Online shopping has experienced an unprecedented boom in popularity as more and more people choose it over traditional brick-and-mortar stores. Roughly 79% of Americans purchase online, according to a recent study.
So, it's unsurprising that more and
more would-be business owners share your dream of building an online
marketplace similar to eBay and Amazon. Here, we'll show you how to set up an online
marketplace from scratch. You will learn all you need to know to begin your
journey right now, from making a marketplace MVP to starting and growing your
business.
What exactly is an online marketplace?
Online marketplaces are virtual stores where buyers can peruse and buy various products. If you have never been to one, picture an outdoor market where vendors from all over the world set up shop, displaying multiple goods for sale. Buyers are free to peruse the displays before making a final decision. The experts project that e-commerce annual sales will hit $8.1 million by 2026.
Online marketplaces differ significantly
from multi-vendor stores in that vendors sell their wares on your platform in
exchange for the exposure and revenue your brand guarantees. In contrast, a
multi-vendor store requires you to buy products from multiple labels and take
responsibility for each sale individually.
Types of online marketplaces
You should be aware that there are various kinds of online marketplace:
1. Based on the focus
- Horizontal:
A horizontal marketplace features many vendors selling diverse goods and
services. Here are a few examples: Amazon and eBay.
- Vertical:
One kind of market is the vertical marketplace, which caters to a
particular product or service. Examples are Etsy, which sells handmade
items; Upwork, which offers freelance services; and Udemy, which offers online
courses.
2. Based on the target audience
- B2C
marketplaces: These online venues allow companies to sell their wares to
consumers in a one-to-one setting. Amazon and Walmart.com are two
examples.
- B2B
marketplaces: Businesses can buy and sell goods and services with one
another in B2B (business-to-business) marketplaces. Amazon Business,
Tradekey, and Alibaba are a few examples.
- C2C
marketplace: C2C marketplaces allow users to transact business directly
with one another rather than going through a middleman. Websites like
Etsy, eBay, and Craigslist are examples.
Based on the geographic reach
- Local
marketplace: Marketplaces on a local level: online venues that bring
together vendors and consumers in a certain region. Nextdoor and
TaskRabbit are two such examples.
- Global
marketplace: Online marketplaces that serve buyers and sellers worldwide
are known as global marketplaces. Here are a few examples: Amazon and
eBay.
Key Benefits of Creating an Online Marketplace
Many advantages can accrue to owners of online marketplace once they go live. You may anticipate the following advantages:
- Affordable
running expenses
Online marketplaces typically have
cheaper overhead than conventional brick-and-mortar stores. Since third-party
sellers on the platform handle inventory management, there's no need for
physical stores.
- Various
sources of income
Owners of online marketplaces can make
money in various ways, including through advertising, subscription models,
transaction fees, premium listings, premium memberships, or partnerships with
supplementary services. A steady flow of money can result from this.
- Expandable
company
Businesses that operate in online
marketplaces can expand rapidly. Market owners stand to gain both in terms of
user base and revenue as their platforms continue to grow and draw in more
buyers and sellers.
- Global
influence
Independent small businesses can reach
a wider audience than they could in a brick-and-mortar store thanks to online
marketplaces.
- Customer curiosity
Because of the variety of goods and
services offered, online marketplaces have become a one-stop shop for shoppers.
More people are drawn to this variety.
- Passion among investors
Investors are also interested in
multi-vendor online marketplaces. Investors are intrigued by their capacity to
adapt to evolving consumer demands and generate revenue through different
channels. Additionally, larger companies or investors may find successful
marketplaces to be attractive acquisition targets.
How to Develop an online marketplace?
There are several critical stages to building an online marketplace. Let's look at the main aspects of making an online marketplace that supports multiple vendors.
1. Select a niche
Identifying a market niche is the initial step in developing an online marketplace with multiple vendors. Your marketplace will prioritize these products and services.
Instead of trying to compete with giants like Amazon, it's better to focus on a niche that interests you or one where you notice the demands of modern consumers are unmet.
There are a number of things to think about when deciding on a niche:
- How large
is the potential customer base for the goods and services that your online
marketplace plans to sell?
- How
fierce is the rivalry in this specific market segment?
- Is this
niche a promising one for future growth?
- How
lucrative is this niche?
- How will
your marketplace stand out from the rest?
2. Do some market research.
Conducting thorough market research is the next step after deciding on a niche to target in your online marketplace. As part of this process, you should verify your niche selection, research your competitors, learn your target audience, and stay abreast of industry trends.
Analyze your rivals in the chosen market segment. Compare and contrast their features, pricing tactics, and customer feedback.
To learn about the niche market's
expectations and problems, conducting interviews or surveys with prospective
users is a good idea. Industry trends and new technology may affect your
market, so it's important to keep up with the latest news.
3. Establish a business model
To successfully monetize your marketplace, you must have a sustainable business model. Here are some of the most common ways that online marketplace make money.
- With
every transaction that occurs on the marketplace's platform, a small
percentage is taken as a commission. Commission rates usually range from
five percent to twenty percent, though they can be as high as thirty
percent.
- Premium
subscription tiers on marketplaces can provide extra perks to sellers and
buyers alike, and these tiers can be priced accordingly. Benefits such as
reduced transaction fees, advanced analytics, and priority listings are
common with these subscriptions.
- Sellers
may be required to pay a listing fee to have their wares featured on
certain online marketplaces. Etsy is one example of an online marketplace
that implements a listing fee for vendors.
- Businesses
looking to reach a specific demographic can purchase ad space on certain
online marketplaces.
4. Construct a minimum viable product
The acronym for "minimum viable product" is MVP. It is a stripped-down product version that early adopters can use to test the waters and give input on improving the final product. If you want to ensure your app meets user needs before spending much money on development, the minimum viable product (MVP) method is a good bet.
Launching a minimum viable product (MVP) is also considerably faster than releasing a full-fledged product. This is a great opportunity to start making money from your product sooner rather than later.
Here are some important things to keep
in mind when you start building your multi-vendor e-commerce marketplace
website:
A. Website address
Your domain name is the address that people will use to locate and visit your marketplace website; examples include infostride.com and amazon.com. Think about these things when you're picking a domain name.
- Try to
think of a name that is simple and easy to remember.
- Your
domain name must convey the nature and purpose of your marketplace.
- Make sure
your domain name stands out and isn't too similar to others.
- Do not
use hyphens or numbers.
The infrastructure and resources needed to make websites and web applications accessible on the internet are provided by web hosting. It entails putting various forms of content, such as databases and website files, on dedicated computers called servers.
These servers are set up to transmit web content to browsers when people visit websites; they are connected to the internet. Cloud hosting, shared hosting, virtual private server (VPS), dedicated servers, and other varieties of web hosting are available.
When choosing a web host for your online marketplace, it is important to consider your present and future demands. When deciding on a hosting solution, it's wise to get input from your development team to ensure it meets your marketplace needs.
In the digital marketplace, digital content can be easily created, managed, and organized with the help of a content management system (CMS). It is the foundation of the marketplace and facilitates the efficient management and presentation of content, including product listings, descriptions, images, and more, for administrators, sellers, and users.
You have the option of developing your own content management system (CMS) from the ground up or using an MVP-friendly CMS like WordPress, Shopify, Joomla, or another similar platform.
Use a content management system (CMS)
like WordPress or Shopify if you're on a tight budget and need something up
quickly. An ideal strategy would be to use a hybrid approach, launching with an
MVP-friendly content management system (CMS) to save time and then switching to
a custom CMS when your market grows and more specific needs arise.
5. Get your marketplace up and running and test it
Testing and public launch of your marketplace are the next steps after setting up your minimum viable product (MVP). Quality assurance is essential to fix any problems and make sure the user experience is smooth.
Also, get some people to try out the
app in beta so you can hear their thoughts on improving it. You should start
planning to launch your marketplace once you are sure your MVP is stable and
fully functional. Based on early user feedback, consider doing a soft launch to
improve your offering.
6. Expand Your Company
Focus on growing your business and expanding your user base once you have launched your marketplace MVP. A well-rounded marketing plan with digital, social media, and content marketing tactics can entice vendors and consumers. Another option is to form partnerships with other companies operating in your sector so that you can promote each other's goods and services.
Keeping tabs on your results will allow
you to fine-tune your marketing approach. You should also keep asking your
customers for their opinions to improve your marketplace. In the end, building
and expanding an online marketplace is a never-ending process that calls
for persistence, flexibility, and a promise to provide worth to everyone
involved.
Future of Online Marketplaces
Online marketplaces are becoming more dependable and functional thanks to the innovative algorithms and updates developed by tech innovators around the world. This sector is currently experiencing rapid growth. The business-to-business e-commerce market is expected to reach over $1.2 trillion by 2022. Additionally, 67% of businesses agree that e-commerce is critical to their growth.
We believe that incorporating game-changing technologies, such as AR and VR, will shape the future of online marketplaces. Both technologies have been overlooked and have not yet been implemented.
Virtual reality (VR) can potentially increase sales in the jewelry and clothing industries by letting customers virtually try on items before buying them online. In contrast, augmented reality (AR) is ideal for interactive marketing (think Pokemon Go).
In addition to these, there may be
chatbots that can process complicated inquiries, start refunds and returns, and
much more shortly. As smart home devices become more commonplace, voice search
will become the norm, allowing users to dictate queries and get results.
Several marketing norms are about to be rewritten because of this revolutionary
change.
Conclusion
While the idea of a sharing economy is not new, it has grown in popularity since the advent of the internet. There are now tremendous opportunities for everyone thanks to modern marketplace websites that link sellers and buyers all over the globe in a matter of seconds.
The success of services demonstrates that good ideas can succeed in the marketplace. Any idea that can differentiate itself from the competition has a good chance of succeeding. Anything worthy of implementation is worth pursuing if it can improve people's lives and also generate revenue.
To help customers make an informed buying decision, some markets offer extra information/reviews in a standardized style. At last, the marketplace operator or owner reaps all the benefits of a reseller without the hassle of keeping inventory or coordinating fulfillment.