplace?
What will I sell?
To whom will I sell?
Then you need to decide on the type of marketplace. The business model and structure are built depending on the selected kind of marketplace. He also focuses on the target group of buyers.
And so, to create an online marketplace, you need three components:
Platform. It brings together different groups of users for other purposes.
Clients. A group of users who want to buy something or use the services of another group of users.
Sellers. Users who want to sell something or provide a service to customers for a specific price.
There is no single answer to how to create a marketplace app or website since the development stages and the budget will depend on your business's specifics. That is why I will walk you through the main important steps in launching your multi-vendor marketplace.
First of all, to create a successful site, you need to focus on a specific niche. Your site should offer unique products or services that will be of interest to prospective buyers. An area in which you already have experience is best suited for a marketplace. By following this tip, you will know more about your users' problems and how to solve them. Moreover, sellers can be provided with such tempting solutions that they will not be able to refuse.
The next step is to do market research. You have to analyze your competitors' best solutions and make a list of your project features at the best stage. Also, find out what your marketplace's specialty will be to stand out.
The target audience is your potential buyers who can order a product and bring profit to sellers and the marketplace as a whole. Since marketplaces almost always have a very wide target audience, their definition is different from an online store.
Let's start with the fact that the marketplace has two target audiences: sellers of goods and buyers, and you need to work with them separately.
Here are the main parameters you need to define for sellers:
Region of cooperation. The whole country or a specific region, city.
Registration method: legal person, private entrepreneur, or without registration.
Product categories (industrial, consumer, etc.).
Cost of goods: luxury segment, goods‚ general consumption, exclusive goods, handmade goods, etc.
The main parameters you need to define for buyers:
Geolocation. The whole country or specific regions. This parameter directly depends on the possibility of delivery of goods to customers.
Age. Social status and ability to pay.
Preferred type of Internet access device (mobile phone, PC).
Considering the target audience's parameters, you can choose a strategy for the development of the marketplace. A marketplace created without reference to target audiences is doomed to failure.
There are many services for accepting online payments on the global market, which allow you to receive money, convert currency, and perform other actions. When choosing, proceed from customers' needs and the technological platform's capabilities on which the marketplace was created.
Let's consider the most popular online payment services:
At this stage, the future owner of an online trading platform must collect information about the existing business models of trading platforms and choose what best suits his field. Remember that if the marketplace commission is too high, sellers will not use your platform.
Choose a platform based on specific business requirements. This step will define the number of development costs. Below I will list the most popular platforms to build a marketplace. If none of the platforms suits you, then our Fulcrum Rocks team will be glad to help you.
Magento Community Edition is a free version, but to turn your site into a trading platform, you will need to buy and connect modules such as Multi-Vendor Marketplace ($ 349.00). Besides, you will need help from third-party developers to install and configure the modules.
The platform has flexible pricing policies ranging from $ 79 to $ 239 per month.
CS-Cart Multi-Vendor Marketplace is an add-on that costs about $ 399 but does not forget that the installation and maintenance cost by the development team may differ in different regions.
It's hard to find X-Cart in thematic ratings, but the engine is presented on the Capterra platform. Judging by the reviews, users are partially satisfied with the engine, but they note the slowness of technical support and long-term resolution issues. Among the advantages are the high speed of work, open-source, and convenient control panel.
According to their website, over 20,000 sites around the world operate on the platform. Service representatives help in moving from other platforms. You can create a marketplace and upload a catalog with the participation of technical support.
The cost of a license for X-Cart Multivendor depends on the payment format. The minimum subscription price for a year is $ 298. You can buy a lifetime license for $ 1,495. The most expensive edition of the engine will cost $ 5,995.
For small marketplaces, you can use free CMS WordPress with Woocommerce and the WCFM add-on. The main problem with this solution is that the platform was not initially adapted for high-load projects. In addition to multi-vendor modules, there will be many unnecessary components that will not be useful for the marketplace.
WordPress and its add-ons are open sources. The engine has many fans all over the world, and it's not hard to find experienced developers.
Development time. It is almost impossible to create an ideal product in terms of functionality and convenience in a year. It is better to choose engines that develop for at least 3-5 years.
Adaptation to the target market. Users want to have their usual payment methods and additional options.
Functionality. The CMS should have modules that are needed for the comfortable operation of the trading platform. If some important function is not in the system, the project team must quickly add it.
Convenience. High download speed, modern themes, adaptation for smartphones, authorization via social networks, and other useful features.
Resistance to loads. The system must remain operational during periods of high activity. If users can't place orders or the pages take a few minutes to load, they are unlikely to give the site a second chance.
Expandability. The engine must have an open-source or API with a detailed knowledge library. It is often necessary to add a function that is not declared by default. With closed source and missing API, this is not possible.
Simple admin panel. The control panel should be lightweight and convenient so that you do not have to spend a lot of time training employees.
Flexible settings. Ideally, each module of the system should be adapted to the specifics of the project. For global projects, multicurrency will be useful, but it will not be helpful for local projects.
Creating your own Aliexpress or Amazon based on a ready-made engine will not work. Entire teams of programmers developed these sites under the strict guidance of experienced managers. It is unrealistic to create a similar product from scratch in a few years only if there is no multi-million dollar budget at hand for the system's development and support.
Here are some arguments on why to choose a development team:
Resistance to loads. There is nothing superfluous in CMS written for specific tasks. Ready-made engines are full of a bunch of unnecessary modules that cannot be disabled.
Unlimited options. Marketplace engines are usually distributed through tiered subscriptions. To get all the features, you have to pay at the maximum rate. If you write an engine from scratch, there will be no restrictions.
Unique design. Appearance strongly affects purchasing power, so it needs to be paid attention to. In CMS, ready-made templates are far from ideal. When developing a control system, several templates can be included in the technical assignment.
Maximum flexibility. The administrative panel and site structure for buyers will be the way the project owner wants. There is no need to look for workarounds or use only what is already in the system.
So, to sum up. For the development of marketplace websites, depending on the scale of the project, two types of platforms are used:
For niche marketplace sites - CMS WordPress with Multi-Vendor functionality;
For example, for high-load projects, Laravel framework for the backend and React.js / View.js for the frontend.
Digital-agency Fulcrum offers creating a turnkey marketplace website in any option depending on the client's goals and objectives.
Below you will find essential marketplace features that you need to consider when creating your feature list. I emphasize that the cost of development depends on the number of features that you want to implement.
User account. Remember, buyers' and sellers' accounts should be different, as they perform various actions on the site.
The seller's account should include a catalog of goods. You can add new products and change their descriptions, provide more information about the company, payment methods, delivery terms, and other functions that will make the purchase process even more comfortable.
At the same time, the buyer's account should be simple and easy to use. At this stage, you can enable features such as quick sign-in via social networks, a shopping cart, billing information, shipping address, and other data that will help sellers complete an order without delay.
Messages. When buyers are interested in a product, they get more information about it. Therefore, marketplaces should enable buyers and sellers to exchange messages.
Online booking and wishlist. These features can make the shopper experience even more convenient. By reserving items or a wishlist, sellers will plan future deliveries based on this data.
Catalog. An online store's product catalog should have features such as categories, search, filters, sizes to make the user experience even more convenient. If it is difficult for your marketplace users to find the desired product, they will not use this platform.
Customer Reviews. It is very important that buyers can share their experience with a product or with a specific seller.
Social login allows vendors and customers to log in or register with their social media accounts for the multi-vendor vendor market instead of filling in personal details and login details in the registration form.
Bulk product upload gives the supplier the ability to bulk import or export products and update product information in bulk.
Invoices. The function of creating invoices and reports allows a supplier to create invoices for orders placed for their products.
Secure payment gateways allow customers to pay through your payment method.
Multi-shipping Methods gives the merchant the right to offer customers different shipping methods.
The Mobile Login client allows clients to log in only with their mobile number.
Order in one click and shopping cart. It should be quick and easy.
User technical support. Always many technical questions may arise both from the side of sellers and from the side of buyers. Therefore, for the convenience of both, it is necessary to create a professional support service.
When the marketplace is technically ready, you can proceed to the beta testing stage, that is, launching a test version to identify problems and improve functionality. The beta launch can be divided into several stages:
Stage 1. Selection of an audience among potential partners. These partners can be already existing online stores interested in expanding the points of sale of goods.
Stage 2. Sending invitations to test the beta version of the marketplace. It is necessary to collect a database of potential partners' contacts and make a personal mailing list with conditions for testing participation. If it is massive, you should not expect high engagement of partners.
Step 3. Define the test term and provide a link to the beta. After clicking on the link, the partner will be able to use all the marketplace functions.
Stage 4. Collecting feedback from users using a survey form or direct communication. Based on the test results, it is necessary to collect feedback from partners to identify weaknesses and correct errors.
Stage 5. Measurement of website conversion, search convenience, etc. At this stage, we work with the interface and factors of converting visits to sales.
Stage 6. Correcting the marketplace, fixing errors, and launching the main version.
I decided to give you some tips to avoid the main problems faced by almost everyone who has ever been involved in the development of a marketplace.
1. Always allow more time for the development of the platform itself. Trust my experience: you can't create the perfect product the first time. Everything always needs improvements and changes.
2. Recruit effective staff, even if it takes a lot of time and effort.
3. Make sure that there is no information leak before starting the project. First, it threatens to increase competition from other market participants. Secondly, information about the project may end up in the media's hands before the site is fully ready for launch, which threatens a possible reputational risk.
4. Launch the MVP version of your marketplace first. It will save you lots of time and money. Below I will tell you what it is and why it is better.
Therefore, you can choose any of the proposed options, depending on the size of your budget.
Wow, all of it sounds like a lot of work. Am I right?
A startup in this niche can be an expensive project that can take a long time. Therefore, it is better to start with MVP (Minimum Viable Product). This option will allow you to test your product with minimal functionality and financial investment in real market conditions.
When developing a marketplace, the main advice is to avoid trying to implement all features in the first version of the product. If you try to do everything at once, you will run into several problems:
It will be more difficult for you to get the whole idea across to the development team, and the technical specifications manual can get huge, with tens or even hundreds of pages.
The development of a project will be a long process, and as a result, it will create risks of obtaining a low-quality product.
You may run out of budget at some point, and you will have to stop the project.
And finally, during the project's implementation, you will have additional requirements for it, which will be introduced into the technical specifications, making it more and more.
In general, if you don't want your project to take too long, be too expensive, and cause too much pain to develop, start from MVP.
How does it work? First, split the implementation into multiple versions, find clients, and see how they react to new features on the website.
So, it won't burden the development and test the idea in real market conditions. And if you are confident that your idea is promising and people are willing to pay for it, you can increase your audience and further develop the project.
If you still have no idea how to launch MVP right and quickly, the Fulcrum team is happy to help you for a relatively small price. We are specializing in MVP development. And your online marketplace will be ready within 60 days!
To answer the question about the cost of creating your marketplace, we need more information about your business, target audience, industry, and budget. The price depends on the number of features you want to implement, but building a marketplace from scratch won't be quick or cheap.
For instance, here are the main stages and development time:
Authorization and registration module - 40-80 hours;
Data and role management module - 60-120 hours;
Administration module - 150-300 hours;
Search module - 30-200 hours;
Module for managing goods or services - 30-200 hours;
Social interaction module - 150-300 hours;
Notification module -30-160 hours;
Payment module - 30-120 hours;
When you are evaluating your budget for creating an online marketplace, we should not also forget about additional costs such as:
UI / UX design creation
QA - manual and automated testing
Marketplace technical support
The design of such a large marketplace like Amazon will take about 360 hours at least, and the cost will be approximately $10,000. But I don't think that you need the exact copy of the Amazon marketplace.
If you want more information about creating a marketplace, the best CMS, creating an online trading platform from scratch, and other online trading areas, fill out the contact form. The Fulcrum team will be happy to help you and your e-commerce business succeed.
Our team has a lot of experience in creating marketplaces. Take a look at our latest project - LastCall. It is a marketplace for events, where people can offer their services and users can book them.
The Fulcrum team is engaged in work planning and budgeting. Since Fulcrum is a full-cycle development company, we can provide such services as:
Research and plan for your project;
Quick and high-quality work;
Development of a trading platform - marketplace (selection of a platform, or development from scratch);
Mobile development for your web projects;
Integration with internal and external services;
Any functionality depending on tasks and business processes;
Scaling and optimization for the high load;
UI / UX design;
Technical support, etc.
Benefits to order the creation of an online marketplace in Fulcrum
15+ successful projects worldwide;
We will develop a marketplace from scratch or select a CMS platform;
We integrate with the accounting system and any services;
We will develop and implement the required functionality;
Ready to scale and optimize the project in the future;
We provide integrated marketing services.
Let's start with the giant. Amazon is one of the most popular sites for selling things on the internet. It is also the world's largest marketplace.
Initially, Amazon was created in 1994 and sold only books. Now the platform has evolved into a giant multi-category e-commerce marketplace with products for almost any need. Amazon is a truly global brand that hosts marketplaces for retailers around the world.
Where Amazon is popular:
The United States has 95 million users who are Prime subscribers.
Germany, which was Amazon's second-largest market last year.
The UK, whose Amazon marketplace covers a huge proportion of the e-commerce industry.
This american marketplace has 3 million sellers and more than 300 million buyers. The site has 1.5 billion monthly visitors. 64 different currencies are available on it, and delivery is offered to 160 countries. The work takes place mainly in the B2C format.
Individuals and legal entities can register on Amazon. The cost of creating a store based on a marketplace depends on the type of user. A salesperson can be individual or professional. When registering an individual user, you need to pay only $ 0.99 once and give 15% of the product's cost in case of a successful sale. For the professional user, there is a subscription fee of $ 39.99.
eBay was founded back in 1995, and with 182 million users last year, it is one of the most successful internet sites globally. eBay was originally known as an auction site and later added a "buy now" feature. This marketplace has also been a popular marketplace for used goods.
Now people love to buy there:
Health and beauty products
The development of an application for the eBay marketplace opened up new opportunities for users. 180 million customers visit it every month. The site operates in B2B and C2C formats.
Where eBay is popular:
The UK is the leading e-commerce market.
The USA, it is half of its users.
Not only official stores can sell goods here. Anyone can make money by selling their products. Of course, by pre-registering as an individual or business user, specifying contacts and card number. Newbies are allowed to add up to 50 ads per month. The site receives 2-12% of the product's price.
Etsy has a completely different business model than Amazon and is a huge success. This marketplace was founded on June 18, 2005, in New York, USA. Etsy has over 1.7 million sellers who have listed 40 million items and has over 26.1 million active buyers.
Etsy prides itself on being a creative marketplace. This website is a bit like eBay but sells unique and vintage items, making it a great place to look for gifts or special purchases.
It is one of the best online marketplaces for sellers with creative hobbies or talents.
Among the offered product categories, you will find:
Jewelry and hair accessories
Art for the interior
The commission on this marketplace is much lower than on eBay and Amazon. On Etsy, you have to pay 20 cents for each product listing, and the lot is displayed for four months. And for each lot sold, a 3.5% commission is charged. Etsy only accepts money on Paypal.
Where Etsy is popular:
In the USA, it makes about 65% of total Etsy traffic.
In the UK, it is popular among small businesses and shoppers.
Marketplace development is a complex and responsible process that can take up to six months and cost a lot of money. Therefore, before starting development, carefully analyze the niche, determine the trading platform's strategy and the means of monetization. With the correct calculation, correct marketing, and PR activities, the marketplace's payback will be from 1 to 3 years, and then the site will work for a profit.
If you need help creating a marketplace website or mobile application for it, please contact us. We already have lots of clients worldwide who relied on us.
Here are the most important steps to build a marketplace website:
Define your niche and the audience that you will work with.
Select the category of goods with which you will work.
Decide on the market (b2b or b2c) and the type of business model: classifier, the marketplace, electronic trading.
Determine your budget and required functionality.
Select your preferred payment solutions.
Find the right platform.
Build a team of employees.
Choose a plan and launch the platform.
Create a Minimum Viable Online Marketplace Product.
Collect customer feedback and improve your product.
Develop and expand your trading platform.
First of all, don't sell to everyone. We recommend that you start slowly following these steps:
Analyze your competitors.
Define your target audience.
Select a monetization model for your marketplace.
Write a business plan.
Create a design for your website.
Don't implement all features that Etsy has. Create an MVP first.
Test your website, and receive feedback.
The last stage repeat many times by improving your marketplace website and adding new features, etc.
Before you pick a reliable development company, analyze and define your requirements for a future marketplace app. Answering these few questions will help you:
What pros and cons do your competitors have?
What will be different in your app from your competitors?
What features should you have in your marketplace app?
What features are must-haves on the first stage, and what can wait?
What design do you want for the app?
What amount of money are you ready to invest in a beta version?
After you get all the answers, please find a few development companies, and send them all your requirements. Please, don't hesitate and keep track of the whole development process. Don't forget to test your app to make sure it is targeted correctly. After everything is done, you are ready to promote your marketplace app!
The most popular are:
IXXO Cart Multi-vendor
To choose which one is the best, you should take to consider your budget and necessary features. We can recommend WooCommerce if you sell digital products.
For a multi-vendor marketplace with physical products, take a look at Magento or CS-Cart platforms. Sharetribe can be your choice if you want to create a peer-to-peer marketplace.