Many of you people must be wondering what actually is a marketplace online? Let us tell you. It is a type of e-commerce website that links 3 parties: the first one is the sellers who want to sell their products/services, the second one is buyers who want to buy those products/services and the last one is a platform owner who manages the relationships between them and regulates all the processes & transactions.
According to statistics, 52% of overall global retail sales belong to marketplaces online. With 11% as an average commission taken from each purchase, it is not difficult to imagine the profits received by the platforms.
If you are thinking of becoming a marketplace business entrepreneur, you better start working on it now because, in the coming years, everyone is going to see huge innovation in the field of building and running marketplaces. Despite the fact that this is the right time and finally the technology has fully grown now, however, to build a successful marketplace is far from a trivial task. In this article, we are going to tell you what we’ve learned about building a successful marketplace online.
The majority of marketplaces strongly impacted the economy through the job market, employing 500 to 5000 people each.
Let us tell you one thing before getting started, there is no shortcut way for building and running a marketplace online and making it successful. However, it is important to have a sound strategy and knowing the best practices but you still have to be prepared to put in lots of hard work to boost your community.
This article will act as a high-level overview of many of the things that are required to build a successful marketplace online. These include:
- Why marketplaces are booming
- What are the challenges to building a marketplace business
- Why it’s important to understand your personal motivations
- Why the best way to learn is by launching as soon as possible (MVP)
- Why engaging your users should be a priority
Okay, let’s dive deep into the following topics.
1) Marketplace platforms are great businesses
The reason why the marketplace businesses scale very well is that you don’t need to have your own inventory to run one. For example, many online marketplaces that arrange or offer lodging, primarily homestays, or tourism experiences, these marketplaces do not have any real estate listings, nor does it host events; it acts as a broker, receiving commissions from each booking like if we talk about Airbnb an online marketplace for homes, vacation rentals, etc, this company doesn’t have it’s own hotel or homes but it is still considered as the largest company providing short term accommodation in the world. This is a really attractive proposition: you can build a huge business without having to spend a lot of money to buy the initial inventory, and thus taking on a lot of risks.
2) If You Are Thinking Building a Marketplace Online Is Easy, You’re Wrong!
It takes a lot of hard work to build a marketplace online. It is just the beginning when you come up with an idea and launches a website. It is not necessary to have your own inventory, what actually important is you have to solve the chicken and egg problem: how would you persuade people to bring their inventory to your marketplace when there are zero buyers yet and how are you supposed to attract the buyers when you don’t even have any inventory yet. In the coming post, we are going to go over different means of overcoming this problem.
Also, your idea will likely require a large-scale change in mindset. That’s certainly the case with every other marketplace for home rentals. Before they started, most people hadn’t thought of staying at the homes of unfamiliar people or renting out their own bedrooms to strangers. Airbnb managed to change that mindset, but it required a lot of time and effort in building an extremely convenient solution to find accommodation. Marketplaces are rarely overnight successes—most of them require patience to reach critical mass
3) Why Do You Want to Create a Marketplace Business?
Before you get going building up your e-commerce website/marketplace, you should set aside some effort to reflect on three things: why, what, and how.
For what reason would you like to make a marketplace business? Is it because you are worn out on working for another company? Maybe you need to save the world, make huge amounts of money, or you want to build a productive & profitable side business. Whatever the reasons are, articulating your actual inspirations for becoming an entrepreneur is really important because all your strategies will rely upon them.
-Speak to the investors in their own language, yes you heard it right. You must be thinking what does it mean by “their language”? What kind of advice is this? Hold on buddy, let us explain. These people think in capital letters: ROI (Return on Investment), BFR (Batch Failure Rate), EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), and IPO (Initial Public Offering). Try to explain to investors that you want to create relationships between people, and the next thing they would ask you: how much they’d pay? That’s what capital letter language is.
Okay, moving on to the next step:
The next step is to puzzle out what it is that you are going to build? Are you just building it because of the profitable niche? Or are you really into the particular idea? In this step, we’re going to focus on this topic. However, you must keep in mind that building a marketplace online needs lots of dedication and commitment. The more you are interested in a particular subject, the more likely you are going to be succeeded.
-Plan to build something you are really passionate about. because Passion is a powerful force in accomplishing anything you set your mind to, and in experiencing work and life to the fullest extent possible. Ultimately, passion is the driving force behind success.
In this step, we’re going to talk about how are you planning to build your marketplace online?
We’ve made a simple list of questions, all you have to do is understand the question first and then answer it. It will definitely help you in figuring out how you are going to build a marketplace!
- Do you know how to write code? If not, do you have money to hire developers?
- Are you planning to use existing marketplace software, and if so, which will you choose?
- Do you have previous experience running a startup?
- Do you have previous experience in the target market?
- Do you have co-founders or are you alone?
If you can answer all these questions, it will surely help you define the best strategy for developing your idea. Most great startups are built by really competent teams of founders. However, if you do not have a skilled team around you but still want to shoot for the moon, worry not—there because SkyQuest can help you build a great marketplace online, SkyQuest goes beyond best practices and builds powerful e-commerce platforms that drive sales and grow revenue.
4) Focus on MVP (Minumum Viable Product)
Your main goal should be creating an MVP. You can release your project in the shortest time and receive feedback from the target audience at the earliest. Their reaction will help you define what functions are necessary and what features should be removed. Thus you make your product more competitive and attractive to your target audience
We have seen many cases of entrepreneurs putting all their efforts & initial resources into the development of their platform, and after that, they start to realize that nobody is interested in using it. Marketplaces that are technologically well built but fail at attracting users are called “desert platforms”.
5) Interact With Your Users ASAP
It is really important to interact with your user as soon as you start building a marketplace online. Christopher Lukezic of Airbnb says, “What I’ve learned from [the Airbnb founders] is to listen to your users early on and engage them in the process at every step of the way. Don’t just meet them; engage them, converse with them, and prod them to find out what their problems and needs are. People often start companies to solve their own problems, but, over time, all entrepreneurs recognize that to be successful, the product has to be built for a wider array of end-users.”
He also says, “The ones who are truly successful make sure to engage their users at every point along the way in order to solve bigger and bigger problems by presenting transformative solutions to the way we live our lives.”
Let’s Start Building a Marketplace Online…
So we’ve covered all the important things you need to know before building a marketplace business. Now you have all the information about it and you also know the advantages and the biggest challenges. Congratulations! because you can now build a great marketplace business. However, don’t forget that it needs a lot of hard work and dedication to create one.