April 1, 2024

How to Build an Online Marketplace in 2024

Back in 1982, Boston Computer Exchange, the first online marketplace, was launched and gave birth to a new eon of online business possibilities. 1995 brought Amazon and eBay into place. Both platforms completed one million transactions each by 1997. In 2023 their reputation still precedes them because they remain the most visited online marketplaces worldwide. Though the concept of a one-stop online shopping mall is not new, the e-commerce boom of recent years has made marketplaces a source of significant growth.

The web-based marketplaces are trending to be the fastest-growing. In 2024, they are predicted to top-up to growth of US$3,567.00bn, being the largest retail channel worldwide. It will constitute almost 60% of total retail e-commerce sales. By 2027 the sales of US retail marketplace e-commerce are expected to reach US$603.20bn.

To sustain in this race is going to be a real challenge. However, where there is a challenge, there are perspectives. So, if you are ready to navigate the uncharted waters and learn how to build a marketplace website and not only, read on to find out all the ins and outs of the venture.

Choosing a Niche

The giants of the market have already occupied the space, and it’s quite clear they have the trust of their customers and marketing budgets, which seem unlimited. However, the situation for the newcomers is not as hopeless as it may seem. But, to compete with the market sharks you should clearly figure out your niche and outmaneuver them locally or globally. So, let’s delve deeper into the matter and find out how to identify the e-commerce niche to take.

First of all, figure out the problem you can and want to solve for your target customers. Let’s take Fiverr. The marketplace was launched as an attempt by the founders to find an alternative to a 9-to-5 job. Now it helps millions of freelancers to find well-paid projects that suit their lifestyle.

Airbnb was once launched as a site that had to solve the problem of its founders. It occupied a relatively narrow niche of the tourist industry – accommodation. But this niche was initially even more narrowed to renting rooms in private homes. Despite the fact it was seemingly a tiny sector, the giant was born as a result. Now Airbnb covers 99% of countries all over the world.

Narrowing your niche and developing it, you can supplement it with other products or services later and attract partners to broaden the range of goods you offer.

Being a fitness trainer, you can launch a marketplace of your pieces of training, then supplement it with fitness clothes, clothes for tourism, sports outfits and equipment, nutrients, biologically active additives, healthy food and products, and so on.

To cut a long story short, you should spot an unoccupied niche and the problem you are eager to solve for your audience. Later on, scalability can serve you a good service to expand it. Speaking in more detail, you should also understand your audience and what factors drive their choices. As a result, ideally, you should create a marketplace website that strikes the balance in terms of features, cost, and positioning.

Target Audience

Buyers and sellers are the key players in the online marketplace field. When creating the platform, you should know how to attract both groups. Let’s study how your target audience can be determined.

Firstly, you can turn your eyes on your competitors and consider the channels they focus on, where they target their customers, and who the latters are. Define which users are not your target audience for whatever reason: age, demographics, interests, etc. It’s essential not to spare your advertising budget and resources for the consumers, who do not match your messaging.

Check the users who follow your social media business page if you have it already and study the purchasing behavior of your customers. Content analysis through Google Analytics or other tools will help you find out the most popular search terms, and the needs and desires of the audience that are hidden behind them.

Note the topics that strongly connect with your target customers.

All these will help you understand your potential clients more deeply and tailor your online marketplace and marketing efforts to make gold.

Competitors

Competitor research is a strategic task of every entrepreneur. It’s a broad term rather than a simple process. It comprises many different tasks and very much depends on the industry you are in.

If you manage to clearly understand your rivals, you can figure out the value proposition you can offer your audience and the marketing strategy to follow.

To be on the wave you should gain regular insights into the market trends, consumer behavior, and preferences. Competitor analysis can reveal to you the untapped market opportunities overlooked earlier.

If you understand the competitive landscape of your industry, you can form the best pricing strategy, choose the most workable marketing tactics, benefit from strengths, and avoid weaknesses that your competitors have.

A careful and continuous analysis of your rivals will help you refine your marketing strategies and effectively distribute your resources.

Monetization Models

Nobody starts building an online marketplace to entertain, everyone wants profit. So, before you start an online marketplace, decide on the way and means to commercialize it.

There are certain monetization strategies:

Commission.

It is the most common revenue model and the most lucrative for the founder of a marketplace. You charge a certain percentage of each transaction made through your platform and get the value from everything that passes through your platform.

Subscription

This model, also called membership, presupposes a fee for access to a marketplace. It makes your revenue constant and predictable. You can choose to charge monthly or yearly fees as well as payments for a certain set of features or superior benefits.

Freemium

This model allows you to access basic web resource functionality for free but advanced or premium features come for payment. This model is good for attracting users, then your focus should be to make them loyal.

This model is good when you just start with your marketplace, but should be supported with other methods.

Listing Fee

It’s a good way to profit from the long-selling goods or even the ones that will never be sold. You can charge a listing fee and also be flexible, varying it depending on the item, category, or type of ad submitted.

Featured Listings

This model works for online resources selling specific items or certain types of goods: cars, yachts, real estate, etc.

Featured listings ensure the visibility of the item to the buyers. Featured articles can be placed on the first page, as a featured blog post or newsletter, in a specific category, or appear in the cart.

Lead fees

If your marketplace does not pre-suppose online transactions, you can consider a lead fee. Your clients then will pay to get access to individual deals or potential client details they are interested in.

When launching your online marketplace you can choose one model and then change it to another, or use the combination of several models. Also, consider alternative revenue sources and investors to share initial expenses.

MVP

The first stage of marketplace development should be MVP creation. It should be built with basic features to attract early adopters and receive feedback.

You should solve your suppliers and customers' core problems and validate your marketplace idea. At this stage, you can do certain things manually to automate everything later on. What’s important here is that the Minimum Viable Product will help you collect insights from user feedback.

Interacting with the first users, you can prepare for steady improvements in your marketplace. You can also see whether you need to adjust your idea and make changes in your direction to meet the real market needs.

As soon as you have an MVP that shows results and can attract investors, you can proceed to the online marketplace development.

Key Technology Decisions

Developing a marketplace you should take a range of technology decisions for your solution. Let’s look into some of them:

Determine your marketplace model

If you develop an e-commerce platform, the one that buys and sells goods, your marketplace may be:

Business-to-Consumer (B2C)

Being the most popular such marketplaces directly connect businesses and customers. The market of B2C platforms is projected to reach US$ 7.45 trillion by 2030.

Such websites often include customer feedback, safe payment methods, and a wide choice of goods. You should keep in mind that modern online consumers also expect prompt and low-cost shipping and handling. So, the sellers should be ready to take this responsibility.

Consumer-to-Consumer (C2C)

C2C platforms enable business interaction between people. Such marketplaces may promote goods, old or new, which people want to sell. One of the well-known C2C marketplaces is Etsy. Starting a C2C platform you don’t need a business license to sell goods. Besides, It’s rather a low-cost way to get started. Feedback on the part of customers and rating for sellers is important here.

Business-to-Business (B2B)

B2B resources are tailored for businesses looking to source certain goods or services. Such platforms often concentrate on particular sectors: manufacturing equipment, raw materials inventory, medical equipment and supplies, etc.

Service marketplaces should also be mentioned. They may be platforms for freelance or gig economies (Upwork, Fivver, etc) and reservation and scheduling marketplaces (AirBnb, Setmore, etc.).

Most of the marketplaces are peer-to-peer (P2P), meaning they connect the individuals who offer products or services with those who are ready to buy or rent them. It means you do not need much investment to start an online marketplace.

Choose an e-commerce platform

We have picked the top 5 platforms you can choose to create your best marketplace on.

Magento

This platform is open-source and primarily used for multi-vendor online store creation. It provides extensive functionality, security, the possibility to transfer data, and extensions that easily turn an e-commerce store into a marketplace. As a marketplace owner, you get the opportunity of setting up different commissions for different vendors.

Marketify from WordPress

Marketify is the theme of WordPress allowing you to build advanced marketplaces with no sweat. It can be best used for online marketplaces that list and sell products through simple downloads - photos, themes, templates, etc.

Sharetribe

This platform is best for the fast creation of a multi-vendor marketplace. Sharetribe allows easy customization, so brands can operate in their own special way. The platform does not require any specialized knowledge to start. Sellers pay commission for getting a marketplace space, and buyers get a wide range of payment methods.

Drupal and Ubercart

Drupal is a standout open-source platform to build the CMS marketplace website. Businesses can publish content and sell goods, track orders, and analyze sales reports.

Ubercart module gives multiple seller support allowing to craft a multi-vendor marketplace even without technical knowledge. Marketplace owners can monitor each activity on the platform, by vendors or customers.

CS-cart

CS truck is a power-packed platform offering several packages for eCommerce. With CS you can build a marketplace and add multifaceted functionalities to it. Like nobody else, the platform offers a plethora of tools to connect with vendors and buyers. What’s important, you do not need much financial investment to start.

Decide on hosting - cloud vs dedicated servers

Both cloud hosting and dedicated servers offer a complete server environment. They can be viewed as something more-or-less equivalent because they are managed with the same tools and run the same software.

However, cloud hosting is remotely running on physical servers in a secure data center. You can create a virtual server in seconds and destroy it as soon as it is no longer needed. Thus, cloud servers provide a flexible, inexhaustible, on-demand supply of infrastructure. It is responsive to your business needs and can be scaled up as your marketplace grows.

A dedicated Server is a metal machine configured to the exact specifications of the client, moderately or most powerful. Dedicated servers are mostly used as database servers.

You can choose a cloud variant, which, by the way, can also be private or hybrid, or use a popular configuration of both variants. Dedicated servers are used for the back-end and database, while the front-end component of a SaaS is hosted in the cloud.

Select payment gateway and payment options

The next vital technology decision is choosing a payment gateway – a trustworthy third-party service and secure enough to facilitate payments in your marketplace. The popular modern providers are PayPal, Stripe, MANGOPAY, and much more.

When ensuring smooth and secure operations on your platform turn your eyes to escrow payments, split payments, payments in installments digital wallets, credit and debit cards, and cryptocurrency payments.

The more payment options you provide the easier for a buyer to make a payment and the ршрук the chances, they will make a purchase. So, let your choice be careful, yet abundant.

Marketplace Development Process

Stfalcon is for custom development. It not only makes your product unique but allows you to tailor it to your specific needs. So, we offer you to develop a custom marketplace. You know already that you need an idea, all the rest we can do for you.

The development process we keep to in Stfalcon is usually of a similar structure. The steps for marketplace development will be the following:

• Discovery phase
• Design stage
• Development
• Testing and QA
• Maintenance

Read the more detailed article here.

Our team uses agile development principles, and it helps us deliver software solutions quickly. Still, we stay flexible during the project in case there are some changes. It allows us to go beyond our clients' expectations and deliver software of the superior quality valued by our customers all over the world.

Promoting the Marketplace

Every new marketplace requires effective promotion. The task is especially challenging nowadays when the competition is severe because the marketplaces appear to be growing in size and popularity.

So, to get an effective marketing strategy, you should be creative and sweat a little.

Firstly, gain an understanding of your target audience and set clear and measurable marketing objectives. The next step is to create a unique value proposition and choose the right marketing channels to promote your platform.

Use the power of social media and do not underestimate SEO, benefit from traditional and sponsorship advertising, and collaborate with influencers. Email campaigns also still work, especially if you make some special offers.

It’s important to choose the right approach and create a workable strategy to faster appeal to your customers and benefit from your business.

However, turning to professionals is always the best workable strategy you can consider. It may save you time, effort, and budget.

Cost of Marketplace Website Development

The cost of a marketplace platform development varies and depends on many factors.

To make a budget estimation, you should take not only technical aspects and the set of desired features into consideration, but also the level of the team members. Keep in mind that sometimes you save when trust the development to seniors. Seniors know how to cope with routine tasks quickly and how to handle tech challenges. Juniors may seem a more cost-effective option, but you can face more hours spent on project development. So, the estimation should always be individual and in direct contact with the development company, you trust your project to.

With Stfalcon, you can expect the cost of a marketplace development somewhere between US $70000 and US $120000. However, bear in mind that the sky is the limit. Advanced features and integrations will increase these figures.

Conclusion

It’s the right time now to join the stream of marketplaces that is trending right now. With an experienced team of Stfalcon, you are sure to develop a state-of-the-art platform that will take its place among the other online marketplaces. Contact us to discuss your idea and find the best way to bring it to life.