How to start your online marketplace?
The thought of starting your own online marketplace has crossed your mind a few times?
If yes, then you’re in the right place! In our online marketplace article series, we’ve covered the whole process of starting the online marketplace, getting everything in order, and scaling it.
In this short introduction, you’ll learn more about some basics when it comes to online marketplaces. And if you’re in need of a partner who’ll work with you while developing your online marketplace — feel free to reach out to us!
The topic may seem complex right from the start, but we’ve done our best to bring it to you in this easy-to-read manner.
Why even start an online marketplace?
A great question — and the one we’ll need to resolve in the very beginning.
The answer lies in the definition of the online marketplace. It’s an eCommerce platform where sellers offer their products for sale, while buyers can purchase products from multiple sellers.
You’ve noticed that the whole action happens between buyers and sellers, leaving you in a regulatory position.
You, as the owner of the marketplace, handle all of the payments, and generate your revenue by collecting fees.
The whole concept is a bit different than it is in the case of a traditional eCommerce store.
Usually, the customer purchases a product directly from the store, while on the marketplace this customer can choose which store to buy from. All of us, considering to be the customers, are in the same situation whenever we visit a shopping center, for example.
Today, the online marketplace is an extremely popular business model, and there’s a strong reason behind this.
As we’re writing this, it’s September of 2020, and we’re stoked to see what numbers are going to arise from this unusual year in business. There’s an indication that we’re going to see the numbers continuing on their positive trend, and we’re not surprised.
Here, you can see the global market value of some of the most popular online marketplaces — and the numbers are astonishing.
If there ever was a time to embark on an eCommerce journey, it’s definitely now.
Now, what makes these online marketplaces so popular? It’s the so-called, network effect. It’s sewn into the online marketplace and it connects both buyers and sellers with the platform.
Simply speaking, the network effect is a phenomenon that as the user base grows, so does the value of the product.
This alone makes it possible for you to scale your online marketplace much faster without the need to manage your own inventory.
So, how would this work in real life?
For example, let’s say you’re a clothing company and you have your own eCommerce store and you decided to switch to the online marketplace business model.
As you build the marketplace and start acquiring some new sellers, you quickly notice that those sellers are bringing in new customers along with them. And the community starts to build around your business.
The number of products on your platform continues to grow, and so does the revenue.
Besides sellers, who will put in their effort to bring new customers to their store, you’ll definitely want to invest in marketing. But to not digress too much, let’s get you started with the first step you’ll want to take — research.
Step 1: Conduct thorough research
This may seem like a vaguely defined step, but we’ll get down to the specifics.
When researching the market, your goal is to find out what are your users’ needs, problems, and ultimately — what’s the solution for their problem.
If you got all 3 correct, you’re well set.
You’ll want to have a clear picture of the industry you’re trying to enter. So, let’s divide this step into 3 parts; researching the industry, the competition, and potential buyers and sellers.
Research the industry
When trying to choose an industry and settle down, you’ll want to know about that specific industry as much as you can.
You’ll want to know its size, growth rate, and the latest industry trends.
Here are some websites that could be useful while conducting industry research!
These sources are highly trustworthy and there’s a huge chance you’ve already come across them.
In any case, check them out and start your research as soon as possible! The sooner you start, the sooner your online marketplace can go live.
After you’ve done your research, you’ll be able to validate your business model. For instance, the size of a specific industry may play a big role in your decision making.
And if you’re charging sellers with selling fees, it’ll be a bit challenging to operate in a small market — even though the entry barrier is low.
Next, you’ll want to know if there are some clearly defined niches in the industry that you’ve chosen. It would be a good idea to choose the most attractive niche you can find, but still — it’s up to you.
Research the competition
Without knowing who your competitors are, you may find yourself in a pickle.
A long time ago, a Chinese general, military strategist, and philosopher, Sun Tzu said:
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
It’s safe to say that this saying applies to much more than just military strategy.
So, you’ll want to find out as much as you can. Here are some questions to help you out with this!
- In what niche does your competition operate?
- How is their website designed?
- What features do they have on their website?
- How are they handling inventory and shipping?
- What kind of fees are they charging?
- How are they communicating with their users?
- What kind of guidelines do they set for their new sellers?
- What makes them stand out?
These are some basic questions you’ll want to start with, and there will be many more as you continue your research. Be thorough and leave nothing to chance.
Find your competitors’ strengths and weaknesses and try to identify some gaps that they don’t cover.
You could organize all of this information in a spreadsheet, making it easily accessible to you anytime.
After you’ve researched your competition, it’s time to move on and find out more about your actual users — buyers and sellers.
Research your buyers and sellers
To get you started right away, here are some starter questions for learning more about your users.
- What are your buyers’ and sellers’ main goals?
- What are their main challenges?
- Where are they buying/selling?
- What motivates them in their decision making?
These questions alone will help you to mold a simple buyer persona and better understand your users’ needs. Of course, creating a buyer persona definitely takes more time than just to answer these questions — but consider starting here.
Here are a few more tips on how to identify your buyer persona!
When you’ve gotten to know your users a bit more, it’s time to find solutions to their problems.
If you’re researching more about your buyers, try to find out more about their shopping habits. Here are some questions to help you out.
- Do they shop online or offline?
- In what stores do they shop?
- How satisfied are they with their shopping experience so far?
- What else would they like to experience when shopping online?
And if you’re on a mission to find out more about your potential sellers, the best way to do so is to contact them directly. Ask them about their products, how are they going to sell them, and where else are they going to sell their products.
Find out what’s missing and how to improve their seller experience.
All in all, you’ll definitely have a better understanding of both your buyers and sellers. You’ll be deeply connected with the industry and it’ll make it easier for you to play out the whole business plan.
After you’ve done the research — it’s time to choose how you’re going to monetize your online marketplace.
Wait, where’s the rest?
In this short introduction, we’ve presented you with the first step you need to take when starting an online marketplace — and it’s definitely a huge one.
On our website, you’ll find 3 articles in our online marketplace series, each covering different stages of starting a new online business.
If you’d like to read the rest of the article, visit our website! There, you’ll find much useful information, so don’t hesitate to check it out.