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How To Create A Marketplace Business Plan In 11 Steps: Full Guide

• November 17, 2023
• Fundraising

Both in the B2C and B2B industry, marketplaces have reshaped how we purchase online. They are flourishing in all verticals today, from large-scale consumer markets to B2B niche sectors. Whether you are raising capital or applying for a grant, you will need a solid business plan for your marketplace startup.

Whilst every marketplace is unique, we strongly recommend to follow in your business plan a clear structure vetted by dozens of high-profile VC firms globally. Having a powerful and clear business plan will maximise your chances of raising capital from potential investors.

In this article we walk you through the 11 sections you must have in your Marketplace business plan. Let’s dive in!

Note: If you are looking for a pitch deck instead, read our guide here . Although business plans and pitch decks are similar, they are also very different in their format. If you aren’t sure what is best for you, we recommend to read our article on the key differences between business plans and pitch decks .

Marketplace Business Plan: The Template

If you are creating a business plan for your marketplace startup, we recommend you follow the following structure:

• Executive Summary
• The Problem
• The Solution
• Market Opportunity
• Competitive Landscape
• Business Model
• Intellectual Property
• Marketing Strategy
• Financial Plan

1. Executive Summary

The executive summary is the introduction of your business plan. This is a section you should spend a lot of time on as it’s the first impression investors will have when looking at your business plan.

The executive summary should fit in 2 pages maximum . Make it to the point, concise, and make sure to answer the following questions:

• What is the problem you want to solve?
• What is your solution?
• Who are the co-founders behind the project?
• Do you have early traction?
• What are you asking for (capital from investors, government grant application, etc.)?

2. The Problem

This is the “why” of your business. Explain in this section what is the problem you are trying to solve.

The greatest businesses are solving big problems, yet they aren’t necessarily obvious . For instance, your marketplace might be in a niche B2B market and digitalising a legacy industry (health supplies for private clinics for instance). As such, you are solving an important problem for private clinics: the lack of product information, choice and unfavourable bargaining power from large suppliers.

Ideally you would list the 2/3 friction points you aim to fix. For instance, digitalisation usually fixes multiple problems at once: it is fast, seamless and accessible (vs. slow, prone to errors and non-readily available / accessible solutions).

Expert-built financial model templates for tech startups

3. The Solution

Your startup builds and commercialises a product and/or a service which solves the problem explained earlier.

This section should not explain in detail your product nor how it works. Instead, it should focus on the benefits for your customers .

Ideally, you should compare the pain points explained on section 2 (the Problem) to the benefits your solution brings to your customers. That way,  it is crystal clear to investors your solution really adds value to potential customers .

Following our marketplace example above, the benefits could be:

• Availability of products and comparability: clinics can choose exactly the product they are looking for, easily comparing features vs. alternatives
• Price competition ensuring best price-quality ratio

4. Market Opportunity

Here, you need to clearly identify 2 very important metrics:

• Market size :  how big is your market?
• Market growth:  how fast does your market grow?

If you are operating in a niche market, chances are that you will face some challenges: the information might not be publicly available. In any case, you should be able to make a high-level estimation of your market.  Read our article on market sizing and how to estimate TAM, SAM and SOM for your startup .

When looking for these metrics, you have multiple sources of information: public reports, specialised press, etc. Even public companies publish press releases and annual reports including some of their proprietary market estimates so be sure to look there too.

5. Competitive Landscape

How fragmented is your market.

Are there 3 big players sharing 90% market share or thousands of small players? Here, refer to public market reports and your own understanding of the competitive landscape.

A few questions you could ask yourself, among others:

• Who are your competitors?
• Are they local, regional, national or global?
• Are there any marketplace already in your industry or suppliers only?
• What’s the bargaining power of suppliers vs. buyers?

Where do you position yourself vs. competition?

Is your solution a game changer other competitors don’t have (yet)? Do you have competitors with similar products/services?

Ideally, you would create a small table with, for each type of competitors (e.g. wholesalers, marketplaces, direct suppliers, etc.) the main characteristics they share or not. For instance, do they all a global presence? Do they cover all the products you offer? Are they selling multiple brands / suppliers products? What is their relative price positioning (expensive vs. accessible)?

6. Business Model

This section is very important. Now that we have clearly identified the problem you are solving and the benefits of your solution, let’s have a closer look at your product.

This is where you clearly explain 2 key things:

Which products/services do you offer?

Marketplaces typically act as intermediary between sellers and buyers for specific products and/or services. Unfortunately, the global marketplaces like Amazon are exception to the rule here.

Here you will need to explain clearly what is your product offering : what services/products are you focusing on? Ideally, you would show a breakdown in terms of orders or revenues (pie chart for instance). Indeed, using our health supplies B2B marketplace example above, you might only focus on disposable health supplies (and not heavy medical equipments) for instance.

Another key information to add here is the average order value: what is the average value of the products? Are products transacting on your marketplace $50 piece second-hand clothing or $20,000 specialised industry rental machinery?

Pricing model

Marketplace are generating revenues from a number of sources, usually there are 3 main sources:

• Commission revenue : the main source of marketplaces. Marketplaces generate commissions revenues from 2 sources: either percentage of order value (for instance 10% of all transactions’ value) or a fixed fee instead (for instance $20 per transaction)

Note: the sum of commission revenues as a percentage of total transaction value (gross merchandise value) is usually referred to as “rake” or “take rate”. For a refresher on the 10 most important marketplace metrics, read our article here .

• Subscription revenue : you offer a tiered system, freemium or not (free plan) users need to pay for (monthly or annual billing cycle). You can charge either sellers or buyers (or both) for accessing the marketplace
• Additional revenues: marketplaces can sell add-on services such as promotion & content (e.g. promoted ads), white-label products, marketing and branding services, etc.

7. Intellectual Property

This section is optional: only include it if you already have a MVP. If so, you have a strong argument for product-driven investors which will give a lot of credit to your tech.

Be careful not to go into too many specifics though: investors aren’t always engineer by training. Do not put things like the programming language you have chosen (e.g. React, Python) or the database provider (PostgreSQL, MongoDB).

Instead, include things such as:

• whether you have a white-labelled solution or a proprietary back-end / database
• how many full time front/back-end engineers you have
• how much you invested already in your tech

8. Marketing Strategy

This section explains  how you acquire sellers and buyers respectively .

Depending on the type of customers you have, acquisition will likely be different. For instance, large suppliers (sellers) are usually acquired via outbound acquisition (Sales representatives). Instead, consumers (buyers) are acquired purely through traffic (paid or organic).

The different sources of acquisitions for marketplaces are:

• Paid marketing : any paid digital marketing campaigns (pay-per-click or per-impressions), whether it is search to your landing page (e.g. Google Ads), social media (e.g. Facebook Ads) or referrals. Paid marketing is mostly used to acquire sellers and buyers. As explained above, whilst buyers can be acquired exclusively through paid marketing or organic growth (see below), sellers can also require sales team effort (see below)
• Organic growth : you acquire sellers and buyers without paying for it. Organic growth is typically driven by investment in content (SEO, social media)
• Outbound acquisition : you acquire sellers (or rarely buyers) thanks to your sales team who contact potential customers via phone, emailing or in-person sales efforts. This is especially true for marketplaces who connect a few large suppliers to potential buyers.

Once you have clearly explained your acquisition strategy and what tools you are using (e.g. Google Ads for paid search, social media and content for organic growth), ideally you can show, among others:

• Your average  Customer Acquisition Cost
• Conversion rates and its components (add-to-cart rate, cart abandonment rate)
• Your monthly paid ads budget
• The number of followers you have on social media
• Your newsletter count

Note: for a refresher on the 10 most important marketplace metrics, read our article  here .

The roadmap tells investors where you are going and how is product going to evolve in the future. You can either keep it high-level (e.g. your long-term strategy) or more detailed (e.g. the pipeline of the near-future product features).

Investors do not just invest in your product as it is today. For example, you might only have developed a MVP with limited features for  early-adopters  while your product could be tweaked and serve a much larger customer base in the future.

Also, you might be broadening the type of products you offer in the future. Or you might introduce premium services such as a subscription, or premium listing fees. All of these additional features are very important to add in your investment deck.

Note: if you choose to include your product pipeline, keep it very simple. Your marketplace business plan isn’t your product manager’s presentation to engineers.  Instead of features, focus on the additional benefits and customer segments you might target  as such.

In this section you should focus on the people behind the company. Unlike in the executive summary, the team section of your business plan should not be limited to the cofounding or management team.

Instead, you should explain the current organisational structure of your company, the different teams, who they report to and their relative size.

For the people, keep it short. Keep biography to a minimum and only to key people (cofounders and management team). As rule of thumb, 5 lines per team member are enough, 10 a maximum.

When it comes to biographies, only include what is relevant: name, position, years of experience and/or previous companies is more than enough.

What about advisors?

Do you have angel investors with significant experience who advise you on strategy? Do you have a PhD who acts as advisor to your marketplace startup (on regulation and market access matters for instance)?

Any advisor should also be included here, with the same level of detail as for the management team.

Demonstrating in your business plan that not only team members but also experts are advising and/or sitting on your board is a strong selling point.

Note: add a clickable link to the respective Linkedin profiles so investors can refer to a more exhaustive resume for your team members (if relevant)

11. Financial Plan

Along with your product and the team, this section is very important. Unfortunately, many startups overlook the importance of financial projections in their Marketplace business plan.

Think about your audience: investors (venture capital firms or angel investors) are financially literate individuals . As such, they invest in your business to generate returns. Logically, they care a lot about your financials and more especially,  the expected financial performance of your business .

Do not expect investors to make up their own plan for your startup if you haven’t. As CEO, founder or entrepreneur alike,  you should have a clear idea of where you are going .

As rule of thumb, the more advanced your startup is, the more granularity you should include here. Pre-seed startups might keep it short (2/3 pages maximum) yet we recommend seed and Series A+ startups to include 4/5 pages at least instead.

Common marketplace metrics you should include in your financial plan slide are:

• Gross Merchandise Value (GMV)
• Average Order Value (AOV)
• Seller / Buyer Ratio
• Repeat Orders Rate
• Customer Acquisition Cost (CAC)
• Customer Lifetime Value (CLV or LTV)

For a complete list of the 10 most important metrics for marketplace businesses, refer to our article  here .

Marketplace Financial Model Template

Download an expert-built 5-year Excel financial model for your pitch deck

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How to Write an Ecommerce Business Plan [Examples & Template]

Published: April 03, 2024

If you have a promising idea for an online e-commerce business , it’s important to create an e-commerce business plan to ensure your vision has enough stock to be profitable.

Having a business plan for your online store will help you define your target market, establish your monthly and quarterly sales goals, and increase the likelihood of long-term e-commerce success.

In this post, we’ll go over an online store business plan and how you can create one for your e-commerce startup. Let’s get started.

What is an e-commerce business plan?

An e-commerce business plan is a document that outlines your business and its goals, analyzes your industry and competitors, and identifies the resources needed to execute your plan. It also lists the e-commerce retailers you’ll use to distribute your products and the marketing strategies you’ll use to drive sales.

Whether a company operates as a startup or has years of operations and growth under its belt, an e-commerce business plan is essential for evaluating a business and determining areas of improvement.

An e-commerce business plan is essential, with increasing numbers of shoppers conducting business online. It's estimated this number has reached over 2 billion . An e-commerce business plan keeps you organized and is useful when seeking investors who need to understand your company.

So, let’s dive into some examples of e-commerce business plans and what goes into writing one using our free template .

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

You're all set!

Click this link to access this resource at any time.

E-commerce Business Plan Template

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How to Make an Ecommerce Business Plan for Your Startup

Darren DeMatas

February 28, 2024

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In addition to receiving commissions generated through affiliate marketing, we are able to fund our independent research and reviews at no extra cost to our readers. Learn more.

So you’ve decided that you want to quit your day job and start your very own ecommerce empire. That’s great!

But before you become the next Jeff Bezos  (and definitely before you quit your job!), it’s worth spending some time thinking about a business plan. In this article, we’ll dive into the key elements of an ecommerce business plan, which is very different than writing traditional business plans.

Why You Should Create a Business Plan

We know that starting an ecommerce business is exciting, and it can be tempting to jump right in without constructing a business plan. READ: PLEASE DON’T DO THIS.

If you haven’t put your ideas, questions and concerns on paper, then you haven’t given your business model enough thought .

Taking the time to write a business plan might seem like a lot of work, but it can save you a lot of time and money in the long run by better preparing you for potential challenges and opportunities that you’ll face as a first-time entrepreneur. Think of it as a roadmap for your new business venture.

It’s exciting to start your own ecommerce business. However, you want to be well prepared and not jump into anything without having a solid, foolproof ecommerce business plan in place.

After all, you wouldn’t jump out of a plane without a parachute, so why start a business without a safety device in place? That safety device is your business plan.

The business plan is the brainstorming process that ensures your concept and goals are realistic.

This is more than just mental notes. True business plans take your ideas , questions, and concerns and put those in writing.

As you start creating your business plan, you’ll soon understand that it’s more than a single piece of paper with handwritten details on it. It’s a clearly constructed format of how your business will be created, how it will operate, and what you hope the future holds in terms of a successful ecommerce business.

When you write your business plan, be sure to have a target audience in mind. Are you going to look for investors or put a Kickstarter campaign into motion and use this as your descriptive platform? If so, make sure that your business plan contains everything the audience would want to know about your business (and more!). Many traditional funding solutions require a business plan in order to give you capital. However, there are alternative solutions, such as  Payability  that specialize in ecommerce and don’t require credit checks, a business plan, or any complicated paperwork. They can also get you approved in as little as 24 hours.

When your business plan is completed, you should have achieved the following goals:

• Knowledge:  A greater sense of knowledge of the business aspects.
• Resources:  The resources you’re going to need to make your business successful, such as partners, money, employees, etc.
• Road Map: Have clear set goals to take you from the very beginning of your business and onward.
• Viability: In other words, is your business possible? Will you have enough profit margins to keep the doors open long-term?

Now that you know why you should create a business plan, it’s time to move on to how you can create your business plan and get started putting your ecommerce business into motion.

How to Start an Ecommerce Business Plan

At the very beginning of the planning stages, it’s a good idea to develop a framework for your business model. This business model will continue to evolve as you create each section of your ecommerce business plan, so don’t strive for a perfect completed plan on the first try. You will be making tweaks to the plan of certain steps along the way.

There are many ways to sell products online and different business models  to pursue. Research and learn from successful ecommerce business examples in the market. The exact business model you follow will be one that makes the most sense with your resources, skills, and interests.

In order to create the best online business plan with your product in mind, you need to figure out the following things:

What are you selling?

The first step to creating an online business is to learn the absolute basics of what you can sell.

• Physical products: Clothing , shoes, home goods
• Digital products: Software as a Service products, ecourses, ebooks
• Services: Consulting services, home cleaning

Who are you selling to?

• Business-to-Business (B2B): You are selling to organizations, corporations, and non-profits rather than individual customers
• Business to Consumer (B2C): This means you are selling to individual consumers rather than businesses
• Marketplace: You are acting as a middleman by bringing businesses and (B2B or B2C) customers to one website.

How are you sourcing your product?

• Manufacture in-house: You make your product or service in-house
• Third-party manufacturer: You outsource the manufacturing of your product or service to a third-party manufacturer
• Dropship: You partner with a dropship manufacturer. Basically, this means that they make your product, package it and ship it directly to your customer while your company handles the entire customer relationship.
• Wholesale : You buy goods or services from other companies in bulk and re-sell those products on your online store

Additional References

• Entrepreneurship: Business & Marketing Plans
• Small Business and Entrepreneurship
• Entrepreneurship Resources
• Business Plan Resources

Executive Summary

The executive summary will be written according to your goals, and it’s recommended that this is done at the very end of your business plan completion. This will ensure that you include all of the important factors about your business and present your ideas in a concise and complete way.

Some of the features you’ll include in the executive summary include information showing that you’ve done your research, you have concrete sales forecasts, and the main details about your brand.

Business Model

When you’re figuring out your business model, you have to consider four different areas:

• Monetization strategy
• Product/industry
• Target market
• Sales channel

Monetization Strategy

The monetization strategy delves into the methods you are going to use to sell your products.

This strategy will look at different product monetization methods, including white label, private label , affiliate marketing, wholesale, dropshipping, and even selling ads.

Product/Industry

The product industry section is where you summarize your main niche.

For example, “Vegan Skincare Products.”

Target Market

In the target market section, you will write a sentence or so on who your target market, or ideal customer, is in the community.

If you’re selling vegan skincare products, your target customers might be women who embrace the vegan lifestyle and use natural skincare products in their daily beauty regimen.

Sales Channel

The sales channel refers to where you’re going to sell your products.

For example, you might be selling your products on your own website, and this should be entered in this section.

Business Overview

This next section covers your company overview.

This section of your business plan will cover various features of your company, including the following:

• Company type
• Domain name
• Value proposition
• Brand traits

The brand name section lists your business name or brand name.

This is an extremely important aspect of your business plan as it’s what will set the tone for everything that follows.

Pick a brand name that’s simple yet unique and is something that can be used in a wordplay manner, if desired, but not pun-worthy.

Company Type

The company is how your business operates. For example, you might label your business as an LLC , S-corporation, sole proprietor, or some other type of business organization.

The best way to determine how you should categorize your company is to speak to your accountant. There are various tax and legal aspects to forming your business in a certain way.

Speak with the professionals in the company and corporation formation field to determine how to label your company and which company type best benefits your business in a variety of ways.

Domain Name

This section is where you list your domain name.

Choose a domain name that is memorable and embraces the overall traits and features of your business.

And, when choosing a domain name, be sure to think of SEO aspects when doing so. You’ll find out just how much all of these things tie together and ensure a frequently-visited website is the end result.

Keep in mind that with ecommerce, the domain name is just as important as the brand name. Maybe even more so!

Value Proposition

A value proposition is a short, crisp statement that will gauge how clear your idea is. Write this section as if you had one minute to explain your business to a potential investor or customer and then practice it over and over again.

The value proposition can be used on your ecommerce store as your company description.

Here’s a good example: Say you’re looking to start a hiking company called Atlas Hiking Co. which sells premium performance hiking shirts. A possible company description could be the following:

Atlas Hiking Co. is a lifestyle hiking company that produces high-performance hiking shirts for outdoor lovers. Our proprietary SPF40 fabric is one of the lightest fabrics on the market, providing mountain lovers with maximum comfort, both from a breathability and sun-protection standpoint. Our product is made in the U.S.A. and a portion of our profits are donated to preserve national parks around the country.

Pay special attention to all the sensory words !

The mission statement in your business plan is the “why” of it all.

For example, why you started the business, why you are selling the products you are selling, etc., can all be added to this section of your business plan.

You can make this portion as simple or detailed as you like. Just make sure to properly and clearly explain your business mission.

The vision part of the business plan is your “how” in the grand scheme of things. It is the dream you have for your company and the path you’re going to take to realize that dream.

When you write the vision portion of the business plan, think long-term. What are you hoping to achieve, not just in the near future but for the long haul of the life of your business?

Look into the future and plan out where you see your business in 5, 10, even 20 years from now.

This will help you construct the rest of your business plan if you know where you want your business to head, now and in the future.

Brand Traits

The brand traits section is a short section in your company overview.

Basically, in the brand traits section you’re going to want to list three to five words that describe your brand.

Think of your brand personality and describe it using a few separate powerful words.

The personnel section lists all individuals, including yourself, who will be involved in the daily operations of your business. You can create a separate section for a full operations plan or add that later.

Some business owners choose to handle all duties on their own or with a partner, while others will hire individuals to fill the following roles:

• CEO (usually the business owner)
• Management team
• Customer service/logistics
• PR/Social media specialist
• SEO manager
• Advertising manager

Competitive Market Analysis

Here’s a fact you can bank on: there has never been a successful e-commerce entrepreneur that didn’t understand his/her target market cold.

That’s why this section is one of the most important in the entire business plan. It will force you to understand the industry in which you operate, the overall industry analysis and outlook, the existing competition, and your target customer demographic.

Market Segment

The market segment portion of the business plan will help you to put your ideas down on paper, make them more focused, and get your team together.

This area will include your niche selection, target market, and competitive analysis.

Niche Selection

The niche section  provides an overview of your niche, why you selected it, whether there’s a micro niche included, and the type of niche you’ve chosen.

The purpose of this section is to crystalize the ideas that you have and make sure they are understandable and viable.

The target market section covers an overview of your target market plus describes your market segments.

Ask yourself who your  target customer  is (population size, age, geography, education, ethnicity, income level) and consider whether consumers are comfortable with buying your product category online.

When listing the target market information, make sure to mention your target audience size as this is important for ensuring that your audience will be adequately covered.

Competitive Analysis

With the competitive analysis portion of your market analysis, you want to list your market leader and direct and indirect competitors.

After you mention who these entities are, you need to list the characteristics of each one, such as domain name, business model, monthly traffic, and pricing range.

However, before you even get started in writing this section, you need to spend several hours researching your target market.

Here are some of the most efficient ways to research a particular market:

Industry reports

Google is your best friend. Look for any recent industry reports on your market of choice. This will give you a good sense of how much growth the industry is experiencing, why this growth is happening, and what are the largest customer segments. In our example of Atlas Hiking Co., we should research the outdoor apparel market.

Let’s say that through our research of the outdoor apparel industry, we discovered that there was a huge boom in youth hiking apparel. Perhaps parents were increasingly concerned about their kids’ exposure to UV rays while hiking, so they began to spend more money on their kids. We could use this valuable information to guide our business strategy.

There’s only so much you can read online. Go to a nearby store that sells similar products to yours and interview the store representative. The store rep has interacted with hundreds of interested customers, which can lead to thousands of valuable insights! It’s amazing how these insights can translate into a meaningful business opportunity.

Here’s an example:

If I were going into Billy’s Outdoor Store to research the outdoor apparel market, I would probably ask Billy the following:

• What are your best-selling products?
• What are your worst-selling products?
• Find products similar to yours and ask the representative his/her favorite features on products similar to yours.
• How much are customers generally willing to spend on these types of products?
• Do customers make repeat orders of any of these products?
• Do you get a lot of customers that are looking to buy last-minute hiking gear before they go on a hike?

Competition

Create an Excel spreadsheet of all of your competitors. In your spreadsheet, you should have the following columns:

• Competitor Name
• Price point
• Product Description
• Key Features (e.g., fabric, waterproof, slim fit, etc.)

What is the competition missing? Is there a gap in the offering? Where you can add some additional value?

After conducting the competitor analysis, Atlas Hiking Co. might find that the competition’s hiking shirts offer very few features at a low price point, but no one offers a luxury hiking shirt with additional features at a higher price point.

This is just an example of the types of insights one can gain from market research which can drastically alter your business model.

Keyword Research

By using Google’s keyword planner  and trends pages, you can get a good sense of how in demand your product is and whether it’s trending upward or downward. Google is great for a general idea, just don’t bank on it.

Some other keyword tools you can use for keyword research include Ahrefs, JungleScout, and Viral Launch. Check out this list  for more ideas.

Trade shows

Are there nearby trade shows that you can go to? Again, creating connections with other people in your industry is a surefire shortcut to countless hours of reading on the internet. Trade shows are also a great opportunity to talk to competitors, meet manufacturers, and better understand where things are heading in your industry.

Once you finish researching the relevant industry, you should summarize your findings by answering the following questions:

General Industry

• How big is the overall industry?
• How big is the specific sub-industry in which you intend to operate?
• Where has most of the historic growth in the market come from?
• Why is this the right time to enter this market?
• What are the sub-segments that are poised for future growth (e.g., youth apparel)?
• How crowded is the product category with competition?
• How is your competition distributing its product (online, retail, wholesale, etc.)?
• What’s missing from the competition’s product offering?

Products and Offers

So we know we want to sell hiking shirts, but how do you research specific products?

But for some of us, we’re not quite sure what we should sell. To succeed in online retail, you need a product that is trending upwards in a growing niche.

Different types of products

Some of the different types of products include the following:

• Convenience products: Frequent purchase products, little effort on buying
• Shopping products: Less frequently purchased in between purchases, little more effort and planning, shop around
• Specialty products: Strong brand preference and loyalty, will buy no matter what the price

The various types of niches include the following:

• Hobby niches
• Lifestyle niches
• Problem niches
• Weird/embarrassing niches

Existing products

Come up with detailed specifications for each product or service you intend to sell. If it’s a hiking shirt we’re selling, we would want to have:

• Detailed sketches of the shirt
• Fabric weight, materials, type
• Key features (e.g., pre-shrunk, water-proof, SPF 40)

Future product pipeline

What are other products that you have in the pipeline? Perhaps once you’ve successfully sold hiking shirts, you’re able to leverage your manufacturing relationships to provide hiking socks and shorts. Include that information in this section.

The products and services section will cover the various selling categories of items.

These product offerings will include the following:

• Core product

Each product group will have its own purpose in your sales catalog. For example, tripwire is the product that brings customers to your ecommerce store or online marketplaces  while the core product is your main seller.

Knowing what products you’ll include within each section allows you to have a firm grasp on what your main product will be and how the other types of products will work alongside your main product.

This section will also cover the search volume and Amazon pricing range.

You’ll need to calculate your true costs. You have to make sure you don’t overestimate your margins.

To tabulate your total true costs, you need to write down the costs in the following areas:

• Target price
• Supplier cost of the product
• Total cost per unit
• Net profit per unit
• Profit margin per unit

Once you complete the pricing portion, you’ll have everything on one sheet and readily accessible whenever you need it.

Marketing Plan and Operations

So, now you’ve concluded that you have a great business idea, and it’s in a growing market. That’s fantastic – but how are you going to drive traffic to your ecommerce website and get customers to buy it ? And how much can you afford to spend on your product?

Marketing  is everything. It’s important that your marketing efforts match your business model.

If you have a website and no marketing, your site won’t have any visitors. With no visitors, you will make no sales. Then how do you grow and sell your ecommerce business (if that’s your long-term goal)? Even with the best possible products, nobody will buy them if they aren’t directed to them in some way.

In order to come up with a marketing strategy, you need to first know your customer inside out. You should be able to answer such questions as:

• How old is your customer?
• Where does your customer live?
• What is the population of your customer base?
• What is their education level?
• What is their income level?
• What are your customer’s pain points?

With so many channels to reach your customer, which one is best for you?

Once we know pretty much everything there is to know about our target customer, we can shift focus to our marketing strategy. You want to choose marketing strategies that equal positive conversion rates. What channels should you use to grab the attention of your customer demographic? Some of the key marketing channels include:

Paid Marketing

• Pay-per-click – this online marketing typically involves using Google Shopping campaigns  and managing a product data feed.
• Affiliate sales networks – Allowing other blogs and websites to sell your product for a cut of the revenue. List the different affiliate sale networks that you plan to promote through.
• Facebook ads ⎯ Ads posted on Facebook to draw in buyers through social media means.
• Influencer marketing ⎯ Hiring industry influencers to get the word out about your product through their social media platforms and contacts.

Organic Marketing

• Social media (Facebook, Instagram , Pinterest, etc.): What is your strategy for social media, and where will you dedicate your attention?
• Search Engine Optimization : Create and promote awesome content so people find your product organically through search.
• Content marketing: Figure out how you’ll use content marketing in your business. Consider various article topics that will persuade your target audience to buy your products.
• Blogger networks: could be organic or paid through affiliate sale programs.
• Key bloggers: Develop a list of the key bloggers in your product category. For Atlas Hiking Co., this might be an influencer that blogs about the best hiking trails in America.

Finding the optimal mix of these advertising tools depends 100% on your customer segment as well as your product type. For example, a SaaS product targeting millennials will require an entirely different marketing strategy than an e-commerce physical product targeting baby boomers. Perhaps that should be a post on its own for another day!

How much should you spend to acquire a customer?

In order to understand this, we need first to discuss a concept known as customer lifetime value or LTV. In essence, this is a formula that helps you better understand how much an average customer will spend over time.

Here’s  a good read on how to calculate LTV.

It’s important to remember that for new businesses, you don’t have a lot of data on customer purchase habits so it’s a good idea to be more conservative with your assumptions in calculating LTV.

Let’s say, for Atlas Hiking Co., I determine that the average LTV per customer is $300. This means that over time, the average customer will spend $300. Let’s say, on average, if I receive $300 in revenue, $100 of that will translate to gross profit before I factor in my marketing costs (basically, I’m just subtracting the cost of making the shirts).

Knowing that my gross profit is $100 per shirt is a critical piece of information because it tells me that I can spend up to $100 in marketing to acquire a customer and still be profitable!

Some of the marketing options include social media marketing and content marketing.

Think about your business model and then line up your marketing budget. Your marketing budget may include the following items:

• Sales/branded content
• SEO/blog content
• Facebook/Instagram ads
• Influencer marketing
• Marketing tools
• Niche advertising

Choosing The Right Technology

With so much technology and SaaS products out there, it’s important to understand the various moving parts and diagram how they all integrate with one another.

Some of the different elements include:

• Shopping Cart Platforms  – e.g., Shopify , BigCommerce , WooCommerce , or any open-source platform
• Hosting – Nexcess , BigScoots , Kinsta , WPX
• Payment Processo r – e.g., Stripe, Paypal
• Fulfillment Center – e.g., Amazon, ShipBob
• Apps – e.g., Zipify, BuildWooFunnels, Gelato
• Accounting & Taxes  – e.g., Quicken, Xero
• Marketing Automation – e.g., Klaviyo , Mailchimp
• Marketing Tools – e.g.  Buzzstream, Ahrefs
• Customer Loyalty Programs  – e.g., Antavo, Smile

Come up with a detailed list of the different products and services you need to run your business as well as the monthly and per-transaction cost of each of them. This will be important in understanding the impact of these services on your margins.

Matching your business model to your technology is essential, too. Certain website platforms are better suited for specific sales models.

Email marketing is another type of technology that should be carefully considered and matched up correctly with your business model.

Keep in mind that it takes, on average, 6-7 interactions with a brand before someone makes a purchase, so you need to keep using technology to get them back to your website.

As you explore the technology options and find out ways to draw potential customers in and keep them happy while they’re there, here are some key points to keep in mind:

• What you say about yourself and your products with your website content
• How you respond to questions on live chat and email support
• How to make use of chatbots
• How you connect on social media
• The information you send through email marketing
• What bloggers and influencers say about your brand
• How existing customers review your company
• How you advertise
• How you establish loyalty beyond sales

After you figure out your technology methods, you have to come up with a technology budget.

The business plan must also include the operations side of things. Determine who will be your manufacturer, secondary manufacturer, and shipping and fulfillment  provider.

When looking at supply chain costs and options, ShipBob  is an ecommerce fulfillment provider you can consider.

Financial Plan

When figuring out your financial plan, evaluating and pinpointing your startup costs  is essential.

The focus of the financial plan is how long it will take for you to make your money back. You also need to figure out if you need a business loan .

Traffic and conversion rates will help you determine how long it will be until you start making money back.

You’ll also want to use an income statement to detail financial information.

This section is used for financial projections, such as forecasting sales, expenses, and net income of the business. Ideally, you’ll want to create a monthly Excel balance sheet showing the following:

• Projected revenue:  First, come up with your projected number of units sold and then come up with your projected revenue (Projected Revenue = # of Units Sold * Average Sales Price).
• Fixed expenses:   these are expenses that are fixed no matter how much you sell. Typically, these relate to monthly SaaS subscriptions, employee salaries, or rent.
• Variable expenses  – these expenses change in direct proportion to how much you sell. Common examples include the cost of goods sold and credit card payment processing fees.

This helps business owners better understand what they need to achieve to hit their profit goals. In reality, projections are usually always off the mark, but it’s good to give yourself some measurable goals to strive for.

This section should aim to answer the following questions about your product offering:

• How much product do you need to sell per year to meet your income goals for the business?
• What are the margins on your product? If you sell one hiking shirt for $50, how much do you make after paying your supplier, employees, and marketing costs?
• What is the lifetime value of a customer?
• How much can you spend to acquire customers? If you conservatively project that the average customer will spend $300 over time on your shirts, then you can afford to spend an amount less than $300 to acquire that customer using the paid marketing channels described previously.
• Do you have any big capital expenditures early on that would require you to need to bring in investors?
• Can you improve gross margins by making bigger orders from your suppliers?

There are various acquisition channels that will help your traffic to convert including:

Your revenue plan will contain a 12-month revenue forecast plan to help you map out each month of earnings.

There are different business earning models you can go through to determine how much you can make with your business.

You want to calculate how much traffic costs. This all depends on the methods you use to gain traffic to your site.

As you determine what your profit might be with your ecommerce business  or ecommerce businesses, there are certain math formulas to use:

• The profit equation
• Break-even analysis
• Units needed to achieve the profit target

You should also consider how you will use fintech companies in your ecommerce business.

What are the key elements of an ecommerce business plan?

The main components of an eCommerce business plan include the executive summary, company description, market analysis, organization and management structure, product line or service, marketing and sales strategy, financial projections, and funding request, if applicable.

How do I create a budget for my ecommerce business?

Start by estimating your initial startup costs and ongoing expenses. Consider costs like website development, inventory, marketing, shipping, taxes, and any necessary licenses or permits. It’s also important to factor in a contingency plan for unexpected costs.

How do I find the right product to sell?

Research is fundamental. Look at market trends, customer needs, and competitor products. Use tools like Google Trends or social media platforms to understand what customers are currently interested in. Always consider your passion and knowledge about the product too, as this can drive your business forward.

How can I differentiate my product from competitors?

Differentiation can come from unique product features, superior customer service, better pricing, or a compelling brand story. Understand what your competitors offer and how you can do it differently or better.

Wrapping Up Your Business Plan

Careful planning is crucial to get your e-commerce business from the planning phase to the launch phase and to ensure its successful future.

Going through the exercise of writing a business plan will cement your own understanding of your business and your market. It will also position you to take advantage of lucrative opportunities while mitigating harmful threats to your business down the line.

Your turn! Have you written a business plan for your online store? Do you have anything to add? Tell us about it in the comments below!

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Online Marketplace Business Plan Sample

Download the multi vendor marketplace business plan sample in pdf, fill the form to download online marketplace business plan example.

As the name implies, a marketplace is a two-sided business model connecting potential buyers and sellers within one platform to facilitate sales, purchases, and exchanges.

There are many companies operating as online marketplaces, such as Amazon, eBay, Airbnb, and Uber. 

Online marketplaces are reshaping the way things are purchased online, both in the B2C and B2B industries. From large-scale consumer markets to B2B niche sectors, they thrive in every market today.

Writing a business plan is important for any type of company, but it’s especially crucial when building a marketplace. Though every market is unique, we strongly recommend following a clear structure vetted by our professional business plan writers .

Having a strong and clear marketplace business plan will maximize your chances of raising capital . This document lays out your goals and strategies for achieving them, and it can be used as a roadmap to help keep your business on track.

Marketplace Business Model Examples

$3.23 trillion in goods were sold in 2021 on online marketplaces. This is where Amazon is a leader.

Typically, online marketplaces operate on commission, subscription, or listing fees. However, there are many more revenue models. Each has its own benefits and difficulties.

There are 6 different marketplace business models that entrepreneurs can use today:

1. Commission Revenue Model

A commission model charges a fee for every transaction. This is the most popular online marketplace business model. Typically, the marketplace charges a percentage of the customer’s payment to the supplier.

Amazon, eBay, Etsy, or Airbnb are examples. They all charge a commission per transaction and have sellers offering a variety of products.

2. Subscription Model

A subscription model is a revenue model where users pay a regular fee to access a platform.

Using an online marketplace with a subscription model allows suppliers to find new clients, or access a database of potential clients.

Subscription models are good for online marketplaces with limited resources, or whose business logic excludes transactions between users.

3. Listing fee Model

In the listing fee model, online marketplaces charge sellers for posting ads on the platform. Listing marketplaces are popular because they drive a lot of traffic to the site, allowing providers to gain more exposure on their listings.

To justify their listing fees, these sites must drive high volumes of traffic. Sites such as Trulia.com and Realtor.com use this business model.

4. Freemium Model

A freemium marketplace allows both buyers and sellers to use it for free. The business is monetized by offering additional features, premium subscriptions, or cross-selling other products and services.

The idea behind this model is that your free platform gets users hooked, so they can’t resist paying for your premium features.

Unsplash is a great example of a stock photo provider.

5. Featured listings and ads Model

A featured listings and ads model is an online marketplace revenue model in which sellers purchase advertising privileges to enhance their visibility. 

The seller or service provider pays to have their listing displayed higher than others or to be at the top of their category.

eBay’s classifieds division uses this method. It’s free to list and sell on their platform, but users pay a flat fee if they want their offering to appear first.

6. Lead Fee Model

A lead fee is somewhere between a listing fee and a commission model.

Typically, lead fee models involve customers posting requests on a site and providers bidding for these requests. You only pay lead fees when you are put in contact with a potential customer: you don’t pay a listing fee.

Thumbtack, a B2C marketplace for local professionals, like plumbers and guitar teachers, is one recent example.

Marketplace Business Plan Template

We have put together an online marketplace business plan sample just for you, so you can learn how to write your own.

Marketplace Business Plan: The Template

• Executive Summary
• Financial Highlights
• Startup Summary
• Industry at a Glance
• Projected Industry Growth
• Key External Drivers
• SWOT Analysis
• Marketing Plan
• Management Summary
• Financial Indicators
• Revenue Forecast

1. Executive Summary

EPlace Solutions will be an innovative online e-commerce portal offering a variety of products to consumers throughout the globe. Founded by Mr. John Jones , a seasoned business visionary with an eye towards profit and achievement, the organization is set to enter the market during 2023. 

The timing of market entry is nothing less than exceptional as consumers throughout the globe have begun releasing pent-up spending that was held as a result of the global recession.

Online shopping is at an all-time high with new consumer mindsets calling for them to shop for the types of deals and bargains that will be so much a part of the EPlace Solutions business model. 

While the market has a great deal of potential and is filled with incredible opportunities, in order to capitalize on them, a strong infusion of working capital must be acquired. 

Working capital will be used in a variety of areas including marketing, logistics, insurance, management as well as the financing of the day-to-day operations of a business of this type. The founder projects needing a working capital sum of 100K for his venture with repayment of this sum coming from profits made through the website.

To read the full executive summary, click here to download the PDF

Useful Resource:   How to write an executive summary for a business plan

2. Financial Highlights

The financial highlights for EPlace Solutions are shown in the chart above. The organization projects to have strong growth trends over the course of the next five years.

View the full financial highlights by downloading the pdf

3. Startup Summary

Detailed startup summary is available here as a pdf download

4. Industry at a Glance

Click here to download a detailed guide on industry at a glance

5. Projected Industry Growth

In the 10 years to 2016, industry value added, which measures the E-Commerce and Online Auctions industry’s contribution to the US economy, is expected to increase by an average annual rate of 11.0%, while US GDP is forecast to rise by an average annual rate of 2.0% over this same period.

This indicates that the industry is in the growth phase of its life cycle, as its growth rate outpaces GDP over a 10-year period. Rising industry participation and new forms of businesses also indicate a growing industry.

If you are interested in learning more about the projected growth of the industry, click here to download the pdf

6. Key External Drivers

Disposable income is a deciding factor in determining the quantity and quality of online purchases. Changes in income can occur because of movements in wages, government benefits, unemployment and tax rates and returns on assets.

Download the pdf file here for a complete guide on key external drivers

7. SWOT Analysis

The following is an analysis of the SWOT analysis of the EPlace Solutions business model as well as the opportunities and threats present in the marketplace.

• Strengths: Knowledge of the founder. EPlace Solutions founder Mr. John Jones is a seasoned business professional who is well attuned to the e-commerce and Internet-driven marketplace. His broad skill set will be invaluable during all phases of business growth and evolution.
• Weaknesses: Lack of funding. Lack of funding is the primary weakness for  EPlace Solutions as all of the other components of the business  model and approach are extremely sound.
• Opportunities: Increase in online activity among minorities. Minorities  are beginning to turn to the Internet for their shopping needs in  large quantities. Research conducted via IBISworld.com shows  that appealing to this segment of the market will be one of the  keys to success for companies like EPlace Solutions that are  looking for long-term sustainability
• Threats: Larger competitors. Larger competitors such as Ebay.  com and Amazon.com pose a threat as they are already firmly  entrenched in the marketplace and have acquired a large share of  the online shopping market.

Download the pdf for a complete guide on SWOT analysis

8. Marketing Plan

For marketing, EPlace Solutions primarily relies on the Internet. A user-friendly website will be developed utilizing the latest design and online technologies as part of the planned marketing efforts.

The website will also feature SEO (Search Engine Optimization), which will allow it to rank higher with popular search engines such as Yahoo.com and Google.com. EPlace Solutions intends to use Facebook.com and Twitter.com extensively throughout each calendar year as part of its marketing model and approach.

9. Management Summary

Click here to download a complete guide on management summary

10. Financial Indicators

To learn more about financial indicators, click here to download the pdf

11. Revenue Forecast

Click here to download the complete revenue forecast guide

Break-Even Analysis

Profit and Loss Statement

Pro tips: Learn how to make a profit and loss statement with our free to download income statement templates to make a stunning one for you .

Projected Cash Flow

Click here to download the pdf to view the full projected cash flow

Projected Balance Sheet

To view the full projected balance sheet, click here.

Our free real sample business plans make it easy to write a business plan that looks as polished and professional as this one. If you need help in writing a business plan, you can hire our professional business plan writing services to save you time and secure funding.

Below Let’s review an online marketplace business plan sample that can help you create your own business plan or download the free online marketplace business plan sample in PDF here.

Other Sample Business Plans

Does your online marketplace LLC need a business plan?

Whenever you decide that an LLC is right for your online marketplace business, you should create a business plan (even though it is not required), so you know what you will do and how.

Recommended: Read our free guide to learn how to form an LLC in your state, or choose wise business plans to make LLC registration simple.

Download Online Marketplace Business Plan Example

We will show you some real-world business plan examples so you may know how to write your own, especially if you are seeking a bank loan or an outside investment and need to use SBA-approved formatting.

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How to Create an Online Marketplace Business Plan

How do you write an online marketplace business plan? Here’s all you need to know about writing a business plan for your online marketplace.

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How do you create an online marketplace business plan?

Look no further. Today, you get the exact steps to create your own online marketplace business plan. 

Want to learn more? Read on!

Source:  Pexels

What is an online marketplace?

First things first: 

What is an online marketplace? A marketplace business is a platform where vendors and buyers meet and exchange value (usually, money). These can be e-commerce, rental, or service marketplaces in either the business-to-business (B2B) or business-to-consumer (B2C) niches. 

Marketplaces are growing fast. In fact, 47% of global online purchases happen via online marketplaces. And B2C marketplaces are estimated to reach $3.5 billion in sales in 2024.

Are online marketplaces profitable? 

Just like any business, online marketplaces can be profitable. For instance, if you compare online marketplaces to e-commerce or service businesses, the online marketplace business model can be far more profitable. 

E-commerce businesses require an inventory. Shipping and returns often eat up a big chunk of profits. Service businesses require high labor costs (unless you’re doing all the work yourself). 

Online marketplaces, on the other hand, take time to build up but once you have traction, you have far fewer costs than most other business models. 

What is an example of an online marketplace? 

You likely know most of the bigger marketplaces: Amazon, Airbnb, Etsy, eBay, Uber, and Alibaba, to name a few marketplace examples . As marketplaces are growing, other big names are likely to pop up in most niches. 

Now you know what a marketplace business is. But how do you start one? 

The first step? A business plan. 

How to create an online marketplace business plan 

Next, let’s look at how to create an online marketplace business plan.  

A business plan will help you gain clarity on the business you’re about to start. And most importantly, you get an understanding of your target market and competition. After all, 20% of small businesses fail in their first years, but with sufficient preparation, you don’t need to be one of them. 

Here’s what a basic online marketplace business plan template looks like: 

Introduction

• Executive Summary
• Company Description
• Product/Service Description 
• Value Proposition
• Market Analysis 

Business Model 

• Sales Strategy 
• Growth Plan
• Management & Staffing
• Financial Summary 

Executive summary

An executive summary is a summary of your business plan. This is a short text snippet and includes a high-level overview of your business concept, marketplace, business goals, market, customers, value propositions, the scope of business, and online marketplace business model . 

Company description

A company description gives a brief overview of what your business is. It includes a description of your business structure, industry, what you’re selling, your long-term plan and short-term goals, as well as your team. 

Marketplace description

Explain your pricing strategy and model, if your business is ready for the market, and if there are any intellectual property considerations you need to take into account. (Likely, there aren’t.)

Value proposition

Market analysis

In this section, you present your target audience and why they want to buy from you. 

Target market

Your target market, your customers, are the focus of your business. Remember that as a marketplace business owner, you need to understand both your sellers and your buyers. 

Find out things like where they live, their age, education, income, and interests.

But also understand their psychographics such as what problem it is that they want to solve, why they can’t solve it today, and what measurable outcome they want to achieve. 

In this section, you present the size of your target market and its trends and trajectories. You get this information from news outlets, governmental statistics offices, and academic research. 

SWOT analysis

A SWOT analysis analyzes the strengths (what makes you unique), weaknesses compared to your competitors, opportunities (possibilities in your industry), and threats to your business. 

Competition

What does your competition look like? If it’s intense, you won’t see as high profits as if there is less competition. And if it’s easy to start a business in your industry, there will be more competitors. 

Your value proposition helps you understand how your business will stand out. For instance, do you offer lower prices? Do you have a unique business idea? Or do you focus on a very specific niche? 

Ask yourself who your customers are and how you’re different from the competition.

Business model

In this section, you list the workflows you need for making your business work. This includes logistics, suppliers, and inventory, as well as a contingency plan if something goes wrong. 

However, as an online platform business, you don’t really need to think too much about your operations, as that part is handled by the sellers who sign up for your marketplace. 

Marketing  

How are you going to grow your business? You need to be specific about where your audience hangs out online and how you can reach them. Also, don’t try to do it all at once -- focus on one or two strategies and expand to other strategies when you have some traction. 

Your marketing strategy needs to focus on:

• Your marketplace pricing (if you use commissions, the percentage cut you get from every transaction) 
• Your promotion strategy 
• How your marketplace is different from other marketplaces 

Sales strategy

This section covers all the steps of your sales cycle. For instance: 

Facebook ad → user signs up → buys from a vendor 

However, note that your sales cycle also covers your vendors signing up. In a way, you’re selling to two different groups of people. 

Growth plan

How will you grow your marketplace business? Make this a specific and realistic plan and explain the exact steps you’ll take to grow your business. 

Management & staffing

Explain what the management of your business will look like. Likely, you won’t have a team when you’re just starting out. But define at what point you’ll start hiring so that you’re prepared for when that happens. 

Financial summary

Your financial plan is a summary of your income statement, cash-flow statement, and balance sheet. Here’s what they mean: 

Income statement

What are your revenue and expenses? This is a profit-loss calculation that you can base on estimates if you don’t have any sales at this point.  

Balance sheet

This is a list of your business assets; what you own and what you owe. 

Cash-flow statement 

This statement also takes into account when revenues are collected and expenses paid. With more money coming in than going out, you have a positive cash-flow statement. 

How do you start an online marketplace? 

Finally, how do you build your online marketplace ?

First, you need to set up your marketplace website. 

You can either use a marketplace website builder or develop your own website. The cost of building a marketplace business from scratch is typically quite high (as is the case for most web development projects). A simple marketplace can cost $20,000 or more. 

That’s why marketplace website builders are a great option. These typically come with drag-and-drop, no-code tools that make it easy to set up a website even if you don’t have a technical background. 

Our own tool helps you get started fast, just like we help all of our other customers.

Of course, building your website is just step one. Step two is to grow it. For that, we have plenty of resources to help you get started: 

• The Marketplace Payment Solutions That Work Great Right Now
• How to build an online community 
• Online Marketplace Strategy: How to Win with Your Marketplace 
• Key Marketplace Metrics: How to Measure Growth 
• A Marketplace Marketing Strategy That Works Great 

Over to you!

There you have it! Now you know how to create an online marketplace business plan. 

While a business plan can help you get clarity, don’t spend too much time writing it. After all, your focus should be on starting your online marketplace.

Want to take the first step and build your marketplace website?

Try Kreezalid for free (no credit card required). 

After 5 years helping companies to develop their online marketplace, I saw success stories as well as failures. Today I share my experience and my clients feedbacks through useful resources that will allow you to focus on what really matters for the success of your online marketplace. Because believe me, the secret isn't in the code ...

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The Beginner’s Guide to Starting an Online Marketplace Business

As the founder of MultiMerch, I've seen my share of online marketplaces start with a promising idea, fail to generate traction and close down shortly after.

The reasons are all over the place – no market need, unsustainable business model, poor software choices, lack of marketing, you name it.

In this guide, you'll learn how to start a marketplace business – from doing market research and choosing the right business model to mastering operations, selecting software and building, launching and growing your marketplace platform.

But first...

In 2017, customers have spent $1.47 TRILLION on online marketplaces . That's nearly half of all global online sales.

It's a lot of money spent!

There's a great chance you have bought, booked or sold stuff via a marketplace platform this month without giving it a second thought.

That's because they span all industries – from large traditional online malls like Amazon and AliExpress to booking and rental platforms like Airbnb or Eventbrite, from service marketplaces like Upwork and Taskrabbit to digital software and asset marketplaces, gaming and music platforms and everything in-between.

Why are marketplaces so popular?

The main reason is the network effect that's baked into the marketplace model that brings together the two sides of a transaction (it's also why they're called two-sided marketplaces).

The network effect is what allows you to grow a scalable business with multiple different revenue streams without having the downside of managing your own inventory and logistics.

This makes marketplaces inherently different from the traditional online stores.

Growing a traditional ecommerce business in a sustainable manner requires you to be in the "Goldilocks zone" where your free cash flow, operating expenses and inventory sync up. Otherwise, you can end up growing yourself out of business .

You'll have a different set of challenges as a marketplace owner, but growing too quickly won't usually be your primary problem.

For example, if you have an ecommerce business selling guitars online, you can grow more rapidly by switching to a marketplace model and allowing others to sell their guitar accessories on your platform. You have just expanded your business without having to hire a bunch of extra employees or buy tons of new inventory.

Another benefit of a marketplace business compared to a regular ecommerce business is the loyalty and sense of community baked into the platform thanks to the underlying network effects.

Often, the community will self-organize and create its own ecosystem around your marketplace – think of the hundreds of unofficial Amazon seller forums, Uber drivers groups and Aliexpress buyer forums.

To sum it up, starting a marketplace is a great way to tap into the network effects and start a thriving ecommerce ecosystem or rapidly expand your operations without requiring a ton of extra capital, workforce and inventory.

Whether you're creating a marketplace website from scratch or switching from regular ecommerce to marketplace commerce, there's no way around doing your market research.

According to CBInsights, "no market need" is the #1 reason startups fail (42% of all cases examined).

Starting an online marketplace without clearly understanding the target market and the needs of your users is a great way to learn a painful lesson, but not a great way to start a business.

This is where market research comes in.

To build a viable marketplace business, you need a clear understanding of the market, your users, their needs and the solution they're looking for.

Assess the market

You need to understand what you're getting yourself into before getting yourself into it.

What does the industry look like?

Assess the market size and volume to better understand if the business model you have in mind makes sense. It may sound easier to get into a smaller market, but if you want to charge selling fees and there's not enough transaction volume, you'll need a different business model.

Are there clearly defined niches in your target market? The better you understand the market segments, the more likely you'll be to choose the most attractive niche.

Today's big marketplace businesses have grown from small niches:

• Amazon was initially a small online bookstore
• Etsy grew from a community forum for crafters
• Eventbrite was focusing on the tech community first

No matter what industry you're in, you will have the competition – either direct or indirect. Find out who your competitors are and how long they have been around.

Researching the competition lets you gain insights into the marketing strategies and the business models common in your target market – as well as the strengths and weaknesses you can exploit.

Pay attention to market trends – is the market going up or down, growing or shrinking?

If you can spot big changes or trends like technology breakthroughs, regulation or the change in customer behavior, you can use them for your advantage.

Identify your users

You aren't building your marketplace for yourself – you're building it for the users. If you don't know who your users are, you can't solve their problems efficiently.

"Focus on identifying your target customers (including creating personas and looking at the market opportunity), then undertake a competitor analysis, and create a list of potential users (both supply and demand). Then, survey or interview these potential customers and look for the 'Blue Ocean' opportunity."

Start with the simple questions:

• who are your target users and what are their main goals and challenges?
• where do they buy, why do they buy and who do they buy from?
• what are their motivations and what influences them?

At this stage, you can create a few simple buyer personas to better understand your audience.

Since you're building a two-sided marketplace, you'll have at least two distinct user groups:

Your buyers and sellers come with their own set of goals, challenges and motivations.

Make sure you understand both sides.

Understand the needs and solutions

Now when you understand the market and the users it's time to dig into their needs and the solutions that can solve their problems.

Here, you want to figure out the biggest pain points your target users have and how they alleviate them.

Do your target customers shop online? If so, where do they do it, how do they do it and why do they do it? Are they satisfied with their shopping experience? What could be better?

What about your sellers? By now you should have an idea about who will sell their items on your marketplace – go ahead and talk to them! Ask them how they sell their products right now, what other platforms they use and what they're happy and unhappy about. How can you make their experience better?

Asking these questions will help you better understand your user needs and the strengths and weaknesses of your competitors – and build a better solution as a result.

What you want to take away from your market research is a clear understanding of your target market and the audience you want to serve.

Doing it will allow you to select a suitable niche for your marketplace platform, design a solution that solves the problems of your users, draw up a business model that makes sense and prepare a marketing strategy that will make your new platform stand out from the competition.

We've already learned that most startups fail trying to build stuff no one needs.

Do you know the failure reason #2?

Ran out of cash.

That's right – building a valuable product that people need isn't enough. You need a way to make it profitable – and keep it profitable in the long run.

Fun facts ahead. Amazon had its first quarterly profit in Q4 2001 , more than 6 years after it was founded. It took Etsy 5 years to start turning a profit in 2010 . eBay, on the other hand, has (apparently) been profitable from the start thanks to monetization via listing and selling fees.

My point is – no matter your industry and background, it's a good idea to design a viable business model BEFORE starting your online marketplace, not when you're already going full steam ahead.

Now, the exact way your marketplace will make money depends on a lot of things. However, here are a few marketplace business models for you to consider.

Sign up fees

A sign up fee is a flat payment you charge your sellers to sign up (well, duh!) on your marketplace platform.

The great thing about sign up fees is that you can charge them even before you have a thriving marketplace – as long as you can sell your vision to new sellers.

Sign up fees are also pretty straight-forward to collect as you can use any regular payment gateway or even request payments manually (e.g. via PayPal, bank transfer or in person).

The main drawback is – sign up fees don't scale and once you've gotten the seller on your platform you'll need other monetization ways.

To grow a marketplace, you need to be in the middle of the transaction. As you grow your audience, inventory and volume, so will your business. If you don't do this, you don't have a sustainable marketplace – and will struggle to grow the platform.

You will also need a solid proof that your platform is worth it to charge sellers a sign up fee upfront.

Because of scalability reasons, you'll rarely see the big marketplace players use sign up fees for monetization purposes. However, you can also charge a sign up fee to weed out the less serious sellers.

For example, it costs $25 to sign up as a Google Play vendor – and Google clearly doesn't make a killing off Play Store sign up fees.

Subscriptions

Subscription is king – I don't have to tell you that. The global sharing economy is powered by subscription-based businesses generating recurring revenues.

Gartner predicts that by 2020 , all new software industry entrants and 80% of historical vendors will offer subscription-based business models.

Charging your sellers a specific amount on a regular basis is a great way to generate recurring revenues that will keep your marketplace going.

Here's the #1 rule of subscriptions – make sure your sellers get more value out of your platform than it costs them to stay subscribed.

They won't mind paying $19.99 a month if they generate $199.99 a month in profit.

Subscriptions are more difficult from a technical perspective. You will also need a payment gateway like Stripe that supports subscription payments (you can do manual invoices while you're an MVP, but good luck scaling this approach).

It's worth it, though. Combine the idea with multiple different tiers that let sellers unlock more features (like advanced selling tools) or lower their selling fees and you've got yourself a steady recurring revenue stream.

For example, Amazon offers two plans – an Individual plan with an extra $0.99 per item selling fee and a Professional selling plan at $39.99/month for larger sellers.

Listing or insertion fees

You can collect a listing fee from yours sellers when they list their items for sale on your platform.

Listing fees can be flat or variable amounts based on the price of the product, the category the product is inserted into and other parameters.

Just like with subscriptions, sellers will usually be fine with a small insertion fee to list their item as long as they can generate a profit in return.

And just like sign up fees, listing fees are relatively easy to collect – but they are much more scalable.

To reduce friction, consider deferring the charge to after the product has been sold instead of doing it at publication.

For example, Etsy charges a $0.20 insertion fee, but collects the listing fee for multiple quantities of the item only after it's been sold.

Selling fees

Selling fees are everywhere – and for a reason. It's a great monetization strategy.

You'll charge your sellers a selling fee each time they receive and process a new order on your platform. The more orders your marketplace receives – the more revenue you get in sales fees.

Sounds great, doesn't it?

The drawback is, selling fees are far more difficult to implement than other types of fees.

For one, you need a payment gateway that can split buyer payments so you can get your fee at the time of sale (unless you want to collect sales fees manually, which you probably don't – for various reasons, including legal).

And you need a steady stream of new orders coming in to generate enough revenue from small sales fees. When you're just starting out, it can be a problem.

It does scale really well, though.

If your platform gets enough traction and you can collect selling fees automatically, you've got yourself a good business going.

You'll find examples of selling fees on most popular marketplaces today:

• Amazon charges per-item category-based selling fees
• Etsy has a 5% "transaction fee"
• Envato chargers sellers 12.5% to 55% on sales
• Airbnb charges hosts a "service fee" of 3%+

More business models and monetization examples

These are just the most common marketplace business models – you can do more than that, including:

• collect payment processing fees
• promote featured stores and sponsored products
• manage your own ad system

I covered these and other monetization strategies in my other blog post:  10 Marketplace Business Models To Generate Revenue

Creating an online marketplace website is one thing. Successfully managing a marketplace business is something completely different.

Even a regular ecommerce business gets complex at times due to the amount of stuff you have to deal with on a regular basis.

Marketplace operations can get more difficult than that due to the nature of two-sided platforms.

Here are the challenges you will be tackling as a marketplace owner on a day-to-day basis:

Managing sellers

Sellers are the cornerstone of your marketplace so you will be dealing with them a lot.

This includes everything from acquiring new sellers and helping them get started to keeping existing sellers happy and successful.

First, you will need to convince your sellers to join your platform . Hopefully, you've outlined your unique value proposition during your market research and planning.

Now, you'll need to create a set of landing pages that explain how your marketplace works and why it makes sense for sellers to join you.

Here's how Amazon explains the process on its seller landing page :

Next, you will need a streamlined signup process . Decide who can apply and what information you need from them, then design your registration flow with this in mind.

Will you allow anyone to sign up or are you accepting vetted sellers only? Make sure you have a way to review the applications if you want to keep freeloaders out.

If you're collecting sign up fees or subscriptions, you'll need to make sure you can either build payment processing into the registration flow or have a way to collect the fees manually through direct communication with the sellers.

And while you're at it, you'll also need to decide how much control your sellers will have over their stores, what their stores should look like and how customers will discover them.

Now, once the new seller signs up you'll want to make it as easy as possible for them to get their product catalog into your platform.

Managing products

As a marketplace owner, you won't usually have to deal with your own inventory. However, you'll still need processes in place to manage products sold by your sellers.

There are two distinct ways to organize your product catalog:

• on marketplaces like Etsy or eBay every product belongs to exactly one seller
• on platforms like Amazon a single product can be sold by multiple individual sellers

The way you organize the catalog will affect your software selection, the layout of your marketplace pages and how your sellers publish and manage their products.

Now, you want to make it really easy for new sellers to get started on your platform. You can do it by either offering them a way to import their existing products in bulk or providing them with an onboarding service where you do it for them.

If most of your sellers are existing ecommerce business owners, it's a good idea to offer them a way to import their catalogs from other platforms they already sell on, like Amazon or Shopify.

To make it easier for your sellers to list items for sale, optimize your product listing forms by removing the unnecessary details. If you plan to carry different product categories, keep in mind that different products may require different sets of fields .

As you grow, you may need a product moderation system or a set of content to ensure the quality of your listings and keep scammers off your platform.

Payment processing

Marketplace payment processing is always more complex compared to processing payments in a regular online store.

First, you will need specialized marketplace payment gateways to allow customers to purchase from multiple sellers at once and split payments at checkout.

More payment solutions are offering support for marketplace payments today, but the implementation can be tricky.

Second, you will be processing different types of payments .

Just a few examples of payments on a typical marketplace platform:

• order payments from customers to sellers
• subscription and fee payments from the sellers to your platform
• payouts from your platform to the sellers

Different payment flows have different implementation requirements.

So, make sure you know what payment gateways you'll use and how exactly you'll use them.

If you can't find a suitable gateway and make it work with your marketplace software, you're in trouble.

Finally, keep in mind that you may be responsible for payment taxation, invoicing and reporting as a marketplace platform owner. These requirements will depend on your region and your industry.

We will take a closer look at payment processing in the next chapter.

Logistics and shipping configuration

You don't have to deal with the inventory yourself, but your sellers do – and your platform has to support it.

The first question to ask is whether you want your sellers to ship items or you want to do it yourself (like Amazon FBA).

If you ship yourself, the logistics will be more complex as you'll need to get the inventory from your sellers, then store and dispatch it to the buyer. In this case, estimating shipping costs and times and tracking the item at every stage will be more difficult.

If you make sellers responsible for shipping, they'll need a convenient way of managing delivery rules and communicating them to customers. You can use flat rate, price- or weight-based rules or custom per-product shipping rules, but make sure your sellers can specify different shipping rules to different locations via different carriers easily.

Whatever shipping flow you use, there are more questions to ask yourself:

• how will you handle tracking numbers?
• do you need third party tools like shipping APIs?
• how will you set and enforce shipping SLAs across the marketplace?

Shipping cost and speed  affects marketplace conversions , so getting this part right is crucial.

Order management

Getting customers to buy from your platform is the first step. Actually making sure your sellers deliver is the next step.

The sooner the seller knows they've received a new order, the sooner they can dispatch it and keep the customer happy and willing to purchase again. So, your platform will need to notify sellers of new orders and make it easy for them to view, manage and process the orders.

And if you allow customers to buy from multiple sellers at once, you want to make it clear to everyone how different products within the same order are dispatched.

To keep the customer informed about the status of the order at all times, you can offer your sellers a way to share the tracking number with the customer.

Finally, delays and issues will inevitably arise – have a plan in place to handle them.

At the very least, you want to provide a communication channel between the customer and the seller so they can find a solution.

As you grow, you may want to create your own protection programs for buyers and sellers, like eBay's Money Back Guarantee or Airbnb's Host Protection Insurance .

If you don't do this, you risk getting entangled in disputes, refund requests and lawsuits yourself.

Marketing and content management

Your platform will get some traction thanks to the network effects, but you still need to actively promote it – especially in the early stages.

Where do you start?

The obvious first question is how will you get new sellers and customers to join you and stay with you when you're just starting out. We'll look at this later in this guide.

Then, once you get going, you'll need to figure out how to keep your marketplace growing in the long run. You'll do it through search engine optimization, organic and paid marketing campaigns and other business development initiatives.

Why SEO? Because over 50% of trackable traffic on average still comes from organic search.

To minimize the amount of work you yourself have to invest in optimizing your marketplace for search engines, make sure the software you use is built with SEO in mind. This means search engine friendly, optimized and shareable seller stores, product listings and other marketplace pages.

Most regular sellers won't be bothered optimizing every listing for search engines so you have to make it a no-brainer for them – or end up with poorly optimized platform.

Now, there's more user-generated content on a typical marketplace platform than just products. You'll have product reviews, user questions and answers, featured seller stores, blogs and more – and that's great for you, the platform owner!

Make it easy for your users to create great content on your platform, encourage it and feature it prominently.

However, you will also need systems in place to prevent low-quality UGC:

"Content moderation plays a key role in everything – from user acquisition and conversion to retention. Studies we've carried out have shown that as many as 75% of users will not return to a site where they encountered a scam and 80% of users wouldn't convert if a listing had a poor description.

Low quality content also plays a negative role when you're trying to rank. Google doesn't like duplicate content and will penalize sites with too many identical pieces. It's a good idea remove duplicate listings, stock images and other content pieces users may upload that already exist on your site – both for SEO purposes and to improve the search experience for your users.

In general, you need to vet all UGC to ensure it is relevant, high quality and appropriate. The content users post to your marketplace make up your inventory and act as a store front. Much like you don't want rotten apples on display in a fruit stand, you don't want low quality content featured on your site."

Organic marketing is great in the long run, but don't forget about paid acquisition. The more content gets created every day, the more value you'll get out of paid marketing campaigns. Make sure you have a paid promotion strategy for your marketplace in place to attract new users and create brand awareness.

Seller and customer relationship management

Now, attracting new users is not enough – you need to keep them happy, loyal and using your marketplace on a regular basis.

You will be communicating with your users and helping them answer questions and solve problems daily, so have a plan for that in place.

Some of the challenges you'll be tackling:

• onboarding new sellers and answering their questions
• providing technical support and enforcing the rules
• answering order-related questions
• mediating disputes between the seller and the buyer

To reduce your own involvement, allow customers to ask sellers questions about products and communicate with them before and after the order. The more communication options you offer, the more likely the issues will be resolved without requiring your attention.

Some of our clients want a way to filter customer-seller conversations to make sure they don't try to bring the transaction offsite. Instead of worrying about it, I suggest focusing on providing the best possible experience to both parties on your platform so that going around isn't worth it.

Mass communication is important, too. You'll want to be able to notify your sellers about policy changes and new features available to them or tell your customers you're running a marketplace-wide discount campaign this month.

And don't forget post-transaction communication. Allow and encourage it to ensure repeat purchases, collect reviews and build trust between your platform, your buyers and your sellers.

This will help you turn your marketplace from a purely transactional platform into a sustainable business customers enjoy dealing with.

Let me tell you this one thing first:

The easiest way to waste time, budget and effort when building an online marketplace is to create features your users don't need.

I've seen a lot of marketplace projects that have spent way too long in the development stage to either never launch or to find out the users need a completely different set of features a week after launch.

I've also seen marketplace platforms launch in a matter of weeks with only the basic functionality in place – and evolve as they grow. This has usually worked much better in the long run.

My advice to marketplace entrepreneurs is to start with the essentials and launch an MVP early, then improve the platform as the business grows and the requirements get more clear.

And I'm not the only one saying this – here's one of our implementation partners:

"The best approach is to start with a limited feature set and only build the main features your platform needs. After you have enough to make the platform work, launch it. If it gains traction with the users, you'll start to see the early benefits and will have more time and freedom to develop additional features and make your platform even better."

Now, what are the essential marketplace features exactly?

While some of this will depend on your industry, I like to group the functionality into three big categories – features for sellers, buyers and the platform itself:

Essential seller features

Your sellers want to sell their items and get paid. This means listing, selling and dispatching products efficiently.

To make it easy for your sellers to get started on your platform, focus on streamlining the onboarding process. The simpler the onboarding, the more likely new sellers will be to join you.

A great onboarding process includes clear seller terms and helpful landing pages, straightforward seller signup and an easy way to import and manage their product catalog.

What kinds of products will your marketplace carry? Optimize product management features for this particular product type – don't make your sellers do more work than absolutely needed to get the product published.

Next, your marketplace should make it dead simple for your sellers to receive and process orders. Notifications are a must to make sure orders don't go unnoticed.

To make selling and marketing easier, offer your sellers at least the basic sales and marketing tools – such as discount code management and product promotions.

Finally, make sure your sellers can freely communicate with you and the buyers. Public product questions and a private messaging system will be a good start.

Essential buyer features

What's your goal when shopping on Amazon? To find, purchase and receive the products you're looking for quickly and easily.

So, make it really easy for your buyers to search for products and browse categories. What makes it easy? A search bar that works (quite a low bar), faceted product filters and information-rich product pages are all a good start.

Simple checkout is the next step. The easier placing an order is on your platform, the more likely the buyer is to go through. A modern checkout process is a must – ideally one that makes it possible to purchase from multiple sellers with a single payment.

You want to offer payment methods that make sense for your users. Stripe is great and all, but it's useless if the shoppers in your region prefer to use cash on delivery. You should've answered this question during your market research as it will usually depend on your region and industry. In most cases, you will need a split payment gateway and/or a manual processor like cash on delivery.

Now, order management is as important to the buyer as it is to the seller. Make it simple for your buyers to view and track their orders, as well as get notified when the status changes.

Communication is crucial, too. Allow your customers to ask sellers pre-sales questions, get in touch with them if they have order-related questions and leave feedback. This will ensure your platform provides a great buyer experience and helps retention.

Essential marketplace platform features

The aim of your platform is to connect buyers with sellers – and generate revenue to keep your business going. So, you will need the right tools to support your marketplace operations and your business model.

In addition to everything I've outlined above, you will need a way to monitor, manage and moderate everything that happens on your platform.

Helping sellers set up and maintain their stores, approving and updating individual products, looking up and managing orders – all this will be part of your daily routine as a marketplace operator.

You also will want to customize the look and feel of the marketplace without digging into code. This will make it easier for you to make seasonal changes, introduce new products and categories, run marketplace-wide promotions and feature your best sellers and products.

Payment processing, of course – I mentioned this above. Depending on your business model, you may need to process not only buyer to seller payments, but also collect seller fees, do manual payouts to your vendors and handle other types of payments.

"When it comes to payment gateways and payment providers you have to make sure your platform has options. Its important to not be locked down to one specific method because you will never know what you need as you scale. So when picking a platform, make sure options are an option."

The same goes for shipping and logistics. Your platform needs to offer sellers a way to manage shipping methods and make it clear to buyers where they ship to and what are the costs.

This doesn't necessarily mean you need a direct integration with third party shipping services and APIs – automation can come later. But at the very least your sellers need a way to specify their own delivery costs manually.

Advanced marketplace features

These are just the essentials to get your marketplace up and running.

There's much more you can offer your users down the road:

• reporting tools
• advanced selling and marketing features
• integrations with third party ecommerce services
• your own mobile apps and more

All of this is definitely possible (but not essential). I covered these and other marketplace features in a separate blog post: What features exactly does your marketplace platform need?

It's not a sustainable business if your marketplace platform can't process payments safely, securely and reliably.

The global digital commerce volume has exceeded $3 trillion in 2017 and is expected to more than double by 2022, according to McKinsey.

Your marketplace is part of the global payment ecosystem, but there are a few unique challenges marketplace businesses deal with compared to regular ecommerce businesses when it comes to payment processing.

You already know the different payment types you'll be processing as a marketplace platform owner:

• payments from customers (customers purchasing products)
• payments from sellers (signup, listing, subscription fees, promotions)
• payments to sellers (payouts)
• other payments (third party advertisers)

Customer payment processing is arguably the biggest challenge for marketplace owners as it involves three different parties – the buyer, the seller and the platform.

There are three ways your marketplace can process order payments from your customers to your sellers:

Direct payments

With direct buyer to seller payments, your platform is not involved in the transaction at all.

Direct payments require the least amount of involvement by your platform, but have a few major drawbacks.

Since your platform doesn't own the transaction, you have limited options of collecting transaction fees and handling returns and refunds.

Additionally, direct payments will prevent your customers from purchasing products from multiple different sellers at once and will require them to go through the checkout process for every individual vendor.

They are also less safe for all parties involved and make it easier for untrustworthy buyers and sellers to exploit your platform for their own gain.

Aggregated payments

With aggregated payments, your platform aggregates buyers' funds to later redistribute them between sellers via payouts.

Aggregated payments make single checkout possible and allow you to own the transaction, but place an extra burden of tracking your sellers' finances and making regular payouts on your platform.

And with the payment industry becoming increasingly more regulated , payment aggregation as a marketplace payment flow will only be getting more complex.

Split or parallel payments

All this gives rise to parallel (or marketplace) payment processing, where customer's payment is instantly split at checkout and distributed between all sellers and your platform by the payment processor.

This eliminates all of the issues of direct and aggregated payments, while also shifting the liability and the compliance burden from your business to the payment processing company.

The biggest remaining problems of parallel payment processing are implementation complexity and the lack of marketplace processor availability.

It's getting better, though. A decade ago, PayPal Adaptive has been one of the only few marketplace payment solutions with support for split payments. Today, there are dozens of payment processors that support marketplace payments around the world, the most popular ones being Stripe Connect, PayPal for Marketplaces, Adyen Marketpay and Mangopay.

How do you choose a marketplace payment solution?

Selecting the right payment solution for your marketplace is crucial.

A few different factors to consider are the features you need, the availability of the payment provider in your region and, of course, the costs.

Here are a few helpful tips from Paybase, another popular marketplace payment solution:

"When choosing your payments provider, it's important to think about exactly what your business needs and what your priorities are. Each provider varies in what it can offer. Some offer a plug-in solution that is very easy to integrate but will struggle to handle anything that requires a certain degree of flexibility. Others can offer greater scope, but may involve you as a business having to build out your product/service further.

What's most important is to not underestimate the level of flexibility you will need. Think about what you'll need in the future and whether each given payments provider will enable you to do that.

Additionally, it is important to consider the level of financial crime prevention that the provider offers, as the last thing your business needs is high levels of financial crime on your platform due to an inadequate alerting system."

So, make sure to ask yourself these questions before getting to work building your marketplace:

• What types of payments will I be dealing with as a marketplace platform owner?
• What payment solutions are available in my region that meet my requirements?
• What will payment processing cost me and how do I factor this into my business model?

The last question is as important as the first two.

While you don't want to end up with no payment processing at all, you also don't want to rely on a business model that charges your sellers a 5% selling fee only to realize it costs you as much in payment processing fees.

At this point, you have a valid business model and an operations plan and know which payment gateway you'll use and what features your marketplace platform needs.

Now is the time to select the software that will power your marketplace platform – no sooner than that!

I like to group marketplace platform software into 3 different groups – cloud or hosted platforms, standalone solutions and multi vendor CMS extensions.

Note that I don't mention building a marketplace website from scratch here. It's definitely possible, but not really viable for small to medium sized businesses in most cases due to the complexity involved.

Cloud or hosted marketplace solutions

If you're a new marketplace entrepreneur, going with a popular marketplace SaaS is usually the first thing to consider.

Cloud marketplace solutions are the easiest to get started with and require little to no technical knowledge.

In most cases, they also offer free trials so you can spend a while playing with the platform to make sure the solution fits your requirements.

Here are the few popular marketplace SaaS solutions you can look into:

• Marketplacer

The main drawback of cloud marketplace platforms is the limited customization possibility you'll get. If it doesn't suit you out of the box you won't be able to modify it since you don't have any code access.

If you're looking for something more customizable, standalone marketplace software is a better alternative.

Self hosted standalone marketplace software

These are software solutions designed specifically for marketplace commerce, not just regular ecommerce.

Standalone marketplace software gives you much more customization and modification possibilities since you have complete access to the source code and own it outright.

In most cases, you will also host the platform yourself and will be able to control the whole marketplace experience from start to finish.

Some of the popular standalone marketplace solutions are:

• MultiMerch Standalone
• CS-Cart Multivendor
• X-Cart Multivendor

The drawback? You will need at least some technical skill to build a marketplace platform using self hosted software. No matter how user-friendly, software is software – and has to be hosted, maintained and updated on a regular basis.

We always recommend having a developer on your team or working with an agency when working with self hosted software to make your life easier.

Multi vendor CMS extensions

Finally, you can take a regular CMS like WordPress, Magento or OpenCart and slap a multi vendor extension on top of it.

Sounds like a plan?

You might expect this to give you all of the benefits of free and open source CMS while also powering your marketplace. In reality, it rarely works out like this.

Content management systems are designed for regular websites or standard ecommerce. Two-sided marketplaces are inherently different and converting a regular CMS into a marketplace platform is a complex, time-consuming and error-prone process.

If you do decide to give it a try, here are some of the possible software combinations you can use:

• WordPress + WooCommerce + Dokan, WC Marketplace, WCFM, WC Vendors or YITH
• OpenCart + MultiMerch, PurpleTree or Waabay
• PrestaShop + KnowBand or Advanced Marketplace
• Magento + NextBits, CreativeMinds, Webkul or Apptha

In this case, you absolutely want to have a developer on your team who has experience working both with the underlying system and with two-sided marketplaces. I guarantee you will have much more technical work to do than with either SaaS or Standalone marketplace software.

We've been offering the MultiMerch multi vendor extension for OpenCart for years and overcoming the limitations of the CMS itself and the compatibility issues with third party themes and plugins has been a constant struggle. You will deal the same problems with any CMS.

How do you choose the right marketplace software?

The possibilities are endless, right?

When selecting your new marketplace software, I suggest first figuring out what kind you want to go with – cloud, standalone or CMS.

Here are my rules of thumb for picking one of the 3 solution groups:

• Start with a cloud/SaaS marketplace platform if you want to launch your marketplace as soon as possible and don't have the technical knowledge.
• Go with standalone marketplace software if you want the biggest bang for your buck and want to own your platform outright.
• Try multi vendor CMS extensions if you're already using the underlying system (e.g. running a Magento store) or are willing to invest heavily in custom development and have a team capable of doing it.

Now, here are the factors to consider when picking the software solution:

Start with the type of the marketplace you're building. Are you selling products, services or bookings? Software designed for products won't be a great fit for a service marketplace and vice versa.

Know the features your platform needs. Make sure the solution fits your business requirements – not just in terms of the basics, but also payment processing, logistics and other crucial features. And if it doesn't offer the feature you need, can your team modify it to support this?

Take a good look at user experience and reliability. This is often overlooked by new marketplace owners, but it's as important as everything else. Make sure the solution not only provides the features you need, but also offers a great user experience. If your marketplace feels clunky to use, the rest doesn't matter – your users will jump ship as soon as there's a better alternative.

Get to know the team behind the solution. Who are the people in charge and what can you expect in terms of technical support and code quality? Growing a marketplace business will take you a lot of time and effort – so you want to make sure you get all the support and software updates you need over the years. Can you treat the company as your partner , not just a software provider?

Finally, there's your budget. In my experience, budget shouldn't be a top priority when selecting marketplace software. You will spend thousands of hours building your marketplace over the years – saving a few hundred bucks on software that powers your entire business isn't worth it.

For a more detailed overview of marketplace software solutions available out there, check out my other blog post:  Online Marketplace Software: The Complete List

You'd think software is all it takes to start a marketplace platform.

Nope. You will (generally) need a great team to help you pull it off.

These are just some of the crucial skills you'll need to run an online marketplace business:

Development and design skills

No matter what software you use, you will need at least some technical skill to set up, configure, customize and maintain your marketplace platform.

Here's how much technical skill you will need with different kinds of marketplace software:

• cloud platforms will require almost no development experience
• self hosted marketplace platforms will quite at least some technical skill
• multi vendor CMS extensions will require A WHOLE LOT of custom development

Do you have to be a developer to build a marketplace website? No, but having a developer at hand will make your life immensely easier.

When it comes to design, things aren't as difficult.

A modern, responsive platform is a must in 2019, but fortunately most marketplace solutions will offer you ready-made templates you can use instead of designing everything from scratch.

Still, at the very least you will need some design skills and tools to customize your platform and create appealing marketing materials.

In the long run, investing in a UX designer will allow your marketplace to stand out in terms of user experience and aid your acquisition, retention and conversion.

Marketing and sales skills

Neither customers nor sellers will join your new marketplace by themselves.

You will need to actively promote your new marketplace platform to get the business off the ground.

That's where sales and marketing comes in.

First, you will need to find the first sellers and customers and convince them to join you to get your marketplace going. Then, you will need to generate brand awareness to gain traction and grow your new platform.

At the very least, this means mastering the basics of user acquisition and growth , including:

• organic and paid acquisition
• social media and community management
• email marketing
• partnerships and promotions

As a side note, copywriting is another great marketing skill to have. You will need to be persuasive on your website and in your advertising to convince people to join you. Additionally, you may also need copywriting skills to help your sellers create product descriptions that sell.

In reality, this means learning whatever you need to do to keep your business alive and growing.

Operations skills

By now, you've seen what it takes to run a marketplace on a day-to-day basis – we covered this in the operations section earlier.

Stuff like:

• managing sellers and keeping them happy
• monitoring users, products and orders
• resolving customer support questions and technical issues
• managing payments, doing the paperwork, managing your team....

As a marketplace founder, you will be dealing with the operations yourself from the start.

While you can delegate most of design and development and some marketing to others, you are the one responsible for actually running your marketplace. So, the operations are up to you.

That's a lot of skills you need to run a marketplace! How do you manage it?

There are a few ways:

Doing it yourself

Unless you have an existing team, DIY will be the most obvious approach – especially when you're just starting out.

This approach works best with fully hosted and managed marketplace solutions. If you run your marketplace in the cloud, you have most of your technical and design requirements covered – and can focus on marketing and operations.

If you go DIY, make sure you have the time and the grit to handle everything it takes to run a marketplace. It's a lot of work, so use whatever help you can get – from tools and services to mentorship and consulting.

Hiring individual freelancers

Hiring a freelancer is a great way to complement your own skill set without a huge investment and a long-term commitment.

The great thing about freelancers is there are all kinds of them. You'll find people for long term collaboration and one-time gigs, experts and interns, teams and individuals.

When you need a specific thing done quickly without having to learn the skill yourself, hiring a freelancer is the way to go.

And they're scalable. Business going well? Hire more freelancers. Caught in a downturn? Scale back.

Look for freelancers on:

• large freelance websites like Upwork and Fiverr
• smaller niche platforms like CloudPeeps
• groups and communities on Slack, Facebook and LinkedIn.

The drawback with freelancers is you need to very clearly understand and define your requirements – or risk wasting a lot of time and money. The bigger the project you want to delegate, the more detailed specification you need.

Working with an agency

If you have a little more budget, consider working with software development and marketing agencies to offload a whole chunk of work at once.

Going with an agency will let you focus on your marketplace operations without having to spend that extra time managing individual freelancers.

Hiring a software agency will cover all of your technical requirements and a marketing agency can handle most of your marketing initiatives.

The drawbacks of working with an agency are higher upfront and ongoing costs and a bigger commitment. Switching agencies is more difficult than swapping freelancers if you realize you're not a good fit for each other or have to scale your budget back.

Finding a trusted agency is a challenge. To make life easier for our clients, we have a list of vetted MultiMerch implementation partners who can take up any custom marketplace project and get it done – on time and under budget.

Hiring full time employees

Hiring is hard. You probably won't start hiring full time staff right away, but will get to it eventually as your business grows.

The good thing about employees: they are part of your team and will provide consistency, which is especially important for customer-facing roles and operations. Not only you can expect them to devote 40+ hours a week to the business, they'll also become ingrained in your company culture and future success.

The drawbacks are the cost, the effort required to manage your staff and the trade-off in flexibility. Full time staff is hard to scale and the recruitment process can be real tricky and very time consuming, especially for technical roles.

If you have a limited budget, it's a good idea to hire a few generalist employees such as a versatile marketer or a business developer, then add expert freelancers or agencies to the mix for specific tasks and projects.

What to look for when hiring people?

You're running a marketplace business – so, look for experience with two-sided platforms and marketplace commerce when hiring.

This applies to freelancers, employees and agencies alike. The more experience they have working with businesses and platforms similar to yours, the more useful they'll be to your project.

Generic hires might sound more affordable, but will usually perform worse than people who specialize in marketplaces.

And make sure people you work with really believe in your idea and aren't there just for the money.

Now you have everything ready to start building your marketplace website. How do you actually get from purchasing software to launching your marketplace?

In my experience, getting a marketplace platform ready can take anywhere from a day (for hosted SaaS platforms) to a few months and longer for custom builds.

Here are some things you can do to make the process easier:

Create a specification

The more complex the project, the more difficult the implementation. Marketplace platforms are as complex as ecommerce gets.

To avoid disaster (e.g. going broke too soon due to cost and time overruns), prepare at least a rough functional specification that outlines your project goals, requirements and the implementation timeline.

The more technical work your project needs, the more detailed you want your specification to be. If you plan to work with freelance developers or agencies, having a detailed specification in place may save you months of wasted effort in the long run.

Keep yourself and everyone involved accountable by splitting the project into milestones and tracking progress regularly.

Don't forget to define your MVP and your launch prerequisites in the specification. This includes the features you absolutely need for launch and an approximate deployment and launch dates.

The more specific your timeline, the better. "We need the initial MVP ready and deployed on staging by June 1, do a soft launch with early users by July 1 and launch for everyone on September 1" is more helpful than "We would like to go live with our marketplace in the next 6 to 12 months."

Make sure everyone involved in your project clearly understands the requirements and the timeline – and adheres to it.

Master project management

You will need at least basic project management skills to get your marketplace from idea to launch successfully.

This doesn't mean you have to be a project manager, but understanding the basic principles will help you stay on top of things.

If you work with an agency, you will usually have a project manager available to you to keep you informed. If you work with freelancers, you will be your own project manager.

Always consult your technical specification and your timeline when making changes to the project and discuss changes with all parties involved.

Understand that changing one milestone affects the whole timeline down the road.

Do have a backup plan for when things don't go as you expect – because they will. The more people are involved in your project, the more likely it is that something will go wrong, from freelancers going unresponsive to complex features taking longer to implement than planned.

Follow the best development practices

Adhering to good development and operations practices will save your team time and ensure the project gets delivered.

You don't have to assemble the top development team, but do pay attention to the basics – use tests, version control and issue tracking extensively throughout the development process.

Use different server instances for development, staging, and production and don't roll out new software updates directly on top of your live marketplace without testing. It's easier not to break things than it is to fix them later.

Keep fresh, automatic backups at all times – and a way to restore them. If something goes wrong (it will), you want to get the operations back up as quickly as possible.

A good principle to follow when building your platform is KISS. Keep it simple stupid when designing, implementing and deploying your marketplace software.

Know when to launch

Finally, understand that marketplaces take a while to get right. Rome wasn't built in a day, neither was Amazon. However, you will need real users and real feedback to keep iterating and improving your new marketplace.

Two common mistakes I see among new marketplace owners are launching too soon and not launching soon enough , the latter arguably being the worse one.

So, make sure you start testing with the real users early and use the feedback to iron out all of the early glitches by the time your marketplace is ready for the official grand opening.

It's not enough to create a marketplace website – launching it successfully is as crucial.

How do you launch your marketplace?

A good idea is to launch the new marketplace in two phases – soft and hard launch.

Start planning your launch early

The sooner you begin planning your launch, the more time you'll have to talk to people, gather feedback and improve your product and messaging.

Prepare a launch plan by defining your launch timeline, your marketing messaging and the primary channels you'll use. Different industries, regions and marketplace types will require different launch strategies – try and pick the most suitable one.

So, start building anticipation for your marketplace among your target customers and sellers while it's still in development.

If you've done your market research (and by this point, you definitely have), you already know who your users are. Now, go and talk to them – directly, on social media and via ads.

Start gathering a mailing list way before the initial launch – this will let you gauge interest and provide you with a user base of early adopters to reach out to first.

By the time you have your MVP ready for testing, you should have a set of users who know about you and are willing to take part in your project.

Roll out a limited beta version first

No matter how detailed your specification and well-designed your solution, you will run into all kinds of issues at first – from software glitches to usability problems to missing or lacking features.

That's why it's a great idea to do a limited release before your grand opening to test things out and make sure everything works just as expected.

Don't wait too long to introduce your solution to your early beta users – do a soft launch when you have your MVP ready, possibly even sooner.

Use your mailing list and talk to users directly to line up a few of the most devoted sellers, then help them get their stores set up on your platform and see how well it works for them.

When your beta marketplace doesn't have look like a ghost town with tumbleweeds, invite a few early customers and see how they like it.

Gather feedback, iterate and improve

Now, gather as much feedback as you can – in any way you can.

Talk to your early customers and sellers and write down everything they have to say about their experience.

If possible, arrange meetings in person or record and transcribe interviews with your users.

Most importantly, listen, don't talk. This will give you a whole lot of improvement ideas you can use to make your platform even better.

Then, iterate and improve – spend as much time as you need to improve your MVP based on your soft launch feedback.

And one more thing – don't just use your early adopters as test subjects, but try to establish real relationships and build trust with them. This trust will help you promote and grow your marketplace in the early stages of your business.

Launch your improved platform

By now, people are aware of your new marketplace website – it's time to make it officially public.

Run a final set of tests beforehand to make sure everything is working just as expected. Have your team ready for launch – things tend to break down when you least expect them to.

Whatever your marketplace type, try and make an event out of your launch. Go out to where your target users are and bring your launch to them through a webinar, a Q&A session or an AmA post.

Finally, keep the momentum going – your launch isn't the end, it's just the beginning.

Hopefully you've launched your new marketplace successfully and new people are starting to use it. Now, it's time to focus on user growth and retention.

Growing a marketplace is somewhat different from regular ecommerce businesses , but they do have many things in common.

Online marketplaces are two-sided, which means you need to focus on growing both your seller and your customer base.

Growing your supply side will be your primary goal in the early days of your new marketplace business, so it's critical to build your pipeline of new sellers and ensure they stick around.

Getting your first sellers

Ever visited an online store that has exactly 50 empty categories, 4 dusty products and a single blog post from months ago?

That's not what you want your marketplace to look like when new customers and sellers start coming in.

So, finding new sellers will be your first priority in the early stages of your marketplace business, both while you're preparing for launch and immediately after launch.

You have two main ways of getting new sellers on board – talking to them and inviting them personally and raising awareness via paid advertisement.

Since you've done your market research and picked a niche, you know who your sellers are and where they are – it's time to reach out to them!

Get in touch with every single seller who might be interested in your marketplace because you will get rejected:

"I had a really hard time convincing vendors to join Adderah. They told me my platform will never take off. They told me I'll just waste their time because my platform is new and nobody would use it. I've been told that people in Qatif don't like to shop online anyways. So I got rejected A LOT."

Don't spam, but try establishing a relationship and offering value instead.

For example, offer them feedback about their products and a free onboarding service to get them started on your platform. You can also offer your first sellers a way to sell their products for free so they can test your platform and get excited about it. Don't focus on fees – you'll start applying them later.

Paid advertising through Facebook, Instagram or Google Ads is another great option to get first sellers on board. It works even if you haven't launched your platform yet – you can run ads against a landing page that explains your project and invites sellers to join.

Make sure to keep your ads hyper-targeted to your niche when doing paid ads – if you're building a local marketplace, run ads to sellers within your city.

Finally, combine regular ads with remarketing and personal outreach to make your system of getting new sellers more efficient.

Generating brand awareness and growing the customer base

Now when you have sellers and a decent product catalog, it's time to start attracting customers. This part is similar to growing a regular ecommerce business, but you have a few extra opportunities as a marketplace owner.

Just like with the sellers, social media and paid ads will be your primary channels of attracting new customer traffic.

Set up shop on Instagram or Facebook. While organic social media reach is going down, it's still an important channel for ecommerce brands to use.

Now, set aside a small budget for paid advertising and test a few different channels to see which work best. Instagram is a great channel for highly visual ads. If you're running a handmade marketplace with unique products – show them off!

Additionally, keep search engine optimization in mind – SEO will be your growth driver in the long run. You're a wise marketplace owner and have picked a SEO-friendly platform software, right? If so, your categories, product pages and seller stores should start ranking shortly after launch and bringing new traffic in.

Don't forget your mailing list – use it when introducing new sellers, products and features. Invite new customers and sellers to sign up for your newsletter and keep the list healthy and growing.

Make sure you have a way to measure your efforts – use a free tool like Google Analytics or something more fancy like Ahrefs to judge the performance of your marketing initiatives.

Focusing on retention by keeping your users happy

After you've successfully launched your marketplace and have new user acquisition processes in place, it's time to focus on retention .

Why spend effort and budget to acquire new users only to have them never return to your website the next day?

So, you will need to make sure your sellers and customers are happy with the platform and willing to keep using it.

Keep gathering feedback and improving your marketplace. Identify the most active users and schedule personal interviews with them in exchange for a discount code or other offers. Fix issues as soon as they arise.

To make your marketplace easier to use, create a knowledge base for your buyers and sellers that answers the most commonly asked questions. You can also create a guide or a set of tutorials for your sellers that will help them be more successful selling on your platform.

Feature and promote your best sellers by creating case studies and success stories together with them. For example, Etsy's content team does a great job at promoting the stories of their users on their blog:

This will keep them happy and bring new customers in while also helping your SEO efforts.

When you have time, learn more about advanced analytics and conversion rate optimization to make your improvement efforts driven by real data.

Don't forget to keep your marketplace software up to date to make sure your marketplace is secure and efficient at all times.

Experimenting with strategic partnerships and competitive advantages

You'll need more than just a regular growth and marketing strategy to beat your existing competition, especially if you're a newcomer to the market.

Think strategically and try offering new, unexpected benefits to your users that your competition doesn't even think about. Do it by constantly experimenting and improving your value proposition through new tools, services, content and strategic partnerships.

If you've just started a new marketplace for handmade items, consider partnering with a local photography business to offer professional photography services to your sellers to make their creations stand out.

Talk to local and regional magazines and trade shows specific to your industry to get the word about your marketplace out.

Partner with adjacent businesses to create additional value for your sellers and your customers and make it an easy decision for them to join and stay with you.

No matter what you do – never stop learning, experimenting and getting better.

Over to you now

Hopefully, this guide has made the idea of starting your own marketplace business a little less scary.

Now, I'd like to hear what you think of all this:

If you run a successful online marketplace today, how did you get to it?

Those of you who are just starting out – what stage are you at and how does it feel?

And if you offer services to marketplace entrepreneurs, I'd like to hear from you as well!

In any case, let me know what you think in the comments below.

Martin Boss

I'm the founder of MultiMerch and a marketplace ecommerce enthusiast.

You really saved my day by simplifying the whole process and making it less scary. I'm building a Marketplace for services (freelance). I'm a web developer but aside from that, I'm struggling with marketing strategies and and unique value propositions. I have implemented all the features you mentioned but still feeling like it's not enough. I'm also in budget so I'm building it myself. A few advice could still go a long way. Thanks for the powerful post.

Whats up Comr! I noticed your comment and I'm curious of the features you implemented for your business. Were there any software or features that you purchased for your business? If so, which ones, and what were the prices?

Fantastic article with great, tangible advice! Thanks for sharing your knowledge with us

Try this brand new USA marketplace, Marketplace.Bargains we need new vendors, we combine a similar marketplace like Amazon & Ebay auctions together & our fee's are half their cost! We give you a free online store, 6 month FREE trial and you make your own store policies and can link back to your own online store! Register As A Vendor Here! Its just one more sales channel for your products but your products wont get lost in the ocean of products in big marketplaces and you keep more of your income for your business! Stay healthy everyone!

Wow! thanks a lot for sharing such useful content! Please, check our guide on how to create online marketplace

Thanks for sharing such a great post. Also, one can check out online marketplace called Mindful Market USA. One of the trusted platform for value-based shopping.

One should layout the ultimate goal and research the industry before launching a new marketplace. Thanks for amazing tips!

Comments are closed.

Sharpen your marketplace skills with our marketplace toolkit.

How to build your marketplace business plan

The creation of a marketplace is a commercial opportunity which requires significant investment by operators. Even if a marketplace shares similarities with an e-commerce site, there are fundamental differences to be taken into account when developing the business plan, more specifically in terms of overheads and revenues. In this context, the development of a realistic business plan is crucial to validating your profitability and understanding how to generate cash flows and create long-term value.

With more than 10 years’ experience in marketplace operation, Octopia provides its expertise, advice and guidance in the development of your marketplace business plan.

If you would like to know more about the key steps to developing your marketplace business plan, keep reading!

Step 1: Forecast your GMV

The first step in the business plan is to define a potential GMV 1 , using various methods. We generally recommend you forecast your GMV estimations over 5 years.

Method 1: ‘Top-down’

The first method to assess your potential GMV is the ‘top-down’ approach. You can assess the size of the market you operate in and allocate yourself a market share (target or real). You can also define the share of your e-commerce turnover which should come from your future marketplace.

Method 2: ‘Bottom-up by offer’

The second method used to assess your potential GMV is the ‘bottom-up’ approach. Starting with a number of products (target or real), estimate an average GMV for each product and add together to obtain your total GMV.

Method 3: Marketing

It is also possible to estimate your Marketplace GMV using your marketing investments and traffic. You can define a marketing budget and the annual traffic derived from this budget. By applying an average conversion rate 2 which is relevant to your sector, you can deduct a number of orders and potential GMV based on the average shopping cart.

Generally speaking, the more comprehensive the marketplace offer, the more your customers will see you as a one-stop shop, which will increase your traffic and conversions and thus your GMV. In order to offer your end customers a rich selection, you need to recruit a sufficient number of sellers, one of the keys to marketplace success.

Octopia recommends you combine several methods to assess your potential GMV, which will enable you to compare the coherence between models. It is also important to compare as much as possible the results of your methods with your current business results (if in existence) or the market benchmark (average cart, number of orders, conversion rate, traffic and marketing budget, etc.).

The next step of the business plan is to define marketplace turnover.

Step 2: Calculate your turnover

The net turnover corresponds to marketplace revenues after deduction of cancellations and product returns.

Marketplace operators have several revenue sources:

• Commission rates: This is the main source of marketplace revenue. The operator fixes a commission rate which will be levied for every sale made by a third-party seller. This rate generally varies between 5% and 25% per sale.

When launching your marketplace, Octopia recommends you fix a commission rate somewhat lower than the market to attract as many sellers as possible

• Subscription: This is the amount paid on a monthly or annual basis by sellers to access the marketplace. Subscription fees are at the total discretion of the marketplace operator.

As with commission, subscription may serve as a means to enter a market. On launching your marketplace, you can choose to reduce this subscription or provide it for free to attract sellers and provide a comprehensive offer to satisfy your customers. The subscription can thus be added gradually as the marketplace matures to become a considerable portion of your revenues.

• Monetization 3   : This is the cost paid by sellers to the operator in exchange for financial services, credit lines, administrative services or visibility. This monetization varies between 0.1% and 2% of GMV. There is a direct link therefore between the number of sellers and turnover: the more sellers there are, the more monetization the operator can generate.

Monetization is a set of additional services provided at a later stage, when the marketplace is more mature.

Revenues thus depend on the number of sellers and the GMV, and have a direct impact on turnover.

Elements to deduct:

Once you have defined a gross turnover, you must deduct certain indicators in order to obtain your net turnover:

• Cancellation rates: When the end customer decides to cancel their order before receiving the product. This rate is calculated as a percentage of the GMV and is defined on the basis of market studies.
• Product return rate: When the end customer receives the product and returns it to the marketplace. This rate varies according to the market, business sector and country.

Deduct these ratios from your revenue to obtain your net turnover. The business plan is not complete until you have deducted overheads from this turnover.

Step 3: Identify your costs and investments

There are two main overheads to marketplace operation:.

• Marketing: Investing in marketing when launching the marketplace is crucial to enhancing your visibility. This cost varies from one marketplace to another, you can allocate a dedicated budget or a percentage of the GMV.

Octopia emphasizes the importance of calculating the marketing ROI to fine-tune your marketing strategy, i.e., how much every Euro invested will contribute to GMV.

• Payroll: In addition to the standard payroll of an e-commerce site, launching your marketplace will imply the integration of new skill sets, particularly those linked to seller management. The two key tasks are sourcing and account management. Sourcing consists in identifying, contacting and onboarding sellers to your marketplace. Account management is the organization, management and retaining of your sellers to ensure their performance and avoid c hurn 4 . Octopia estimates that one person can source between 20 and 30 sellers per year and a second person can oversee account management for 20 to 35 sellers per year.

If you would like to benefit from our advice to on how to identify the right sellers for your needs, read our dedicated article

Additional overheads to marketplace operation:

• PSP (cash-in / cash-out): This is the payment service provider, which is mandatory to carry out financial transactions on the marketplace. PSPs generally bill a fixed rate per order and a variable cost according to your GMV.
• Customer relations: This is the cost of managing customer relations and after-sales service, etc. The marketplace operator plays an intermediary role between the sellers and the end customer. The operator must arbitrate in the event of a dispute and implement tools to enable seller-customer dialog. These after-sales overheads represent €0.30 to €0.60 on average per order.
• IT running costs: These correspond to the hosting and licensing of the marketplace platform. The marketplace operator pays a one-off ‘set-up’ cost to launch the marketplace, followed by running costs corresponding to an annual subscription.

Launching a marketplace thus implies substantial costs, mainly related to seller management tasks. In addition to a base of 15,000 international sellers ready to join your marketplace, Octopia also offers to outsource your sourcing and account management, and thus their related costs.

Step 4: Analyze the bottom-line impact

Now that the top line and related costs have been assessed and aligned, it is time to examine the impacts on the bottom line. In other words, the analysis of the time to value of the project, the return on investment and the generation of cash flow. By working with Octopia, you can benefit from proactive result-based advice and thus ensure faster, more sustainable growth.

In conclusion, developing a business plan is a complex task which requires solid sources of information. Numerous marketplaces launched in the last 10 years have failed. While the marketplace model implies fewer fixed costs than a standard e-commerce model, the challenge lies in reaching an adequate critical mass to attract a sufficient number of qualitative sellers providing a wide and relevant range which will attract and satisfy more customers.

Octopia guides you through the development of your marketplace business plan. As a specialist in marketplace management for more than 10 years, Octopia has expert knowledge of the key factors for a prosperous marketplace.

• GMV : Growth Merchandise Value represents the total value of goods sold by sellers for a given period on the marketplace, before deducting taxes and commissions.
• Conversion or transformation rate: The percentage of online visitors who reach a certain objective, such as making a purchase.
• Monetization: The type of remuneration which transforms an audience into revenue, by providing sellers with enhanced visibility of their offers.
• Churn or attrition rate: In the context of the marketplace, this is the percentage of sellers leaving the marketplace definitively, either deliberately or due to their suspension by the marketplace.
• EBITDA : earnings before interest, taxes, depreciation, and amortization,

What Is A Marketplace Business Model?

Learning how to sell your products profitably is one of the exciting parts of being a business owner. This requires knowing where your target customers spend time and putting together a plan to reach them. 

Often, this can be achieved by understanding different types of marketplaces . Each marketplace uses a marketplace business model, which is the framework showing why a business exists and how it accomplishes its goals. 

But what exactly is a marketplace business model? Let’s begin with the definition of a business model, which is related to the marketplace definition .

Keep reading to find out what a marketplace business model is and how to pinpoint the right marketplace for your business.

Definition of Business Model

A business model is the structure or rationale driving how a business creates value for its customers. It describes the manner in which a product or service is created, how it’s sold, who it’s sold to, the products’ profit margins, and how the business is competitive in the marketplace.

Key Takeaway : Though they aren’t the same, a business model is similar to a business plan. A business model describes the nature of a business’s activities and purposes, and a business plan describes how those activities are accomplished. 

Offline Marketplace Business Model

An offline marketplace business model is the marketing, sales, and operational framework used for running an offline business. Sustainable marketplace selling is contingent upon knowing buyers’ and sellers’ needs, price points, demographic characteristics, and preferences.

Your business model may include fixed and variable costs, labor costs, expected revenue, marketing channels, examples of unique selling proposition (USP), and other critical business information. Any offline marketplace business model should include attracting as many relevant, in-person buyers as possible.

While every business is different, shipping is bound to be required at times. Whether you get products to customers via dropshipping , 3PL companies , or direct eCommerce shipping , it’s important to have this part of your business running smoothly. 

BlueCart’s eCommerce shipping solutions consolidate the buying power of our customers to negotiate industry-leading rates from 60+ companies. Calculate costs, create labels with a shipping label printer , track shipments, and more.

Offline Marketplace Business Plan

The target audience of an offline marketplace will dictate its business model and marketing approach. 

For example, the business model of a flea market will differ from that of a retail store. In a flea market, one individual may be both a buyer and a seller. At a retail store, the manager oversees numerous vendors who sell products via the store to public buyers.

A flea market business model should include financial projections about how many people are likely to sell and buy, not just those who will buy. This gives the flea market owner realistic ideas for competitive rent prices, the revenue they need to generate to be profitable, and so on. 

What is B2B ? Explore the realm of business-to-business interactions and gain insights on how to excel in this dynamic sector.

The business model also includes how a company or event differentiates itself from competitors. Does your business sell a hyper-niche product? Is your product one of seasonal demand? Does your product have a novel feature? Does your business reach a specific demographic that other businesses have been unable to? 

Answering these questions clarifies the strengths of your business model. Every company is similar to at least a few others, but you should be able to identify why your target market should choose your products over competitors’.

Online Marketplace Business Model

An online marketplace business model is the structure an Internet-based marketplace uses to attract buyers and sellers, sustain revenue, and remain competitive. It’s similar to offline business models in some ways and different in others. There are overhead expenses, eCommerce accounting tasks, eCommerce marketing strategies, and target audiences. 

There are several ways to differentiate offline and online marketplace business models. One, customers bring different expectations to offline versus online shopping. At a retail store, customers know they need to take the product to their car with them. Online, consumers expect fast and low-cost shipping and handling . These consumer trends place less responsibility on the buyer and more on the seller. 

Two, customers have a much broader range of products to choose from online. When you’re at a brick-and-mortar location, the only products available to you at that moment are what’s right in front of you. Online, you can be shopping in a completely different store within seconds. As such, your store must include at least a few high demand products that are listed at competitive price points. 

Three, customers shop for different types of products online versus offline. Clothing, technology products, books, trips, and toys are examples of worthwhile products to sell online . Mattresses, cars, swimsuits, musical instruments, and furniture tend to sell better offline, largely because consumers want to try them first. Going with a marketplace business model based on your business’s niche is a wise choice. 

Types of Online Marketplaces

If you’ve decided online marketplace business models are your thing, you then need to decide on the right marketplace to sell in. There are three basic types of online marketplace business models:

• Consumer to consumer (C2C). In this online marketplace business model, anyone who has products to sell or wants to buy goods can do so. You simply need to list the goods you’re selling or use the search bar to find what you’re interested in. This is called consumer to consumer, or C2C, because you don’t need a business license or specific credentials to sell. eBay is a great C2C example and one of the best marketplace apps for the best side hustles . C2C marketplaces are an inexpensive way to get started if you don’t have the resources necessary for large operations. 
• eCommerce and retail sites (B2B and B2C). An online retail store is the essence of eCommerce--physical products being sold through a website. Business owners look for (or make) popular goods, list them on their website, and sell them to target markets. You can learn how to build an eCommerce website by reviewing eCommerce website examples and using an eCommerce website builder . Luckily, finding the best eCommerce website isn't too much of a hassle. If you want a top-tier digital presence with minimal effort, try BlueCart eCommerce . Our SEO-optimized platform handles your digital catalog , eCommerce payment processing , and store appearance for you. 
• Wholesale marketplaces (B2B). A wholesale marketplace is where businesses sell supplies, raw materials inventory , or other products to businesses or consumers. Wholesale supply chains are a key part of understanding B2B meaning and what products go through before reaching retail channels. Make wholesale sales by listing popular wholesale items to sell , and don’t forget to include a minimum order quantity ( MOQ ) from your buyers. 

If you’re looking for a dynamic online marketplace to sell on, look no further than BlueCart’s online marketplace . Our web- and mobile-optimized platform comes with bank-level security and built-in automation tools. There are over 95,000 buyers already on our marketplace looking for products like yours. Book a demo now to see what BlueCart can do for you. 

Frequently Asked Questions About Marketplace Business Model

What is an example of a marketplace business model.

An example of a marketplace business model is BlueCart Marketplace , an online platform that connects buyers and sellers for various products. BlueCart Marketplace facilitates transactions by providing a user-friendly interface and a secure vendor payment system, making it easier for people to buy and sell goods from all around the world.

What is marketplace model?

A marketplace model is a business model where a platform acts as an intermediary between buyers and sellers, facilitating transactions and interactions between them. The platform typically provides tools and services to enable seamless and secure transactions, and earns revenue through various methods, such as commissions, listing fees, or subscription commerce fees.

What type of business is a marketplace?

A marketplace is typically classified as an eCommerce business, as it operates as an online platform that connects buyers and sellers for the exchange of goods and services. Marketplaces can cater to different industries, such as retail, services, or rentals, and can be focused on B2C, B2B, or C2C transactions.

How does marketplaces make money?

Marketplaces make money through a variety of revenue streams, including:

• Commissions
• Listing fees
• Subscription fees
• Advertising

What are the 3 main types of online marketplaces?

The 3 main types of online marketplaces are:

• B2C (Business-to-Consumer) marketplaces
• B2B (Business-to-Business) marketplaces
• C2C (Consumer-to-Consumer) marketplaces

Can a marketplace be profitable?

Yes , a marketplace can be profitable if it effectively attracts a large user base of buyers and sellers, generates sufficient revenue through its various streams, and manages its operating expenses efficiently. 

Building Your Business for Success

Laying the right foundation for your business often requires more work than you may realize. In addition to filling out paperwork and saving money for expenses, you need a keen awareness of both customers and your competition. 

Choosing the right business model based on your company’s needs and goals is an important decision. After learning about fundamental business models in this blog post, you’re equipped to launch your business in an environment conducive to its success.

The best Multivendor marketplace plugin for WooCommerce

5 Necessary Elements Of A Great Online Marketplace Business Plan

If you want to ensure the success of your multi-vendor marketplace, you need to craft a great online marketplace business plan.

The online marketplace industry is expanding rapidly. According to research and advisory company Forrester, a third of all business in the United States flows through e-commerce, with 63% of transactions occurring on online marketplaces.

Because of this growth, many online sellers have considered adapting to this business model. Some have already grown their online stores. They know the basics: how to attract customers , navigate an e-commerce platform, identify a target market, and manage their inventory.

Others have less experience. While they see the potential of an online marketplace , they have no idea how to get started.

Whether you’re just starting out or are already established, a comprehensive business plan is the cornerstone of every successful e-commerce venture. For this reason, this article will detail five crucial elements that are essential to include in your marketplace business plan.

Why Do I Need An Online Marketplace Business Plan?

Various apps and plugins have made it relatively easy to build a site , bring in vendors , and sell products online. However, that’s just the infrastructure behind the marketplace business model. The real challenge comes from knowing what you will do with that infrastructure.

That’s where a business plan comes in.

In addition to establishing your mission statement , your online marketplace business plan describes the strategy you will use to launch, sustain, and grow your business. Developing a thorough business plan will prepare you to:

• Present your business to investors
• Outline your financial projections for the next 18-24 months
• Focus on the right tasks and next steps
• Make good decisions along the way
• Have a map to return to when things get difficult
• Identify potential weaknesses before you experience them

Having these insights will make it easier to label and achieve your goals as you launch your online marketplace .

1. Know What Sets Your Online Marketplace Apart (And Who It Is Targeted Towards)

There are a number of different online marketplace business models in the industry. Giant companies like Amazon, eBay, or Walmart stand out as the most obvious.

Marketplace operators start salivating when they hear about the numbers that these large companies bring in. For example, the fact that Amazon made over 21 billion in 2020 has tempted many entrepreneurs to create an online marketplace that offers the same scope of products. They want to sell everything or be everything for all people because that’s where the money seems to be.

Unfortunately, this failure to understand the market is one of the biggest mistakes companies make early on.

We’re not here to crush anyone’s dreams, but it’s going to be very hard for any marketplace to compete with these multi-billion dollar organizations. After all, very few customers are looking for a different Amazon or another eBay.

The best way for your marketplace business to survive is by focusing on a specific audience and product that will make you stand out.

What’s the Difference Between Vertical and Horizontal Marketplaces?

As you establish your unique marketplace business model , you’ll want to consider whether you want to position yourself as a vertical or horizontal marketplace.

A horizontal marketplace offers a “one-stop-shop” experience akin to what you find with major players in the industry. In contrast, vertical marketplaces tend to focus on related items or a specific niche.

The Value of Niche Marketplaces

Niche marketplaces thrive when there’s a strong community around a product. People come together because of shared interests in a specific industry. Then, once they trust a brand, they give it a competitive advantage that they can’t find in more established marketplaces.

Success from niche marketplaces will come when you know your audience well. You have to be a master of your target market, knowing what kind of things they want and helping them easily get it.

2. Identify An Appropriate Revenue Model

One of the advantages of an online marketplace is its potential for revenue. Depending on your scope, this type of platform offers several different ways to make money .

There’s not really a single best way for a marketplace to generate revenue, so we’ll cover five of the most commonly used models below:

Commission Model

This is the classic revenue model for marketplaces. Basically, the marketplace takes a percentage of every successful transaction from its vendors. Big brands like Amazon, Airbnb, Etsy, and eBay use this business model.

Subscription Model

The marketplace charges customers and/or sellers a monthly subscription fee to join. However, this concept only works when either party gets access to special or unique perks. For example, customers can pay you a recurring fee to enjoy special discounts or experiences . On the other hand, vendors can pay you regularly to sell products via your platform and gain access to your marketplace’s customer base.

Freemium Model

Freemium models are popular for marketplaces with layered offerings or services. They give away a light version of their product for free but charge for premium services. Some stock photo sites do this by giving away certain photos for free but offering users access to a larger collection if they’re willing to pay.

Listing Model

Businesses that use this model charge sellers a listing fee to post items on their online marketplace platform. This often happens with higher-priced items like cars or houses, especially when the marketplace itself doesn’t get involved with the sale.

For a great example of this business model, check out Autotrader’s site:

Featured Ads

Ads or featured products can be a great way to bring in additional or sustaining income . Sellers pay to have their products listed among the first searches. For many online marketplaces, this serves as one of several revenue streams rather than the primary income source.

In the example below, all the products below are “sponsored.” This means that the brands paid Amazon to be featured higher on the listings.

3. Develop A Plan To Bring Sellers Into Your Online Marketplace

It’s not easy to convince sellers to join a new marketplace. There has to be something that draws them in.

Most people in the industry recognize this as the marketplace’s chicken and egg problem. The marketplace business model really only works if and when you’ve already attracted buyers and sellers. But which one comes first?

You can’t acquire customers if you have no vendors. However, vendors don’t want to join an online marketplace platform if they’re unsure about their ability to sell products on it.

Thankfully, this doesn’t mean that new online marketplaces can’t succeed. They just have to find other ways to incentivize vendors.

Include Dedicated Seller Programs

Some marketplaces offer programs designed to help vendors succeed within the platform. Typically, such programs include trainers and/or account managers who oversee their stores and provide guidance for enhancing their business strategies on the platform.

Make Things Easy

Having a simple onboarding process for an online marketplace can go a long way for vendors. After all, they don’t want to spend too much time trying to navigate a complex system; they want to sell their products and make money. The more you eliminate the roadblocks that get in their way, the more likely they’ll join your marketplace.

4. Make Marketing Part Of Your Online Marketplace Business Plan

Marketing is essential for survival in the digital world. After all, if nobody has heard of your marketplace, no one will visit it.

Unfortunately, establishing a marketing plan is an oft-forgotten piece of building an online marketplace business. Some marketplace operators believe that things will naturally fall into place. Thus, they hesitate to invest the necessary time, money, and effort required for effective marketing.

The more you make your marketing a part of your overall marketplace business plan, the more likely you’ll bring in customers.

Utilizing Various Marketing Channels

The key to marketing in the online marketplace industry is diversifying your channels . Always stay focused on your ideal customers, but maximize your reach by meeting them wherever they may be.

Consider incorporating some of the following marketing strategies into your plan:

• PPC Campaigns
• Email Marketing
• Content Marketing
• Social Media
• Influencer Marketing

5. Use The Right Metrics To Measure Success

You’ll only know how successful your online marketplace business model is if you know the right things to measure.

Many metrics exist, some more meaningful than others. Here’s a curated selection of the most vital ones, accompanied by their respective calculation formulas:

Net Revenue: Multiply your gross merchandise value (GMV) by your take rate to get a sense of the actual revenue you’re taking in.

Repeat Purchase Rate: Divide the number of customers who have shopped in your marketplace more than once by your total number of customers.

Customer Acquisition Cost: Add up the total costs used to acquire new customers and then divide that number by the number of new customers gained from those channels.

Average Order Value: Divide total transaction value by the total number of sales.

Net Promoter Score: Send a customer satisfaction survey to your audience that asks on a scale of 1-10 how likely they would be to recommend your online marketplace to a friend. Then, split the results into promoters (9s and 10s only), detractors (anything under 7), and passives (8s or 7s). Lastly, subtract the percentage of detractors from the percentage of promoters to get your NPS.

Get Started On Your Online Marketplace Business Plan

Now that you’ve got the necessary information, all you need to do is apply it. Create your plan, build your marketplace, and start bringing in revenue.

At WC Vendors, we make it easy to get you up and running. Check out a demo of our product to see how we can help you launch your online marketplace in just a few minutes.

To launch an online marketplace that profits and grows, you need to create an exceptional marketplace business plan.

To do this, you need to:

• Know what sets your online marketplace apart
• Identify an appropriate revenue Model
• Develop a plan to bring sellers into your online marketplace
• Make marketing part of your marketplace business plan
• Use the right metrics to measure success

Do you have any questions about how to craft a great online marketplace business plan? Reach out to us and let us know; we’d be happy to hear from you!

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Blog » Magento 2.0 » The complete guide to starting your marketplace business

The complete guide to starting your marketplace business

• Magento 2 marketplace
• Magento 2.0

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Online marketplaces offer you ample opportunities to enter the domain and start a marketplace business. But, easier said than done. Having been presented with an opportunity is on a different end of the rope to starting your marketplace business. From the initial stage of getting your eCommerce business idea validated to the final stage of launching your business, starting your marketplace business can prove extremely challenging.

Besides the opportunities and benefits it offers, there’s potential to own an online marketplace business with its share of global market size increasing. And the global marketplace market size is expected to expand at an annual rate of 9.7% from 2021 to 2028 .

Several factors have contributed to the growth of online marketplaces. These factors include an increase in digital buyers, availability of a wide range of product options, ease and convenience of shopping online, shift in consumer buying habits brought about by the pandemic, and more.

Isn’t owning an online marketplace business great? You don’t require your products and services to start a marketplace business. You can create an online space for vendors to sell their products and scale their businesses. And, you empower customers to meet their demands in one place.

If you plan to go big from the beginning, Adobe Commerce is the best investment to give your business the right push on multiple channels.

Holiday Season Sale 2022- Now get flat 20% OFF on Magento Marketplace solutions and Adobe Commerce till the end of December, 2022. Click below to view our offer:

You have the option to start a marketplace business in a particular niche. For instance, an online grocery marketplace or healthcare marketplaces are popular marketplace niches. Or, you can start a marketplace business, allowing vendors to sell products in multiple niches.

In this article, we’ll dive into some preconditions of starting your marketplace business. Here’s a breakdown of everything you need to know before starting a marketplace business.

Table of contents

Identify your online marketplace idea, analyze the potential niche, and get it validated, conduct proper research into the core target market, carefully analyze your competitors in the industry to start a marketplace business, choose the right business model to start a marketplace business, choose the ideal marketplace business type before starting your marketplace business, plan out your budget and costs of starting your marketplace business, plan the operations in your marketplace business, identify the value proposition and features of your marketplace business.

• Choose the payment solution for your online marketplace

Find the online marketplace software solution to start a marketplace business

Prerequisites for starting your marketplace business

Before you start a marketplace business, you need to research the growth potential of your marketplace business idea. When you define the problem you shall solve, you should analyze your competitors and market leaders in the industry. There’s a high probability that all potential niches for your marketplace are already covered. The best way to move forward is to narrow down your niche and find a focus in your preferred niche.

Different marketplace niches include the following:

• Grocery marketplaces
• Food marketplace
• Healthcare marketplaces
• Electrical & Electronic Marketplaces
• Automobile marketplace
• Building materials B2B2C marketplace

Secondly, once you have narrowed down your preferred niche, you move on to identifying your target audience and the market size for the demand of what you shall be offering with your marketplace business. Furthermore, you can turn your customers’ expectations into your value propositions with careful analysis.

Validating your marketplace business idea helps you analyze whether you are moving in the right direction. Research for getting your marketplace idea validated requires great effort and time. Creating a prototype is one of the best ways to move forward in getting your idea validated.

With the primary features built on the minimal viable product (MVP) phase, the prototype can help you attract your first customers and gain initial investment. Furthermore, you can prepare a project specification, including detailed information on your business features, products, design, complexity, third-party integrations, and more.

Conducting thorough market research is a crucial step in starting your marketplace business. Without having a vivid understanding of your core target market, their demands, requirements, and problems, you cannot provide a viable solution. There’s no other easier way around it.

You should have a clear picture of the industry you are entering, your competitors, and why your customers should choose your products over your competitors. Furthermore, there’s no limit to how much you can know about an industry you shall enter. As mentioned above, you shall clearly understand the industry you shall enter.

Furthermore, you can start by analyzing its size, growth rate, and the latest trends and developments. The following resources are credible and can prove useful in conducting your market research:

• MarketResearch.com
• Pew Research Center

The size of your target market is also an important factor in determining the validity of your marketplace business idea.

How to define your target market?

The buyer personas you define should align with your potential customers with similar features. You can follow the below points for defining your buyer persona.

• Education level
• Yearly income
• Possible pain points

You can add more data points depending on the type of marketplace. Thus, it’ll help you understand your potential customers’ expectations. To sum up, the more precisely defined buyer personas are, the better you can target potential customers with the perfect solution.

Understanding your competitors also allows you to overcome the competition. You can face either direct or indirect competition in the industry. Here are some questions to help you analyze your competitors in the industry:

• Which niche do your competitors operate in?
• What does their website look like?
• What are their features and value propositions?
• How do they charge fees?
• What does their marketing strategy look like?
• How do they engage with their customers?
• What are their guidelines for new sellers?
• Predict how they shall improve their products in the future.

Again, you can always add more questions to the list as you continue the research. Furthermore, you can identify your competitors’ strengths and weaknesses. In addition, identifying gaps in their business can work to your advantage. Moreover, you can identify the business leader in the industry. Understand what makes them stand out from the rest of the players.

Before starting your marketplace business, you must design a viable business model. Regardless of the industry, you’ll enter, choosing the right business model is a necessary step. Deciding on a business model for your marketplace implies selecting the revenue model to monetize your online marketplace. You can monetize your online marketplace in the following ways:

Commission:

The marketplace owner charges a percentage or fixed fee for every successful transaction on the website. Furthermore, the marketplace owner can define the commission product-wise, category-wise, or seller-wise.

Subscription:

The users pay a monthly or yearly fee to use the marketplace. Subscription-based models are gaining popularity in current times. Furthermore, the subscription-based revenue model keeps your business running since you can secure more revenue with the increase in sellers.

Listing fee:

The seller has to pay a fixed fee for every listing they add to your online marketplace. You can charge listing fees every time a seller on your marketplace sells a product.

In this business model, you offer basic functionalities for free. The premium, advanced features are offered for a certain price. Simply put, users have to pay for the premium package to get an upgrade in features. However, there’s always a risk of customers being satisfied with basic functionalities and never purchasing a premium package.

Third-party ads:

You allow advertisers to display ads on your marketplace website. The more traffic a website has, the more revenue it generates. In this business model, users don’t have to pay for the service because third-party ads generate revenue for the service. For instance, Couchsurfing , a social networking platform, displays third-party ads for generating revenue.

Lastly, you should account for the legal aspects of your target market niche before starting your marketplace business.

Mostly, marketplaces start operating in one niche and then expand their business operations to different markets. For instance, Amazon began selling books and then became a one-stop shop for buying anything. From a vertical marketplace, it transformed into a horizontal marketplace. Let’s dive into the two types of marketplaces:

Horizontal marketplaces:

Horizontal marketplaces cater to a wider range of customers’ requirements across different sectors of the economy. It does not focus on a single category or niche of selling products. Thus, a horizontal marketplace sells a spectrum of products, reaching a wider audience and generating more revenues. To sum up, horizontal marketplaces enable customers to purchase everything from one online space—for instance, Amazon, Walmart, Taobao, eBay, JD.com, and Alibaba. Even Amazon’s logo suggests it sells all products, from A to Z.

Vertical marketplaces:

Unlike horizontal marketplaces, vertical marketplaces cater to a single market sector in the economy. On a vertical marketplace, sellers sell a particular product category to the target audience. With a vertical marketplace, sellers have to focus on a minimal target market focusing on one industry. For instance, a Brooklyn-based model, Etsy is a rich example of vertical marketplaces selling handcrafted and vintage items.

Also read: Innovating the future of enterprise eCommerce businesses with Magento

Several factors, features, and functionalities can influence the cost and time of your marketplace website. Furthermore, the features in a marketplace can depend on your business requirements. However, some features remain the same, including product and order management systems, shipping methods, third-party integrations, etc.

The following factors can influence the cost of projects:

• Software requirement specifications (SRS)
• The stage of your project development
• The complexity of functionalities you’ll include in your marketplace business
• Additional premium features
• Integrations with other services

If you don’t plan your business operations before starting your marketplace business, you might find it quite challenging to manage your business operations. When you start a marketplace business, you have to manage many business operations. Furthermore, you manage both sellers and buyers increasing the frequency and intensity of business operations.

Here is the list of operations you have to perform for managing your marketplace business:

Manage sellers:

Sellers comprise the most important aspect of your marketplace business. You have to ensure a seamless flow of operations for your sellers. When you proceed with building a marketplace business, introduce distinct landing pages to better understand why they should join your marketplace business. Furthermore, you’ll have to design eligibility criteria for sellers who can sell on your marketplace. Lastly, carefully review every application you receive before allowing a seller on your marketplace.

Manage products:

While building a marketplace business, you can implement a product information system for effectively managing your sellers’ products. Furthermore, each product either belongs to a single seller or multiple sellers. This decision shall impact your choice of software, your marketplace’s business layout, and how your sellers manage their products. Lastly, make it easy for your sellers to sell their products on your marketplace. For instance, allow them to import products from their website to your marketplace in bulk.

Manage payments:

Marketplace payment systems are more complex than regular online stores. A specialized marketplace payment gateway can allow customers to purchase from several different sellers at once and split payments at checkout. Different payment flows have different implementation requirements. We’ll discuss more about managing payments in the coming section.

Manage shipping and logistics:

Before you start your own marketplace, you must figure out how you shall manage your marketplace business’s shipping and logistics aspects. You will have to decide whether you shall take care of shipping the products or allow sellers to manage that. Furthermore, you shall have to focus on handling inventory management and shipping expenses.

During the planning phase of your business operations, other aspects you need to consider include marketing, orders, seller-customer relationship, and more.

There are numerous marketplaces in the online space. You will have to define your unique features and value proposition to make a difference. Does your marketplace business save time or money? Does it significantly improve the selling or buying process? Or is there a specialized service your marketplace offers? Define how your marketplace business creates a win-win situation for sellers and buyers by giving them more access to sell and buy products.

The best way to start your own marketplace is to include the basic features and eventually build upon them as you scale up. Lastly, there are three basic sets of features of a marketplace business that allows smooth carrying out of the following functions:

• Allow sellers to sell and manage their products
• Enable buyers to buy products from the marketplace
• Lastly, allowing buyers and sellers to connect

Factors that empower a marketplace business to succeed over others include new experience, economic advantage, technological breakthrough, and demand size. Furthermore, market expansion, payment flow, and networking can also prove beneficial to the success of your marketplace business.

Choose the payment solution before starting your marketplace business

One of the most basic but important features you can offer on your marketplace business is multiple secure payment options . Once you start your own marketplace, you shall have to process the following payments:

• Making payments to third-parties
• When you have to make payments to sellers
• Payment to buyers (Refund)

Since processing payments involves multiple parties, it already gets complicated. To ensure a smooth transaction process, you can opt for either of the following ways of payment processing on your marketplace business:

Direct payment:

Buyers make direct payments to sellers. Since your platform is not involved, there’s less chance for you to charge transaction fees. Direct payments aren’t a great way to process payments because customers will have to buy products from different sellers in one session, and they’ll need to go through separate checkouts.

Aggregated payments:

Your marketplace platform shall collect all buyers’ payments and later redistribute them to your sellers. Though you’ll have to put in extra effort to track your sellers’ finances, aggregated payments allow for a single checkout, returns, and refunds.

Split or parallel payments:

The payment method allows for splitting payments from buyers and then distributing them among your sellers. Some split payment processors include Stripe Connect, Mangopay, and PayPal.

However challenging the implementation of a secure payment system might appear, you still make it easier by considering the type of payments to be made on your marketplace business and the availability of particular payment options in your region. Lastly, you should also consider the cost of the payment solution.

Even if you have created your prototype, planned out your business operation, and selected your payment solutions, you’re still one step away from starting your marketplace business. You still have to choose an online marketplace solution . With so many available solutions in the eCommerce market, here are some tips you can follow:

• Consider what type of marketplace business you shall launch and establish
• Consider all basic and advanced features you’ll need for launching and scaling your marketplace business
• The quality of user experience it delivers and past user reviews who have succeeded using that marketplace solution
• Who are the people behind providing your software solution?
• Lastly, how small or big is your business budget

Also read: How to choose an enterprise eCommerce solution

For instance, self-hosted solutions designed specifically for marketplace commerce offer more personalization and modification possibilities. As the name suggests, you are responsible for hosting your marketplace business website. Eventually, you get endless control over your business and how to personalize it. Moreover, you can make any changes since the codes are open-sourced. However, self-hosted solutions have their drawbacks. You have to start setting up your store from scratch.

Ensuring a successful start for your enterprise marketplace can prove challenging, particularly when a number of factors have an influence. We bring you the enterprise marketplace guide, where you’ll find the solution to all-things complex related to launching an enterprise marketplace. Click on the link below to get your copy. 

Download the Free Guide

CedCommerce: For starting your marketplace business

We have finally arrived at the end of a long read. We have achieved our goal if you find the process of starting your marketplace business less daunting. The points mentioned above are a basic start a marketplace business itinerary to facilitate the process. As you start your own marketplace business and scale up in the future, you shall discover more important factors, one such factor can be Magento Marketplace which holds the ability to transform your storefront.

However, marketplace solutions from CedCommerce can help you launch a feature-rich and customizable marketplace business. We can help you manage business operations efficiently, increase sales, and generate more revenue. Furthermore, you can mold our marketplace solutions to fit your business ideas and requirements.

Now that you have understood everything you need to know before starting your marketplace business, let’s get your business plan started.

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2 thoughts on “ The complete guide to starting your marketplace business ”

Hello, I'm Jon Morgan, I found this guide very informative and helpful, as it shows how to start a marketplace business. It connects the dots for aspiring entrepreneurs, I appreciate the author for this valuable resource!

Thank you so much for your generous feedback! I'm delighted to hear that you found the guide informative and helpful in navigating the intricacies of starting a marketplace business.

Wishing you success in your entrepreneurial journey!

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Marketplace Business Model Guide: Choosing the Right One for Your Marketplace Business

Table of Contents

Common marketplace business models, #1. commission-based marketplace business model.

• #2. Listing Fee Model
• #3. Subscription-Based Model
• #4. Freemium Model

#5. Advertising and Sponsorship Model

#6. affiliate marketing model, choosing the right marketplace business model for your business goals, why is cs-cart multi-vendor one of the best platforms for diverse marketplace business models.

In the dynamic landscape of marketplaces, the foundation for success lies in a well-crafted successful marketplace business model. A business model essentially serves as the blueprint that outlines how a marketplace intends to generate revenue. It's the strategic roadmap that dictates the financial dynamics between the platform, buyers, and sellers.

Imagine a marketplace business model as the navigational system of a ship—plotting the course to profitability in the vast sea of online commerce. For a marketplace, selecting the right online marketplace business model is akin to choosing the most efficient route —one that not only sustains the platform but also creates a thriving ecosystem for its users.

A marketplace business model is basically how your marketplace makes money for you.

The importance of this decision cannot be overstated. A well-chosen, successful marketplace business model not only ensures the financial health of the online marketplace but also determines the nature of interactions among participants. It shapes the dynamics of transactions, defines the value offered to users, and ultimately plays a pivotal role in the sustainability and growth of the platform.

In this guide, we will delve into the intricacies of various proven monetization marketplace business models for marketplaces, exploring their nuances, successes, and potential pitfalls. By understanding the significance of selecting the right business model for marketplaces, marketplace entrepreneurs can chart a course towards sustained success in the competitive seas of business to business and business to consumer online commerce.

Let's talk about how marketplaces make money. We'll explore the basic ways, like when they take a bit of money from each sale or when you pay a monthly fee, and more advanced non-obvious ways. Understanding these ways can help us see how online shopping on marketplaces works and why it's successful.

A commission-based marketplace business model is a straightforward and widely adopted approach where the platform earns revenue by taking a percentage cut from every successful transaction that occurs between buyers and sellers. This revenue model aligns the interests of the online marketplace with the success of its users.

In this revenue model, the online marketplace essentially acts as a facilitator, connecting buyers with sellers. When a successful transaction occurs—be it a product sale, service provision, or any other exchange—the marketplace takes a predetermined percentage of the transaction value as its fee. This percentage can vary depending on the type of products or services offered.

• Uber: Uber, a prime example of a commission-based revenue model, charges drivers a percentage of each fare for using its platform to connect with riders.
• Etsy: The e-commerce platform Etsy charges sellers a percentage fee for each item sold on its platform, aligning its revenue model with the success of its community of artisans and crafters.

Uber charges drivers a percentage of each fare

• Aligned Incentives: The success of the online marketplace is directly tied to the success of its users, fostering a collaborative ecosystem.
• Scalable: As transactions increase, the revenue of the marketplace also grows proportionally, making it a scalable business model.
• Low Entry Barrier: Sellers often appreciate this marketplace model as they only pay a fee when they make a sale, reducing the upfront costs.
• Dependency: Both buyers and sellers may feel the pinch of transaction fees, potentially leading to dissatisfaction and seeking alternatives.
• Pricing Disputes: Determining the fair percentage for transactions can be a point of contention and might lead to disputes between the marketplace and its users.
• Competition: In highly competitive markets, users may migrate to platforms with lower transaction fees, impacting the successful marketplace business model's market share.

In a commission-based model, the platform makes money by taking a percentage from each successful transaction between buyers and sellers.

#2. Listing Fee Marketplace Business Model

A listing fee model in eCommerce marketplaces involves charging sellers a fee to list their products or services on the platform. Essentially, sellers pay a price upfront to showcase their offerings to potential buyers. This revenue model is like renting shelf space in a virtual store.

In the listing fee model, sellers pay a set amount for each item or service they want to feature on the platform. This payment gives them visibility, allowing buyers to browse and consider their offerings. It's a bit like paying rent for a physical store shelf but in the digital realm.

• Amazon: Professional sellers do not have to pay a per-item fee, while individual sellers are charged $0.99 for each item sold.
• Etsy: Etsy charges a $0.20 listing fee for each item posted, regardless of whether or not the item sells.

Etsy’s listing fee policy

• Upfront Revenue: The platform earns money when sellers pay listing fees to showcase their products or services, providing a steady source of income.
• Quality Control: Charging a listing fee can ensure that only serious sellers with genuine offerings become part of the online marketplace business.
• Entry Barrier: For small or new businesses, upfront listing fees can be a hurdle, limiting participation.
• Risk of Overpricing: Sellers might increase their prices to cover listing fees, potentially affecting competitiveness.

Understanding the dynamics of a listing fee model sheds light on how online marketplaces charge sellers for showcasing their goods or services on their digital shelves, forming a crucial part of their revenue models and revenue strategy.

In marketplaces, the listing fee revenue model means sellers pay a fee to show their products on the marketplace’s storefront.

#3. Subscription-Based Marketplace Business Model

The subscription business model in eCommerce marketplaces revolves around sellers paying a recurring fee to access and use the platform's services for a set period. It's like a membership where sellers get ongoing benefits in exchange for their subscription.

Under the subscription-based revenue model, buyers and sellers commit to paying a recurring fee, often monthly or annually, to maintain an active presence on the platform. This ongoing payment grants them continued access to the platform's features, such as increased visibility, marketing tools, or premium features.

• Amazon: Amazon offers a Professional seller plan for $39.99 per month, which includes features like bulk listing tools, advertising credits, and access to Amazon's Brand Registry.
• CouchSurfing: Starting in 2020, when registering on Couchsurfing, new users are required to pay a nominal fee to access the platform, a measure implemented in response to financial challenges stemming from COVID-19. The fee amounts to $2.99 per month or $17.99 per year, covering platform access and user verification.

Couchsurfing subscription plans

• Steady Income: The subscription fees provide a predictable and steady income stream for the online marketplace.
• Enhanced Services: Buyers and sellers subscribing to premium plans often receive additional services, fostering loyalty.
• Risk of Inactivity: Buyers and sellers who pay a subscription but don't actively use the platform may lead to underutilization.
• Affordability: Small businesses may find subscription fees a financial challenge, impacting their participation.

Understanding the subscription-based revenue model reveals how marketplaces create a symbiotic relationship with buyers and sellers, providing ongoing benefits in exchange for regular fees—a dynamic approach to sustaining the platform's vitality, including features such as payment processing to facilitate transactions.

In online marketplaces that use a subscription model, sellers pay a recurring fee to access and use the platform's services periodically.

#4. Freemium Marketplace Business Model

The freemium model in successful marketplaces allows users to access basic features for free, while offering premium, enhanced features. Users pay additionally for these features. It's a strategy where the platform provides a taste of its offerings without upfront charges, enticing users to opt for advanced features through paid subscriptions.

Under the freemium model, sellers can use the basic functionalities of the platform without any cost. However, to unlock additional features or enjoy an enhanced experience, sellers are encouraged to subscribe to a premium, paid plan. This revenue model is like offering a free sample at a store, with the option to purchase the full package for more benefits.

• Craigslist: Craigslist is a classified ads platform that allows users to post and browse ads for free. However, it also offers paid options for users who want to highlight their ads or post ads for a longer duration.
• Cratejoy: Cratejoy is a marketplace where sellers offer subscription boxes for different interests. The platform offers an accessible Marketplace Only plan for free, and also provides the All-in-One plan for $39 per month, which includes additional features.

Craigslist paid services

• User Acquisition: The free tier attracts a large user base, allowing the platform to acquire users without imposing upfront costs.
• Flexible Upgrade: Users can upgrade to paid features based on their needs, providing a flexible and scalable revenue strategy.
• Limited Features: Free users have access to basic features but may miss out on advanced functionalities available in the premium version.
• Conversion Challenge: Convincing free users to upgrade can be challenging, requiring a compelling value proposition for the premium offering.

Understanding the freemium model unveils how online marketplaces balance accessibility with revenue generation, offering a pathway for users to enhance their experience through optional paid subscriptions. This approach ensures a successful marketplace startup by targeting the right market and fostering seamless and secure transactions, often featuring additional revenue streams like fixed or variable fees for premium services or listings.

In the freemium revenue model, sellers access basic platform features for free. To enjoy extra perks, they can subscribe to a premium, paid plan.

The advertising and sponsorship model in an online marketplace business model involves generating revenue by allowing businesses to promote their products or services on the platform through featured listings and ads. It can include display advertising, sponsored content, or partnerships, creating a symbiotic relationship between the marketplace owner, advertisers, and users.

Under the advertising and sponsorship model, businesses pay to showcase their offerings to the platform's user base. Basically they pay for featured listings and ads. This can take various forms, such as display ads on the website, sponsored listings, or even partnerships with the marketplace owner. The revenue stream is generated through advertising fees, creating a marketplace revenue model where sellers can enhance their visibility through paid promotions.

• Zillow: Zillow stands out as the leading platform, where agents and management companies incur charges for promoting their listings through advertising services on the platform.

Advertising opportunities at Zillow marketplace

• Diverse Revenue Streams: The advertising and sponsorship model introduces additional streams beyond transaction-based fees.
• Enhanced Visibility: Sellers can gain increased visibility and exposure to a broader audience through paid featured listings and ads, attracting buyers effectively.
• User Experience Impact: Excessive or intrusive ads may impact the UX, leading to dissatisfaction.
• Balancing Act: Striking the right balance between ads and UX is crucial to maintaining a positive business platform environment.

Understanding the advertising and sponsorship model sheds light on how online marketplaces leverage partnerships and promotions to create a dynamic ecosystem, balancing the needs of advertisers, users, and the marketplace owner itself. This strategic approach becomes an integral part of the overall business plan, especially for niche marketplaces aiming to offer a better value proposition to their audience.

In a marketplace business model, advertising and sponsorship generate revenue by letting businesses promote products or services on the platform.

The affiliate marketing model in a marketplace business model revolves around partnering with external individuals or businesses (affiliates) who promote products or services on the platform. Affiliates earn a commission for each sale or lead generated through their referral efforts, creating a performance-based and mutually beneficial system.

Under the affiliate marketing model, external affiliates promote products or services listed on the platform through unique tracking links. When a referred potential client makes a purchase or completes a desired action, the affiliate earns a commission. This model aligns the interests of the marketplace, affiliates, and sellers, creating a symbiotic relationship where everyone benefits from successful transactions.

• Amazon Associates: Amazon's affiliate program allows individuals to promote Amazon products and earn a commission for each sale generated through their unique affiliate links.
• ShareASale: ShareASale is an affiliate marketing network that connects affiliates with various merchants, enabling them to earn commissions for promoting products or services.

Amazon Associates affiliate program

• Performance-Based: Affiliates earn commissions based on actual sales or leads, ensuring a direct correlation between effort and reward.
• Expanded Reach: Affiliates contribute to expanding the marketplace's reach by leveraging their own networks and platforms.
• Dependency: Success relies on effective affiliate marketing strategies, and the marketplace may face challenges if affiliates are not generating sufficient sales.
• Commission Costs: While performance-based, commission payments can accumulate, impacting the overall cost structure for the marketplace.

Understanding the affiliate marketing model unveils how online marketplaces leverage external partnerships to drive sales and expand their reach. This model is particularly effective for attracting partners with niche audiences, contributing to a diverse and dynamic ecosystem with several money streams. Additionally, it ensures that financial transactions are secure, helping the platform typically sustain revenue while reaching a global audience as affiliates actively promote and sell products.

In the affiliate marketing model of a marketplace business, external affiliates earn commissions by promoting products or services on the platform, fostering a performance-based and mutually beneficial system through referral efforts.

Selecting the optimal marketplace business model for an online marketplace is a nuanced process, and several factors should be carefully considered to align the chosen model with the marketplace's goals and target audience. Here's a detailed breakdown of the main factors and common marketplace business models for specific online marketplace types:

1. Commission-Based Model

Factors to Consider:

• Transaction Dynamics: Analyze the volume and value of transactions on the platform. A commission-based model is well-suited for marketplaces facilitating numerous transactions.
• User Willingness to Pay: Assess whether users are willing to pay a percentage for successful transactions, considering market expectations and industry standards.

Common for: General e-commerce platforms, service marketplaces.

2. Listing Fee Model

• Product or Service Value: Evaluate the value of listed products or services. A listing fee model is effective for marketplaces with high-value items.
• Revenue Accessibility: Balance the need for upfront revenue with ensuring accessibility for a diverse range of sellers.

Common for: Niche marketplaces, platforms with unique or high-value items.

3. Subscription Model

• Frequency of Usage: Examine how often users engage with the platform. A subscription model is suitable when users have regular and ongoing needs.
• Value Proposition: Assess the ability to provide continuous value to subscribers through paid features, services, or content.

Common for: SaaS marketplaces, platforms with specialized services or content.

4. Freemium Model

• Basic Features Appeal: Evaluate the attractiveness of basic features to attract a wide user base. A freemium model is effective when the free offering provides significant value.
• Conversion Potential: Assess the potential for converting free users to paid subscribers based on the perceived value of premium features.

Common for: Social networking platforms, software applications.

5. Advertising and Sponsorship Model

• User Experience: Consider the tolerance of the user base for ads and sponsored content. Maintaining a positive UX is crucial.
• Revenue Potential: Evaluate the revenue potential from partnering with advertisers and sponsors, considering the target audience and market demand.

Common for: Social media platforms, content-driven online marketplaces.

6. Affiliate Marketing Model

• External Networks: Assess the ability to leverage external networks for product or service promotion. Affiliate marketing is effective when external partners can drive traffic.
• Product Suitability: Consider whether the products or services offered are conducive to affiliate marketing and if external promotion aligns with online marketplace business goals.

Common for: E-commerce platforms, content-rich online marketplaces.

Assess the online marketplace's unique characteristics and potential synergies between different marketplace business models. A mixed model, incorporating multiple revenue streams, can often be profitable.

By delving into these nuanced considerations, marketplace owners can make informed decisions about the most fitting marketplace business model or combination of marketplace business models. This detailed analysis ensures not only revenue maximization but also the creation of a sustainable and thriving online marketplace.

In navigating the intricacies of choosing the right online marketplace business model, CS-Cart Multi-Vendor emerges as your dynamic ally. Seamlessly adaptable to any vision, this marketplace software excels in versatility, customizability, and scalability.

Configurable subscription plans for sellers in CS-Cart

Whether it's a commission-based model, subscription model, or the innovative freemium model, CS-Cart Multi-Vendor supports these top marketplace business models out of the box. Tailoring to a listing fee model or exploring an advertising and sponsorship model? This platform integrates effortlessly, promoting seamless and secure transactions for both buyers and sellers.

CS-Cart Multi-Vendor isn't confined to a niche—it thrives in diverse ecosystems. Whether you're developing online marketplaces for consumer-to-consumer interactions or launching a marketplace startup for global commerce, this software provides the tools for success.

Moreover, if you're considering a hybrid approach, combining various models for a dynamic revenue mix, CS-Cart Multi-Vendor gracefully supports this too. It's not just a platform; it's a canvas where your marketplace vision transforms into reality.

Ready to explore the possibilities? Try the CS-Cart Multi-Vendor free demo and witness your marketplace business rise to new heights. Your success story begins here.

Try CS-Cart Multivendor for free

How To Write a Business Plan for Ethical Online Marketplace in 9 Steps: Checklist

By henry sheykin, resources on ethical online marketplace.

• Financial Model
• Business Plan
• Value Proposition
• One-Page Business Plan
• SWOT Analysis
• Business Model
• Marketing Plan

Are you passionate about ethical business practices and want to create an online marketplace that promotes transparency and fairness? You're not alone. The ethical online marketplace industry is booming, with a growth rate of approximately 15% per year in the US alone. Consumers are increasingly seeking out ethically sourced products and services, making this an opportune time to start your own ethical online marketplace.

But where do you start? How do you ensure that your business plan covers all the necessary steps to launch a successful ethical online marketplace? We've got you covered. In this blog post, we'll provide you with a 9-step checklist to help you write a comprehensive business plan for your ethical online marketplace.

Let's dive in and discover what it takes to build a successful ethical online marketplace that not only generates revenue, but also fosters a community of ethical and sustainable businesses.

1. Conduct Market Research

Market research is an essential step in developing a successful business plan for an ethical online marketplace. It involves gathering and analyzing information about your target market, industry trends, consumer behavior, and potential competitors. By conducting thorough market research, you can gain valuable insights that will help you make informed business decisions and develop effective strategies to position your marketplace for success.

Why is market research important?

• Market research allows you to identify and understand your target audience, their needs, preferences, and purchasing behavior. This knowledge will help you tailor your marketplace to meet customer expectations and provide a unique value proposition.
• It helps you identify market gaps and opportunities. By studying your competition and analyzing industry trends, you can uncover unmet needs or underserved segments that you can target with your marketplace.
• Market research provides insights into your competitors' strengths and weaknesses. This knowledge will allow you to differentiate your marketplace and develop competitive advantages.
• It allows you to assess the viability and potential demand for your marketplace. Understanding market size, growth potential, and customer adoption rates will help you evaluate the opportunity and make realistic projections for your business.
• Market research helps you anticipate and adapt to changing market conditions, industry trends, and customer preferences. It provides a solid foundation for ongoing strategic planning and decision-making.

Tips for conducting market research:

• Utilize a combination of primary and secondary research methods. Primary research involves gathering data directly from potential customers through surveys, interviews, or focus groups. Secondary research involves analyzing existing data, reports, and industry publications.
• Use online tools and resources to gather market data, such as social media listening tools, market research reports, and industry-specific websites.
• Segment your target market based on demographic, geographic, psychographic, and behavioral factors to gain deeper insights into specific customer groups.
• Keep an eye on emerging trends, technological advancements, and regulatory changes that could impact your marketplace.
• Regularly revisit and update your market research to stay current with evolving consumer preferences and industry dynamics.

2. Identify Your Target Audience

Identifying your target audience is crucial for the success of your ethical online marketplace. Understanding who your potential customers are will enable you to create targeted marketing campaigns that resonate with their needs and preferences. Here are some steps to help you identify your target audience:

• Conduct market research: Begin by conducting thorough market research to gather information about the existing consumer base and their preferences. This will help you identify potential customers and their behaviors.
• Analyze demographics: Look at demographic factors such as age, gender, location, and income level to narrow down your target audience. Understanding these characteristics will allow you to tailor your marketing efforts effectively.
• Consider psychographics: Dive deeper into the interests, values, and lifestyles of your potential customers. This information will help you craft marketing messages that resonate emotionally and ethically with your target audience.
• Segment your audience: Once you have gathered sufficient data, segment your audience into smaller groups based on shared characteristics. This will enable you to create personalized marketing strategies for each segment.
• Use surveys and questionnaires to gather insights directly from your target audience.
• Monitor social media platforms and online forums to understand what your potential customers are saying about ethical online marketplaces.
• Consider partnering with ethical influencers who align with your values to reach a wider audience.

By identifying your target audience, you can tailor your marketing efforts specifically to their needs and preferences. This will increase the likelihood of attracting the right customers to your ethical online marketplace and building a strong and loyal customer base.

3. Analyze Potential Competitors

When starting an ethical online marketplace, it is crucial to analyze and understand your potential competitors in the market. This step will give you insights into their strengths, weaknesses, and strategies, helping you identify opportunities for differentiation and success. Here are the key aspects to consider when analyzing potential competitors:

• Identify direct competitors: Start by identifying the other ethical online marketplaces that operate in your niche or target market. Look for platforms that have a similar business model and cater to the same audience. This will give you a clearer picture of the competitive landscape.
• Evaluate their offerings: Scrutinize your competitors' product or service offerings. Understand what unique features or benefits they provide to their users that set them apart. Assess the quality of their platform, user experience, and any additional services they offer to attract buyers and sellers.
• Assess pricing and commission structures: Examine the commission rates and pricing strategies of your competitors. Understand how they charge their sellers and whether their rates align with the industry standards. This information will help you determine your own pricing strategy and ensure it remains competitive.
• Study their marketing and advertising tactics: Analyze how your competitors promote their platforms and attract users. Identify the marketing channels they use, such as social media, email marketing, or partnerships. Pay attention to their messaging, unique selling propositions, and any promotional campaigns they run to gain traction in the market.
• Consider their user base and reputation: Take into account the size and loyalty of your competitors' user base. Evaluate their reputation within the ethical online marketplace community and find out what customers and sellers are saying about their experiences. This will help you understand where there may be gaps or opportunities for improvement in the market.
• Identify potential partnerships: Look for potential partnership opportunities with complementary platforms or businesses. This could involve collaborating with sustainable brands, NGOs, or other organizations that align with your ethical values. Partnering with reputable entities can help enhance your credibility and reach a wider audience.
• Use tools like SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to gain a comprehensive understanding of your competitors.
• Stay updated on industry trends and emerging players to maintain a competitive edge.
• Regularly monitor and analyze your competitors to identify any shifts or changes in their strategies that could impact your own market positioning.

4. Define Your Unique Selling Proposition

Defining your unique selling proposition (USP) is crucial for the success of your ethical online marketplace. Your USP sets you apart from your competitors and communicates the value and benefits your platform offers to your target audience. It should clearly articulate why customers should choose your marketplace over others in the market.

When defining your USP, consider the following:

• Identify the key features or attributes that make your marketplace unique. Is it your commitment to ethical sourcing and sustainable products? Is it the seamless user experience you provide? Is it the variety and quality of products available on your platform?
• Understand the needs and preferences of your target audience and how your USP addresses those needs. What pain points does your marketplace solve for customers? How does it enhance their shopping experience?
• Highlight the benefits that set your marketplace apart. These can include exclusive partnerships with socially responsible brands, a secure payment system, or personalized customer support.
• Consider the competitive landscape and how your USP differentiates you from other ethical online marketplaces. What do you offer that others don't? How can you position your platform as the go-to destination for ethical shoppers?

Tips for defining your Unique Selling Proposition:

• Research your target audience extensively to understand their preferences and pain points.
• Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to identify your unique strengths and weaknesses.
• Emphasize the social and environmental impact of your marketplace and align it with the values of your target audience.
• Keep your USP concise and compelling. It should be easily communicated and understood by your customers.
• Continuously monitor the market and evolve your USP to stay relevant and competitive.

By clearly defining your unique selling proposition, you create a strong foundation for your ethical online marketplace. It becomes the guiding principle for your branding, marketing efforts, and customer acquisition strategies. Remember, authenticity and transparency are key in the ethical marketplace, so ensure that your USP aligns with your business practices and values.

5. Outline Your Business Objectives And Goals

Defining clear business objectives and goals is essential for the success of your ethical online marketplace. These objectives will serve as a roadmap, guiding your decision-making process and helping you stay focused on your mission and vision. Here are some key considerations when outlining your business objectives and goals:

• Identify your mission and vision: Begin by clearly articulating the purpose of your ethical online marketplace. What problem are you aiming to solve? What values and principles will guide your platform? Identifying your mission and vision will provide the foundation for all your business activities.
• Set SMART goals: Take the time to set specific, measurable, achievable, relevant, and time-bound (SMART) goals for your online marketplace. By making your goals SMART, you'll increase the likelihood of achieving them and have a clear benchmark to evaluate your success.
• Focus on impact: As an ethical online marketplace, it is crucial to prioritize the impact your platform will have on buyers, sellers, and the broader community. Consider how your platform can promote fair trade, sustainability, or other ethical practices, and make sure these goals are integrated into your business objectives.

Tips for outlining your business objectives and goals:

• Involve your team: Collaborate with your team members or stakeholders to gather diverse perspectives and ensure alignment with your overall business strategy.
• Be realistic: Set goals that are challenging yet attainable. Unrealistic goals can lead to frustration, while achievable goals can provide motivation and a sense of accomplishment.
• Regularly review and adjust: Business objectives and goals should not be set in stone. Regularly review your progress and adjust your objectives as needed to adapt to market changes or emerging opportunities.

In conclusion, outlining your business objectives and goals is a crucial step in developing a sustainable and impactful ethical online marketplace. By clearly defining your mission, setting SMART goals, and prioritizing the impact you aim to achieve, you'll lay a strong foundation for the growth and success of your platform.

6. Determine Your Pricing Strategy

When it comes to running an ethical online marketplace, determining the right pricing strategy is crucial. Not only does it impact your revenue generation, but it also plays a significant role in attracting and retaining buyers and sellers on your platform. Here are some important considerations to keep in mind as you formulate your pricing strategy:

• Understand your costs: Before setting your prices, it's essential to have a clear understanding of all the costs associated with managing the platform. These expenses include website maintenance, transaction facilitation, customer service, and marketing efforts. By calculating your costs accurately, you can ensure that your pricing strategy aligns with your expenses and allows for sustainable growth.
• Consider market demand: Analyze the demand for ethical products and services within your target market. Understand what customers are willing to pay for such products and how your pricing compares to your competitors. Pricing too high may deter potential buyers, while pricing too low may undervalue your offerings and make it difficult to cover your costs.
• Value-based pricing: For an ethical online marketplace, pricing should reflect the value that your platform provides to buyers and sellers. Consider the convenience, transparency, and trustworthiness your platform offers and use that as a basis for determining your prices. Communicate the value proposition clearly to justify the pricing structure to your users.
• Offer tiered options: Giving buyers and sellers different pricing options can help accommodate various needs and budgets. Consider offering tiered plans or packages with different features and benefits at different price points. This gives users the flexibility to choose the option that best suits their requirements.
• Think long-term: While it's tempting to focus solely on immediate profitability, it's important to think about long-term sustainability. Striking a balance between competitive pricing and adequate profit margins is crucial to ensure the continued growth and success of your ethical online marketplace.

Tips for determining your pricing strategy:

• Regularly monitor and analyze competitor pricing to stay competitive in the market.
• Consider offering promotional discounts or incentives to attract initial users and encourage repeat business.
• Conduct customer surveys or gather feedback to understand their perception of your pricing and make adjustments if necessary.
• Keep your pricing structure flexible to adapt to changes in market conditions, user demands, or any unforeseen circumstances.

By carefully considering these factors and continually evaluating your pricing strategy, you can ensure that your ethical online marketplace remains competitive, financially sustainable, and appealing to both buyers and sellers.

7. Develop A Marketing And Advertising Plan

Once you have identified your target audience and analyzed your potential competitors, it is essential to develop a compelling marketing and advertising plan to promote your ethical online marketplace. Effective marketing strategies will not only attract customers but also help build brand awareness and loyalty. Here are some important steps to consider when developing your marketing and advertising plan:

• Clearly define your brand identity and positioning: Your brand should reflect the ethical values and mission of your online marketplace. Clearly define what sets your platform apart from competitors and emphasize these unique selling points in your marketing materials and messaging.
• Identify the most effective marketing channels: Determine which marketing channels will help you reach your target audience most effectively. This could include online platforms such as social media, email marketing, content marketing, influencer collaborations, and search engine optimization. Additionally, consider offline channels such as print media, events, and partnerships with relevant organizations.
• Develop a content marketing strategy: Create and distribute high-quality content that educates, inspires, and engages your audience. This could include blog posts, videos, case studies, and customer testimonials that highlight the ethical aspects of your marketplace and address the needs and interests of your target audience.
• Utilize social media platforms: Embrace social media to build brand awareness and engage with your audience. Regularly update your social media profiles with relevant content, interact with your followers, and use targeted advertising to reach potential customers.
• Leverage influencer marketing: Collaborate with influencers who align with your ethical values and have a strong presence in your target market. They can help promote your platform to their followers and lend credibility to your brand.
• Optimize your website and online presence: Make sure your website is user-friendly, visually appealing, and optimized for search engines. Implement search engine optimization strategies to improve your website's visibility in search results.
• Regularly monitor and analyze the performance of your marketing efforts using tools like Google Analytics to identify areas for improvement.
• Develop a consistent and compelling brand voice across all marketing channels to enhance brand recognition and customer trust.
• Consider partnering with other ethical businesses or organizations to cross-promote each other's offerings and reach a wider audience.

By developing a well-rounded marketing and advertising plan, you can effectively raise awareness about your ethical online marketplace and attract the right audience who resonates with your values. Continuously evaluate and adapt your strategies based on customer feedback and industry trends to ensure long-term success.

8. Assess The Technological Requirements For Your Platform

When creating an ethical online marketplace, it is crucial to assess the technological requirements for your platform. The success of your business relies heavily on the functionality and reliability of the technology you choose to implement. Here are some important considerations to keep in mind:

• Platform Development: Determine whether you will build your platform from scratch or use an existing e-commerce platform. Building from scratch allows for greater customization but can be more time-consuming and costly. Using an existing platform may provide a faster launch but may limit your flexibility.
• Website Design and User Experience: Invest in professional website design to ensure a user-friendly experience for both buyers and sellers. Optimize your platform for mobile devices to capture a larger audience.
• Secure Payment Systems: Choose a secure payment gateway that supports encrypted transactions and safeguards customer data. This is crucial for building trust and protecting sensitive information.
• Inventory Management: Implement an inventory management system to track product availability, manage stock levels, and streamline order fulfillment processes.
• Vendor Management: Develop a system for onboarding and managing vendors on your platform. This can include vendor verification, product listing management, and performance tracking.
• Customer Support: Offer multiple channels for customer support, including email, live chat, and phone support. Implement a ticketing system to track and resolve customer inquiries efficiently.
• Search and Filtering Options: Provide robust search and filtering options on your platform to enhance the browsing and shopping experience for users. This can include filters by price, category, seller rating, and more.
• Analytics and Reporting: Incorporate analytics tools to track key performance indicators, monitor user behavior, and generate reports. This data will help you make informed decisions and optimize your platform.
• Consider scalability when selecting your technology stack. Ensure that the chosen technology can accommodate future growth and increased user traffic.
• Regularly update and maintain your platform's technology to stay current with the latest security patches and features.
• Conduct thorough testing and quality assurance before launching to identify and fix any potential bugs or issues.
• Stay informed about emerging technologies and trends in the e-commerce industry to stay competitive and offer innovative features to your users.

9. Create A Comprehensive Financial Plan

Creating a comprehensive financial plan is essential for the success of your ethical online marketplace. It allows you to understand and project your revenue streams, expenses, and overall financial health. Follow these steps to develop a strong financial plan for your business:

• Estimate your startup costs: Determine the initial investment required to launch your online marketplace, including website development, marketing expenses, legal fees, and any other relevant costs. This will help you set a realistic budget and secure funding if needed.
• Forecast your revenue: Conduct market research and analyze the potential demand for your platform to estimate your sales and revenue projections. Consider factors such as the size of your target audience, pricing strategy, and competitor analysis. This will give you a clear understanding of your revenue potential.
• Calculate your expenses: Identify and analyze all the ongoing expenses associated with running your ethical marketplace. This may include platform maintenance costs, marketing expenses, customer service, payment processing fees, and employee salaries if applicable. It's crucial to be thorough and include both fixed and variable costs.
• Assess your profit margins: Determine your profit margins by subtracting your estimated expenses from your projected revenue. This will help you understand the viability and profitability of your online marketplace. It's essential to maintain healthy profit margins to sustain your business and invest in growth.
• Create financial projections: Based on your revenue estimates, expenses, and profit margins, develop financial projections for at least the first three to five years of your business. This will provide you with a roadmap and allow you to track your progress against your goals.
• Secure funding if necessary: If your financial plan identifies a funding gap, you may need to seek external financing options. Prepare a solid business case, including your financial projections and detailed plans on how the funding will be utilized, to present to potential investors or lenders.
• Regularly review and update your financial plan: Your financial plan should not be static. Continuously monitor your actual financial performance against your projections and make necessary adjustments. This will enable you to identify any potential issues, capitalize on opportunities, and ensure the financial sustainability of your ethical online marketplace.
• Consider consulting with a financial expert or accountant who specializes in startups and online marketplaces. They can provide valuable insights and guidance during the financial planning process.
• Stay updated on industry trends and market conditions to make informed financial decisions.
• Regularly review and optimize your pricing strategy to maximize revenue while remaining competitive.
• Track and analyze your key financial metrics, such as customer acquisition cost, customer lifetime value, and gross profit margin, to evaluate the performance of your online marketplace.

In conclusion, creating a business plan for an ethical online marketplace involves thorough research and careful consideration of various factors. By following the 9-step checklist provided, you can lay a strong foundation for your marketplace and ensure its success. Remember to prioritize transparency, fairness, and sustainability in all aspects of your business operations, and continuously adapt and evolve your strategies to meet the changing needs of your target audience. With a well-developed business plan, your ethical online marketplace has the potential to make a positive impact on both the environment and society while generating revenue.

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How to Create an Online Marketplace Business Plan

Accueil » How to Create an Online Marketplace Business Plan

How do you create an online marketplace business plan?

Look no further. Today, you get the exact steps to create your own online marketplace business plan. 

Want to learn more? Read on!

Source:  Pexels

What is an online marketplace?

First things first: 

What is an online marketplace? A marketplace business is a platform where vendors and buyers meet and exchange value (usually, money). These can be e-commerce, rental, or service marketplaces in either the business-to-business (B2B) or business-to-consumer (B2C) niches. 

Marketplaces are growing fast. In fact, 47% of global online purchases happen via online marketplaces. And B2C marketplaces are estimated to reach $3.5 billion in sales in 2024.

Are online marketplaces profitable? 

Just like any business, online marketplaces can be profitable. For instance, if you compare online marketplaces to e-commerce or service businesses, the online marketplace business model can be far more profitable. 

E-commerce businesses require an inventory. Shipping and returns often eat up a big chunk of profits. Service businesses require high labor costs (unless you’re doing all the work yourself). 

Online marketplaces, on the other hand, take time to build up but once you have traction, you have far fewer costs than most other business models. 

What is an example of an online marketplace? 

You likely know most of the bigger marketplaces: Amazon, Airbnb, Etsy, eBay, Uber, and Alibaba, to name a few marketplace examples . As marketplaces are growing, other big names are likely to pop up in most niches. 

Now you know what a marketplace business is. But how do you start one? 

The first step? A business plan. 

How to create an online marketplace business plan 

Next, let’s look at how to create an online marketplace business plan.  

A business plan will help you gain clarity on the business you’re about to start. And most importantly, you get an understanding of your target market and competition. After all, 20% of small businesses fail in their first years, but with sufficient preparation, you don’t need to be one of them. 

Here’s what a basic online marketplace business plan template looks like: 

Introduction

• Executive Summary
• Company Description
• Product/Service Description 
• Value Proposition
• Market Analysis 

Business Model 

• Sales Strategy 
• Growth Plan
• Management & Staffing
• Financial Summary 

Executive summary

An executive summary is a summary of your business plan. This is a short text snippet and includes a high-level overview of your business concept, marketplace, business goals, market, customers, value propositions, the scope of business, and online marketplace business model . 

Company description

A company description gives a brief overview of what your business is. It includes a description of your business structure, industry, what you’re selling, your long-term plan and short-term goals, as well as your team. 

Marketplace description

Explain your pricing strategy and model, if your business is ready for the market, and if there are any intellectual property considerations you need to take into account. (Likely, there aren’t.)

Value proposition

Market analysis

In this section, you present your target audience and why they want to buy from you. 

Target market

Your target market, your customers, are the focus of your business. Remember that as a marketplace business owner, you need to understand both your sellers and your buyers. 

Find out things like where they live, their age, education, income, and interests.

But also understand their psychographics such as what problem it is that they want to solve, why they can’t solve it today, and what measurable outcome they want to achieve. 

In this section, you present the size of your target market and its trends and trajectories. You get this information from news outlets, governmental statistics offices, and academic research. 

SWOT analysis

A SWOT analysis analyzes the strengths (what makes you unique), weaknesses compared to your competitors, opportunities (possibilities in your industry), and threats to your business. 

Competition

What does your competition look like? If it’s intense, you won’t see as high profits as if there is less competition. And if it’s easy to start a business in your industry, there will be more competitors. 

Your value proposition helps you understand how your business will stand out. For instance, do you offer lower prices? Do you have a unique business idea? Or do you focus on a very specific niche? 

Ask yourself who your customers are and how you’re different from the competition.

Business model

In this section, you list the workflows you need for making your business work. This includes logistics, suppliers, and inventory, as well as a contingency plan if something goes wrong. 

However, as an online platform business, you don’t really need to think too much about your operations, as that part is handled by the sellers who sign up for your marketplace. 

Marketing  

How are you going to grow your business? You need to be specific about where your audience hangs out online and how you can reach them. Also, don’t try to do it all at once — focus on one or two strategies and expand to other strategies when you have some traction. 

Your marketing strategy needs to focus on:

• Your marketplace pricing (if you use commissions, the percentage cut you get from every transaction) 
• Your promotion strategy 
• How your marketplace is different from other marketplaces 

Sales strategy

This section covers all the steps of your sales cycle. For instance: 

Facebook ad → user signs up → buys from a vendor 

However, note that your sales cycle also covers your vendors signing up. In a way, you’re selling to two different groups of people. 

Growth plan

How will you grow your marketplace business? Make this a specific and realistic plan and explain the exact steps you’ll take to grow your business. 

Management & staffing

Explain what the management of your business will look like. Likely, you won’t have a team when you’re just starting out. But define at what point you’ll start hiring so that you’re prepared for when that happens. 

Financial summary

Your financial plan is a summary of your income statement, cash-flow statement, and balance sheet. Here’s what they mean: 

Income statement

What are your revenue and expenses? This is a profit-loss calculation that you can base on estimates if you don’t have any sales at this point.  

Balance sheet

This is a list of your business assets; what you own and what you owe. 

Cash-flow statement 

This statement also takes into account when revenues are collected and expenses paid. With more money coming in than going out, you have a positive cash-flow statement. 

How do you start an online marketplace? 

Finally, how do you build your online marketplace ?

First, you need to set up your marketplace website. 

You can either use a marketplace website builder or develop your own website. The cost of building a marketplace business from scratch is typically quite high (as is the case for most web development projects). A simple marketplace can cost $20,000 or more. 

That’s why marketplace website builders are a great option. These typically come with drag-and-drop, no-code tools that make it easy to set up a website even if you don’t have a technical background. 

Our own tool helps you get started fast, just like we help all of our other customers.

Of course, building your website is just step one. Step two is to grow it. For that, we have plenty of resources to help you get started: 

• The Marketplace Payment Solutions That Work Great Right Now
• How to build an online community 
• Online Marketplace Strategy: How to Win with Your Marketplace 
• Key Marketplace Metrics: How to Measure Growth 
• A Marketplace Marketing Strategy That Works Great 

Over to you!

There you have it! Now you know how to create an online marketplace business plan. 

While a business plan can help you get clarity, don’t spend too much time writing it. After all, your focus should be on starting your online marketplace.

Want to take the first step and build your marketplace website?

Try Kreezalid for free (no credit card required). 

Charlène Guicheron

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Here's how you launch a profitable online marketplace.

Launching a marketplace is an exciting venture for those who have a knack for business and a vision for creating a vibrant hub of commerce.

Whether you're a seasoned entrepreneur aiming to capitalize on a niche market or a fresh face in the business world ready to bring a new shopping experience to your community, establishing a marketplace requires strategic foresight and commitment.

In this blog post, we'll navigate you through the crucial phases of opening a marketplace, from the seed of an idea to the buzz of its inauguration.

How you should prepare to launch an online marketplace

Market research and concept, choose a concept.

Choosing a concept is one of the first steps in opening a marketplace because it will define the range of products you offer, the layout and atmosphere of your space, and the type of customers you attract.

This decision will influence your subsequent choices regarding location, design, vendor selection, pricing, and marketing strategy. A well-defined concept can help your marketplace stand out and draw in a targeted customer base.

Essentially, selecting the right concept is like deciding on the theme of your marketplace before you start organizing the vendors and planning the customer experience.

To assist you in making an informed choice, we have summarized the most popular concepts for a marketplace in the table below.

Pick an audience

When launching a marketplace, it's crucial to tailor your platform to the specific needs and preferences of your target audience.

For instance, if you aim to attract bargain hunters, your marketplace might focus on offering discounts, deals, and a wide range of affordable products. You would also ensure that the user interface is simple and the search functionality is robust to help customers find the best deals quickly.

Conversely, if your target audience is collectors and hobbyists, your marketplace could specialize in rare and hard-to-find items, with features that allow sellers to provide detailed descriptions and provenance for their goods. The design might be more niche and sophisticated, appealing to the discerning tastes of collectors.

Understanding your audience is essential because it shapes every aspect of your marketplace—from the product categories you offer to the design of your website and the marketing strategies you employ. It's akin to customizing a service; you consider what your users need and prefer before shaping your marketplace to ensure it resonates with them.

Moreover, a deep knowledge of your audience enables you to communicate with them more effectively. If you know who you're catering to, you can determine the best channels and messaging to reach them. For example, if you're targeting tech enthusiasts, you might focus your advertising efforts on tech blogs or online forums where they are active.

In our business plan for a marketplace , we have outlined different customer segments that could be relevant for your platform.

To provide a clearer picture of potential audiences for your marketplace, we've compiled a few typical examples below.

Get familiar with the industry trends

When launching a marketplace, it's crucial to stay informed about the emerging consumer trends to choose the right concept for your business.

Consumer trends are a window into what's currently in demand. By aligning with these trends, you can draw in a diverse group of customers who are excited to engage with the newest marketplace offerings. Moreover, featuring trending products or services can distinguish your marketplace from competitors who may be more traditional in their approach.

For instance, we regularly update our business plan for a marketplace to include the latest emerging trends. This ensures that you have the insights needed to create a thriving marketplace.

One significant trend is the rise of eco-conscious shopping, where consumers prefer products with a lower environmental impact. Marketplaces that highlight sustainable and eco-friendly products are likely to resonate with this growing demographic.

Additionally, there's an increasing interest in personalized shopping experiences. Marketplaces that offer customized recommendations and curated collections based on user preferences are becoming more popular.

Another trend is the integration of technology, such as augmented reality (AR) and virtual reality (VR), to create immersive shopping experiences that can set your marketplace apart.

Furthermore, the demand for local and artisanal products is on the rise, as consumers seek to support small businesses and unique craftsmanship.

We've compiled a list of more trends in the table below.

However, there are also some declining trends.

As consumers become more environmentally and socially conscious, there's a decline in the popularity of marketplaces that lack transparency about product origins and labor practices.

Additionally, marketplaces that fail to offer a user-friendly, mobile-optimized shopping experience are losing ground to those that prioritize ease of use and accessibility on all devices.

Lastly, with the rise of conscious consumerism, excessive consumerism driven by fast fashion and disposable products is becoming less attractive to a growing segment of the market.

Choosing the ideal location

Choosing the optimal location for your marketplace is a key determinant of its success, and it requires careful consideration of several factors.

Begin by analyzing the local demographics. Understanding the characteristics of the local population can help you cater to their shopping habits and income levels. For instance, if the area has a high concentration of families, you might want to ensure that your marketplace offers a variety of household goods and family-friendly products.

Visibility and accessibility are crucial. A marketplace that is easily noticeable and reachable by various modes of transportation, including walking, driving, or public transit, is more likely to attract regular customers. Prime locations might be near main roads, shopping districts, or transit stations.

Accessibility also includes ample parking or being within a reasonable walking distance from residential or commercial areas where your target customers reside or work.

Competition can be beneficial if it demonstrates a thriving market, but too much can be detrimental. you should strike a balance. Consider the presence of other marketplaces and look for a location that allows you to fill a market gap or offer unique products or services.

Rent costs are a significant factor. Locations with high visibility and traffic often have higher rents, so you need to weigh the potential for increased revenue against the leasing expenses. Opt for a rent that is manageable based on your projected earnings. Sometimes, a less prominent location with substantially lower rent may yield a better profit margin.

Negotiating favorable lease terms can greatly affect your marketplace's financial stability. This could include securing a lease with renewal options, negotiating limits on rent hikes, or obtaining a reduced rent period initially to offset setup costs.

Consider the growth potential of the area. Is the neighborhood experiencing development that could bring in more customers? Having the option to expand your marketplace in the same location can be a significant advantage as your business grows.

Do not underestimate the importance of parking and public transportation. A marketplace that is convenient for customers to access is more likely to attract and retain a steady clientele.

Employing market research and demographic analysis tools can offer valuable insights into the most suitable areas to establish your marketplace. These tools can pinpoint neighborhoods with an ideal customer base for your offerings.

The choice between a city center and a suburban area hinges on your target market and operational model. City centers typically have higher foot traffic but also higher rents and increased competition. Suburban areas may offer a loyal customer base with potentially lower rent, but they might require additional marketing efforts to become a go-to shopping destination.

Being situated near landmarks, community hubs, schools, or business parks can ensure a consistent stream of potential customers, especially if your marketplace provides products that meet the everyday needs of these groups.

It's also vital to understand local zoning laws, health regulations, and other legal requirements to confirm that your chosen location is suitable for a marketplace. Adhering to these regulations from the outset can prevent costly and time-consuming issues later on.

Lastly, assessing the long-term viability of a location is imperative. Look into future developments in the area that could impact your business, either positively by attracting more customers or negatively by increasing competition or rental costs.

Startup budget and expenses

Calculate how much you need to start.

On average, the initial capital needed to open a marketplace can vary significantly, ranging from about $30,000 to $100,000 for a modest local market to $200,000 to $500,000 or more for a larger, more centrally-located marketplace with a diverse array of vendors and amenities.

If you're looking to determine the precise budget required for your marketplace venture and want a comprehensive breakdown of expenses, you can utilize the financial plan we've developed, specifically for marketplaces . This excel tool is designed to be intuitive and will provide you with a detailed and immediate analysis of your prospective project.

The budget can fluctuate greatly depending on the location of the marketplace. High-demand areas with substantial foot traffic will generally incur higher leasing costs, which can significantly impact startup costs.

The scale of the marketplace is also a key factor in the initial investment. A larger venue not only means higher rent but also necessitates additional vendors, security, and infrastructure, which contribute to increased operational expenses.

The quality and range of facilities offered to vendors and customers alike are another important consideration. Providing high-quality amenities can be costly but may attract more vendors and customers, potentially increasing revenue. On the other hand, starting with basic facilities can lower initial costs but may not draw as much interest.

Even with a limited budget, it's possible to open a marketplace, but it requires strategic planning and prioritization. The absolute minimum budget might be in the range of $30,000 to $60,000 , if you opt for a less expensive location, limit the size and scope of your marketplace, offer basic amenities, and handle much of the management and coordination yourself. This approach demands a proactive and resourceful mindset, focusing on a niche market or a specific type of vendor to minimize complexity and costs.

To maximize a limited budget, consider the following tips.

Identify all your expenses

The expenses when starting a marketplace include location rental or purchase, booth setup and maintenance, licensing and permits, insurance, marketing and advertising, technology and software, staff training, supply chain establishment for common areas, and a reserve for unexpected expenses.

Securing a location for a marketplace is a significant expense. Renting or purchasing a space can range from $5,000 to $500,000 depending on the size, location, and condition of the property. Booth setup and maintenance for vendors can also vary, with costs ranging from $1,000 to $50,000, depending on the number of booths and the level of customization required.

Licenses and permits are essential for legal operation. Costs can vary by location but typically range from a few hundred to several thousand dollars. This includes business operation licenses, health department permits, and possibly additional permits for special events or alcohol sales if applicable.

Insurance is critical to protect your business against liability, property damage, and other potential risks. Essential policies include general liability, property insurance, and workers' compensation if you have employees. Annual premiums can range from $3,000 to $10,000 or more, depending on your coverage levels and marketplace size.

Marketing and advertising are crucial for attracting vendors and customers. Initially, you might spend between $2,000 to $10,000 on marketing efforts, including social media advertising, traditional advertising, and creating a website. The amount can vary based on your strategy and the competitiveness of your market.

Investing in technology and software for point-of-sale systems, inventory management, and accounting software is important for both the marketplace management and its vendors. Costs can range from $2,000 to $20,000, depending on the sophistication of the systems you choose. Subscription-based services may have ongoing monthly fees.

Staff training is important for customer service and operations. Setting aside $1,000 to $5,000 for initial training and ongoing professional development can help ensure a well-run marketplace. This also includes any costs for obtaining or maintaining personal certifications.

Establishing and maintaining a supply chain for common area necessities and services is an ongoing expense that can fluctuate based on market prices and your marketplace's volume. Initial setup can cost between $3,000 to $15,000. Developing relationships with reliable suppliers and considering bulk purchases for non-perishable items can help manage costs.

Finally, setting aside a reserve for unexpected expenses or emergencies is crucial. A good rule of thumb is to have at least three to six months' worth of operating expenses saved. This can cover unforeseen repairs, equipment failures, or shortfalls in cash flow.

Here is a summary table to make it easier to digest. For a full breakdown of expenses, please check our financial plan for marketplaces .

Business plan and financing

Make a solid business plan.

Embarking on the journey of launching a marketplace requires a solid foundation, and crafting a business plan for your marketplace is a fundamental step.

Why is this so important? A business plan is your blueprint for success. It details your vision, the strategies you'll employ to turn that vision into reality, and the potential hurdles you might encounter along the way. For anyone seeking financial backing, whether from angel investors, venture capitalists, or banks, a comprehensive business plan is indispensable. It showcases the feasibility and profitability of your marketplace concept.

Essential elements of a marketplace business plan include a thorough market analysis, robust financial projections, and a detailed operational strategy. Conducting a market analysis is crucial to understand the demand for your marketplace, the target demographic, and the competitive environment. This involves examining current trends in e-commerce, identifying direct and indirect competitors, and pinpointing a unique value proposition that sets your marketplace apart from others.

Financial planning is equally vital. This segment should cover your anticipated revenue streams, such as listing fees, commissions, or subscription models, as well as the costs associated with platform development, maintenance, and marketing. It should also feature financial forecasts like profit and loss statements, cash flow analysis, and a break-even point. These financial insights offer a clear view of your marketplace's fiscal prospects to both you and potential investors. You can find a comprehensive guide in our financial plan for a marketplace .

While there are commonalities in business plans across various industries, a marketplace business plan will emphasize specific areas.

For instance, a marketplace must focus on technology infrastructure (to ensure a seamless user experience), vendor acquisition and support (to maintain a diverse and quality product offering), and customer service excellence (to build trust and loyalty). Additionally, it's crucial to outline strategies for scaling the platform, managing data security, and adhering to e-commerce regulations.

To create an effective marketplace business plan, in-depth research and realistic financial estimates are imperative. Engage with potential vendors and customers to gauge their interest and determine the features and services that will make your marketplace stand out. Consider how you can scale your operations and adapt to changes in the market or technology over time.

For a marketplace, developing a strong brand and marketing strategy is also key. This could involve emphasizing the convenience, variety, or exclusivity of your platform to attract users and retain them.

Success in the marketplace industry is not solely based on the platform's technology but also on strategic planning, market understanding, prudent financial management, and efficient execution of your operational plan.

Keep in mind, a business plan is not static; it's a dynamic document that should be regularly reviewed and updated to reflect the growth and evolution of your marketplace.

Get financed

Thinking of launching a marketplace but don't have the capital to do it on your own? There's no need to worry, as there are numerous financing options available to help you get started.

Just like any other business, a marketplace can be financed through various means: equity investment from angel investors or venture capitalists, loans from banks or alternative lenders, and grants or subsidies from government programs or foundations.

Each financing method comes with its own set of benefits and things to consider.

Equity financing means bringing in investors who will provide capital in exchange for a share of ownership in your marketplace. This is a great option because it doesn't require immediate repayment and can bring in substantial funds.

However, it also means you'll be sharing your profits and decision-making power with others. For a marketplace, equity investment might be particularly appealing if you're looking to scale quickly or if you need a significant amount of capital to build a robust platform and attract vendors and customers.

To attract investors, you'll need a compelling business plan that showcases the potential for growth, a scalable business model, and a deep understanding of the online retail industry.

Debt financing through loans is another option. This allows you to maintain complete control over your marketplace, but you'll need to repay the borrowed amount plus interest.

Loans can be used for a variety of purposes, such as technology development, marketing campaigns, or operational costs. Financial institutions may require collateral and typically expect a down payment, which can range from 15% to 25% of the loan amount. It's crucial to ensure that your marketplace's revenue projections can handle the loan repayments without stifling your growth.

Grants and subsidies are less common but can be a valuable resource. These funds are often provided to stimulate innovation or support businesses in strategic industries. While they don't need to be repaid, they are highly competitive and may come with stringent requirements.

For a marketplace, grants could be used to fund technological innovation, green initiatives, or community-oriented projects.

To secure financing, whether it's through loans or investment, you'll need to present a detailed business plan that includes market analysis, a clear value proposition, financial projections, and a marketing strategy. Your plan should illustrate what makes your marketplace unique, such as a niche focus, advanced technology, or a strong user community.

Investors and lenders will evaluate your marketplace based on criteria like the founder's track record, the robustness of the business plan, and the financial health of the company.

They will scrutinize your financial projections to determine if you can generate sufficient revenue to cover operational costs, repay debts, and turn a profit. A thorough understanding of the online retail market, including trends and competitive dynamics, will also strengthen your case.

Below is a summary table of the various financing options mentioned for launching a marketplace, along with their advantages, considerations, and potential uses:

Legal and administrative setup

Permits and licenses.

Launching and managing a marketplace involves a complex set of responsibilities, including compliance with various regulations and securing the necessary permits, licenses, and insurance to safeguard your business and customers.

The specific requirements for permits, licenses, health department regulations, inspection schedules, consequences of non-compliance, and insurance policies will differ based on your location, but there are common standards that are widely applicable.

To begin, you must secure the appropriate business permits and licenses.

This generally involves acquiring a business license from your local municipality, and if your state imposes sales tax, a sales tax permit will be necessary. Depending on the nature of your marketplace, additional permits may be required, such as a public market permit or a special event permit if you plan to host temporary or seasonal markets.

It is imperative to consult with your local government to determine the exact requirements for your marketplace.

When it comes to health department regulations, marketplaces that feature food vendors must adhere to food safety and sanitation guidelines to prevent the spread of foodborne illnesses.

This encompasses proper food handling, storage, and preparation protocols, maintaining a clean environment, and providing regular food safety training for vendors and employees. Health department inspections are carried out to ensure these standards are met. Inspection frequency can vary, but they are often conducted at least biannually, with additional inspections possible in response to complaints or past infractions. Pre-operational inspections may also be mandated before the marketplace can commence operations.

Failing to comply with health department regulations can lead to penalties ranging from monetary fines to the temporary shutdown of the marketplace until issues are rectified.

In extreme cases, persistent non-compliance can result in permanent closure or legal action. It is crucial to take these regulations seriously and ensure that your marketplace meets all health and safety requirements.

Insurance is another essential component of running a marketplace. At the very least, you will need general liability insurance to cover incidents or injuries that occur within the marketplace.

Property insurance is also vital to protect the marketplace's physical assets against damage or theft. If you employ staff, workers' compensation insurance is typically mandatory by law to cover work-related injuries or illnesses.

Furthermore, if your marketplace involves the sale of products, product liability insurance can offer protection in the event that a product sold at your marketplace causes harm to a customer.

Business Structure

The three common structures for opening a marketplace are LLC (Limited Liability Company), partnership, and sole proprietorship. Each has their unique features and implications for your business.

Please note that we are not legal experts (we specialize in business and financial planning) and that your choice should be based on how much risk you're willing to accept, how you prefer to handle taxes, and your plans for growing and possibly selling your marketplace.

In simple terms, a sole proprietorship is simple and straightforward but carries personal liability. A partnership allows for shared responsibility but requires clear agreements to manage risks. An LLC offers a balance of protection and flexibility, making it a strong option for many businesses looking to scale.

Consider your long-term goals, and consult with a financial advisor or attorney to make the best choice for your marketplace.

We’ll make it easier for you, here is a summary table.

Getting started to launch an online marketplace

Offer development, design and lay out.

Designing and laying out your marketplace for operational efficiency and an enhanced customer experience is a complex task that requires attention to detail and a deep understanding of consumer behavior.

Let's explore the steps you can take to ensure your marketplace is optimized for both vendors and shoppers.

First and foremost, consider the flow of customers.

Your marketplace layout should facilitate a natural and logical path for shoppers, starting from the entrance and leading them through various vendor stalls, to the payment areas, and finally to the exit or any additional services you may offer, such as a food court or rest areas. This flow should be seamless, preventing congestion and allowing customers to easily navigate the space. Strategically place high-demand and popular items or vendors at key points to draw shoppers further into the marketplace.

This approach not only highlights the diversity of your marketplace but also encourages customers to explore and make impulse purchases.

When it comes to the design that supports this flow, prioritize spacious walkways, clear signage, and a coherent arrangement of stalls and services.

Wide aisles accommodate more foot traffic and reduce the feeling of overcrowding. Signage should be visible and helpful, directing shoppers to different sections or pointing out amenities. The layout should be intuitive, with related products or services grouped together to create a logical shopping experience. Payment areas should be distributed throughout the marketplace to minimize wait times and improve efficiency.

Addressing the balance between quality infrastructure and budgetary limits is crucial.

Focus on investing in essential structures and facilities that will have the most significant impact on vendor performance and customer satisfaction, such as secure and well-maintained stalls, reliable payment systems, and robust security measures. For other elements, consider cost-effective solutions that do not compromise the overall quality and safety of the marketplace, such as modular stalls that can be easily reconfigured or upgraded as needed.

Health and safety within the marketplace are paramount. Your design must include clear demarcations for different types of vendors, especially if you're accommodating food sellers alongside other goods.

Create designated zones for food vendors that are equipped with proper sanitation facilities and ensure there is a clear separation from non-food vendors to prevent any cross-contamination. Install handwashing stations at strategic locations for both vendors and customers to promote good hygiene practices.

Implement and enforce strict guidelines for vendor operations, including the handling, storage, and display of products. Ensure that all food vendors adhere to food safety regulations, keeping perishable items at the correct temperatures and maintaining clean preparation areas.

Train your staff and vendors on the importance of maintaining a clean and safe environment, highlighting practices such as regular cleaning, waste disposal, and emergency procedures.

Regular evaluations and updates to these guidelines are essential to stay in line with local health codes and industry standards, ensuring your marketplace remains a safe and inviting place for everyone.

Craft your offer

Your product selection and vendor partnerships will be the cornerstone of your marketplace's success (or the reason for its struggles).

To begin, understand the shopping habits and preferences of your target demographic through direct methods like customer interviews, online polls, and social media engagement, as well as indirect methods such as analyzing market trends and studying the strategies of successful competitors.

With a solid grasp of your target market's shopping preferences, you can start to curate a product range that not only meets their needs but also distinguishes your marketplace from others.

Emphasizing local and sustainable products in your marketplace is an excellent strategy to boost appeal and promote eco-friendliness.

This approach not only supports local businesses and reduces your environmental impact but also ensures that the products you offer are fresh and of high quality. Forge relationships with local suppliers to understand which products will be available during different seasons. This information allows you to adapt your product offerings seasonally, introducing exclusive items that can draw in customers seeking the newest and most sustainable options. Seasonal selections also generate excitement among your customers, as they anticipate the arrival of new and unique products.

To differentiate your marketplace in a crowded industry, focus on exclusivity and quality.

This can be achieved by featuring hard-to-find items, such as handcrafted goods from local artisans or products that cater to niche interests or lifestyles, like eco-friendly gadgets or organic skincare. Sharing the stories behind your products, such as the craftsmanship of artisans or the ethical sourcing of materials, can also add a layer of uniqueness.

Ensuring consistency and quality across your marketplace involves setting high standards and maintaining strong relationships with your vendors.

This includes selecting vendors who are committed to quality, ensuring they adhere to product specifications, and conducting regular reviews of their offerings. Consistency is crucial for earning your customers' trust, as they will come to expect a certain level of quality and service with every visit to your marketplace. Invest in partnerships with reputable suppliers and don't hesitate to refine your selection based on performance and customer satisfaction.

Leveraging customer feedback is vital for the ongoing enhancement and evolution of your marketplace's product range. Establish channels for feedback, such as review systems, customer service surveys, and interactive social media platforms, to gauge what your customers appreciate and identify areas for improvement.

Be receptive to constructive criticism and ready to implement changes based on customer insights. This not only aids in perfecting your product lineup but also demonstrates to your customers that their opinions are valued, encouraging loyalty and repeat patronage.

Determinate the right pricing

When launching a marketplace, it's crucial to establish a pricing strategy that balances profitability with customer appeal. Here's a structured approach to setting your prices effectively.

Firstly, you must understand the costs associated with running your marketplace. This includes platform maintenance, transaction fees, marketing, labor, and any other operational expenses. Knowing these costs is vital to ensure your pricing covers them and helps you turn a profit.

Next, analyze your competition and the general market to gauge the going rates for marketplace services. While you don't need to mirror these prices, this information provides a reference point.

Understanding the price sensitivity and preferences of your target audience is also key. Gather insights through customer feedback, surveys, or by experimenting with different price points and observing the effect on transactions. This will help you find the sweet spot where customers feel they're getting good value without being overpriced.

Psychological pricing tactics can influence consumer behavior in a marketplace as well.

Charm pricing, such as listing a service fee at $4.99 instead of $5, can make a fee seem more competitive. This approach can be particularly effective for smaller transaction fees or add-on services.

However, you should apply this strategy carefully to avoid undermining the perceived quality of your marketplace.

The perceived value is crucial in a marketplace setting.

Boosting this perception can involve ensuring a seamless user experience, providing excellent customer support, and maintaining a strong brand presence. These elements can justify higher fees as customers perceive they are receiving greater value for their money.

Consider dynamic pricing strategies to manage demand and supply effectively. For example, you might charge lower commission rates during off-peak seasons to attract more sellers or offer time-limited promotions to boost sales during holidays or special events.

When introducing new features or services, introductory pricing, such as trial periods or discounted rates, can entice users to try them. Once these features are established, you can adjust the pricing based on their popularity and cost considerations.

For different sales channels within your marketplace, such as mobile app vs. web platform, consider the distinct costs and customer expectations. Pricing might need to reflect the convenience of mobile use or the broader functionality of a web platform.

Finally, the psychological impact of discounts can be significant. While they can drive transactions and attract users, excessive discounting may harm your brand's reputation and lead to an expectation of low prices. Use discounts strategically, perhaps as part of a loyalty program or for end-of-season sales, without making them a regular expectation for your users.

Manage relationships with your suppliers

Poor relationships with suppliers could significantly hinder the success of your marketplace.

Conversely, nurturing strong partnerships with vendors is crucial for ensuring a diverse and high-quality product selection for your customers.

Engage in regular communication, ensure prompt payments, and show appreciation for their goods and services to build loyalty and dependability. Be clear about your marketplace's standards and consumer demands, and try to visit their facilities when possible. This will give you insight into their production and logistical challenges, which can lead to more effective collaboration.

Consider negotiating long-term contracts with key vendors to lock in favorable prices and secure a consistent product supply. However, it's also wise to cultivate a network of alternative suppliers to protect against potential shortages or disruptions.

For a marketplace dealing with perishable items, inventory management is critical. Employing strategies like FIFO helps ensure that the oldest products are sold first, reducing the risk of spoilage. Keep a close eye on inventory levels to tailor your orders to fluctuating consumer demand, thus preventing overstocking and minimizing waste. A JIT inventory system might also be beneficial, where products are ordered just in time to meet demand, though this requires accurate sales forecasting.

Technology can greatly enhance inventory control and reduce waste in a marketplace.

Using an inventory management system that syncs with your POS system allows for immediate tracking of stock and sales data. This setup can lead to more precise demand predictions, streamlined restocking procedures, and the identification of trends that can guide product assortment and marketing efforts.

Moreover, digital platforms can improve communication with vendors, making it easier to adjust orders quickly and collaborate on promotions or exclusive deals.

As your marketplace grows, you'll face challenges such as ensuring consistent product availability, managing higher operational costs, and maintaining quality across a larger inventory. Tackle these issues by standardizing procurement procedures, training your team effectively, and investing in technology that can boost efficiency without sacrificing the diversity and quality of your offerings.

Expansion means dealing with more products and vendors, so negotiate with suppliers for volume discounts without compromising on the quality of goods offered. Quality control is even more important as your inventory expands, necessitating strict adherence to your marketplace's standards and more frequent reviews of vendor performance.

Effective cost control in a marketplace involves a thorough examination of procurement and logistics. Regularly reassess and negotiate with vendors to ensure you're receiving competitive prices without sacrificing quality.

Also, explore alternative products that may provide cost savings or take advantage of seasonal fluctuations in pricing. Use technology to monitor and analyze expenses, waste, and inventory turnover to pinpoint opportunities for optimization. Reducing waste not only lowers costs but also supports sustainable practices, which can attract eco-conscious shoppers.

Hire the right people

When launching a marketplace, you should consider the variety of roles needed to ensure smooth operations. Initially, you may not need to fill every position, particularly if you're working with a tight budget.

At the core, your marketplace will require a team that handles vendor management, customer service, and overall marketplace operations.

For vendor management, you'll need professionals who can recruit and support vendors, ensuring they're satisfied and their products meet your marketplace's standards. A vendor manager or coordinator with strong communication and relationship-building skills is key.

Customer service representatives are essential to address customer inquiries and issues, providing a positive shopping experience. They should be adept at problem-solving and have excellent communication skills.

An operations manager is crucial to oversee the day-to-day running of the marketplace, including staff management, inventory control, and ensuring compliance with legal and financial regulations.

As your marketplace grows, you might consider hiring specialists in areas such as digital marketing, IT support, and data analysis. Outsourcing can be a strategic option for roles like accounting, legal services, and logistics, allowing you to focus on your marketplace's core functions.

When hiring, prioritize candidates with relevant experience, technical skills, and a passion for the e-commerce industry.

For vendor management roles, look for experience in sales or account management, as well as strong negotiation skills. Customer service representatives should have a background in customer support, preferably in a retail or e-commerce setting. Operations managers should have a solid understanding of business management, e-commerce platforms, and leadership capabilities.

To ensure candidates are a good fit for your marketplace's culture and demands, consider practical assessments such as role-playing customer service scenarios or analyzing case studies related to vendor management.

Seek out individuals who are passionate about e-commerce and customer satisfaction, and who can adapt to the dynamic nature of the online retail industry.

Finding the right candidates can be challenging. Utilize online job boards, e-commerce forums, and social media platforms to reach potential hires. Networking within industry events and attending career fairs can also be effective. Offering internships or partnerships with business schools can help you connect with emerging talent.

Here is a summary table of the different job positions for your marketplace, and the average gross salary in USD.

Running the operations of your online marketplace

Daily operations.

Running a marketplace efficiently is key to maintaining a competitive edge and ensuring customer satisfaction. By adopting the right strategies, you can simplify your daily operations and focus on growth.

Firstly, a robust Point of Sale (POS) system tailored for marketplaces is a game-changer. It should integrate sales, inventory, vendor management, and customer relations. This integration enables you to monitor sales in real-time, manage inventory with precision, and maintain a database of customer preferences and purchase history.

Modern POS systems often include features for online marketplaces, which can broaden your reach and accommodate customers who prefer shopping from the comfort of their homes.

Effective inventory management is crucial for a marketplace. Opt for software that provides real-time tracking of your products. The best systems will alert you when stock levels are low and offer insights into inventory trends, aiding in smart restocking decisions. This minimizes overstocking and understocking, ensuring you have the right amount of product on hand based on sales data and projections.

Some systems also support vendor management, which is vital for tracking multiple suppliers and their products, ensuring you maintain a diverse and high-quality selection.

Building strong relationships with your vendors is as important as it is with suppliers in a bakery. Set clear expectations for delivery schedules, product quality, and payment terms. Good relationships can lead to better terms and consistent supply. Always have alternative vendors to avoid any disruptions in your product offerings.

Creating a positive work environment is essential for your team's morale and performance. Offer regular training, communicate goals and expectations clearly, and provide constructive feedback. Recognize and reward dedication and achievements, and ensure that work schedules respect your employees' work-life balance.

Customer experience in a marketplace hinges on the atmosphere, product variety, and the service quality. Train your staff to be helpful, courteous, and efficient. Personal touches, such as remembering customers' names and preferences, can make shopping experiences more memorable.

Ensure your marketplace is clean, well-organized, and has clear signage to facilitate easy shopping. This contributes significantly to a positive customer experience.

Develop customer service policies that might include satisfaction guarantees, transparent return and refund policies, and ways to collect and act on customer feedback.

Encourage feedback through various channels, such as in-store, on your website, or through social media, and respond to it promptly and constructively. This demonstrates your commitment to customer satisfaction and continuous improvement.

When dealing with customer complaints, listen thoroughly before responding. Apologize when necessary and offer a resolution, like a refund, exchange, or future discount. Use negative feedback as a chance to refine your operations, products, or service. Often, turning a negative into a positive can secure a loyal customer base.

Revenues and Margins

Know how much you can make.

Understanding the financial workings of a marketplace is crucial for its success.

We have an in-depth article on the profitability of marketplaces that you might find useful. Below, we'll touch on some key points.

One important metric for marketplaces is the average transaction size, which is the average amount a customer spends per transaction.

This metric can vary widely depending on the type of marketplace. For example, a general e-commerce marketplace might have an average transaction size of $50 to $100 , as it offers a wide range of products at various price points.

A niche marketplace, such as one specializing in handmade or vintage items, might see higher transaction sizes, perhaps $75 to $150 , due to the unique and often higher-priced items.

For B2B marketplaces, where businesses are purchasing in larger quantities or at higher price points, the average transaction size could be significantly larger, ranging from $500 to several thousand dollars .

When it comes to revenue, marketplaces typically take a commission on each sale. The total revenue will depend on the volume of transactions and the commission rate. For instance, a marketplace with a 10% commission rate and monthly sales of $100,000 would have a monthly revenue of $10,000 .

Marketplaces with a high volume of transactions but lower commission rates might have similar revenue to those with fewer transactions but higher rates. It's all about finding the right balance for your marketplace.

Startup marketplaces may initially see lower revenues as they build their user base and transaction volume. However, established marketplaces with a solid reputation and customer base can achieve monthly revenues in the tens or even hundreds of thousands of dollars .

Marketplaces don't just earn money from transactions. They can diversify their revenue streams in several ways.

If you're looking for inspiration, here's a table that outlines various potential revenue streams for a marketplace.

Understand your margins

As you may already be aware, generating high volumes of transactions doesn't necessarily equate to high profits. For a marketplace, it's crucial to understand the nuances of revenue, expenses, and margins to gauge the true profitability of the platform.

Let's delve into the key profitability metrics for marketplaces: gross and net margins.

To accurately forecast your marketplace's profitability, you can adjust the assumptions in our financial model designed specifically for marketplaces .

Marketplaces typically see gross margins ranging from 10% to 50%. This is because they often have lower direct costs compared to traditional retail businesses.

Gross margin for a marketplace is calculated by subtracting the cost of goods sold (COGS), which for a marketplace includes payment processing fees, hosting costs, and direct support costs, from the total revenue generated from transaction fees, subscriptions, or other revenue streams. This figure is then divided by the total revenue and multiplied by 100 to get a percentage.

Net margins incorporate all other operating expenses, such as marketing, employee salaries, technology development, and office space. Net margins provide a more complete picture of a marketplace's profitability and are typically lower than gross margins, with industry averages often ranging from 5% to 20%.

Different types of marketplaces—general, niche, and service-based—can have varying profit margins due to differences in their business models, scale, and target markets. Here is a table to illustrate these differences:

Marketplace margins are influenced by factors such as the variety of products or services offered, commission structures, and operational scale.

A diverse offering can attract a larger user base but may increase complexity and support costs. Commission structures must be competitive yet sufficient to cover costs and generate profit. Operational scale can lead to cost efficiencies, with larger marketplaces often benefiting from lower per-unit costs.

Ongoing expenses that impact marketplace margins include technology maintenance, customer support, marketing, and administrative costs. Payment processing fees are a direct cost that can vary based on transaction volume and agreements with payment processors.

Marketplaces targeting specific niches may have different margin dynamics compared to those with a broader focus. While niche marketplaces can charge higher commissions, they also face the challenge of attracting a sufficient number of users and transactions to be profitable.

External factors such as economic conditions, competitive landscape, and user behavior trends also play a crucial role in marketplace margins. Economic downturns can reduce transaction volumes, while competitive pressures can force changes in commission rates. Staying attuned to user behavior trends and adapting the platform accordingly can help manage these fluctuations.

To address the challenge of maintaining healthy margins amidst varying costs and competitive pressures, marketplaces can focus on efficient cost management, strategic commission rates, and continuous platform optimization.

Regular monitoring and analysis of financial performance, including gross and net margins, is essential for the long-term success of a marketplace. Fortunately, all of this can be managed with our financial model tailored to marketplaces .

Implement a strong marketing strategy

Marketing doesn't need to be as complex as some experts make it seem. We understand that you'll be focused on managing your marketplace and might not have ample time for extensive promotional campaigns. That's why we'll keep our advice straightforward and impactful, similar to the marketing strategy we've detailed in our business plan for a marketplace .

Creating a brand for your marketplace is not just relevant; it's essential.

Your brand is the identity your customers will come to know and trust. It's more than just your name or logo; it's the experience you offer and the promise you make to your customers. Your brand should reflect the diversity and quality of the products available at your marketplace, the convenience of shopping with you, and the values you uphold, such as supporting local vendors or promoting eco-friendly products. This helps your marketplace to stand out in a competitive industry and fosters a dedicated customer base.

For your marketing plan, begin by identifying your target audience. Who are the shoppers you aim to attract? What are their shopping habits and preferences? Do they prioritize a wide selection, affordable prices, organic options, or unique finds? Knowing your audience will shape your branding and marketing efforts.

When it comes to promotion, social media and digital marketing are invaluable for marketplaces. Platforms like Instagram, Facebook, and Pinterest are ideal for showcasing the variety of products you offer with high-quality images and engaging posts.

Provide a glimpse into the daily operations of your marketplace, which adds authenticity and demonstrates the value you provide to both customers and vendors.

Customer reviews and testimonials can reinforce credibility and inspire others to visit your marketplace. Educational content, such as how to choose the best produce or the benefits of buying local, can also engage your audience and position your marketplace as a knowledgeable leader.

Content strategies that are effective for marketplaces include highlighting new arrivals, vendor stories, and special promotions. Collaborating with local influencers or hosting community events can increase your visibility and draw in a crowd.

However, not all strategies may be suitable for your marketplace. For instance, if your target audience is within a specific region, international advertising might not yield the best return on investment. Similarly, if your marketplace is known for organic products, focusing on discount bulk goods might not align with your brand.

Even on a tight budget, there are clever tactics you can employ to attract new customers.

First, consider participating in or hosting community events where you can showcase the vendors and products from your marketplace. This not only boosts sales but also enhances your marketplace's profile.

Offering samples or hosting interactive workshops can engage potential customers and create buzz around your marketplace.

Partnering with local businesses or organizations can extend your reach and bring in a new customer base.

Developing a loyalty program can motivate repeat visits. Simple point systems or digital rewards can prove to be quite successful.

Also, never underestimate the power of word-of-mouth marketing. Encourage your satisfied patrons to share their experiences by providing incentives for referrals.

Grow and expand

We want you to thrive with your marketplace. We trust that the guidance provided here will support you in reaching that goal.

Imagine you're at the helm of a bustling online marketplace, with robust margins and a strong cash flow. Now is the time to contemplate how to scale and broaden your venture.

There's always potential for greater achievements, and we're here to show you the path to even more success.

Also, please note that there is a 5-year growth strategy specifically designed for marketplaces in our business plan template .

Successful marketplace operators often exhibit qualities like resilience, adaptability, a keen understanding of their industry, and the ability to connect with and comprehend their user base. These traits are essential as they steer the complex journey of business expansion.

Before adding new product categories or services to your marketplace, consider the existing market demand, how these additions will complement your current offerings, and the impact they will have on your operations.

Market research is critical in this decision-making process. By examining user preferences, emerging market trends, and the performance of similar offerings, you can make informed choices that are in line with your marketplace's capabilities and user expectations.

To evaluate the success of your current operations, look at sales trends, user feedback, and operational efficiency. If your marketplace consistently hits or surpasses sales goals, garners positive reviews, and operates smoothly, it might be ripe for expansion.

Adding new vendors or categories should be grounded in solid evidence of demand, a deep understanding of the target market, and the financial robustness of your current operation.

Partnerships with established brands can offer a way to expand your marketplace with lower capital risk, leveraging the brand power and customer base of your partners.

However, this requires a strong platform, proven operational systems, and the ability to support and integrate with your partners' businesses. Each partnership model has its advantages and challenges, and the choice depends on your strategic goals, resources, and preferred growth trajectory.

Digital marketing and SEO are crucial for increasing your marketplace's visibility and traffic. A strong online presence can help you reach customers beyond your immediate geographic location, adapting to the growing need for online shopping convenience.

This strategy requires an understanding of digital marketing, customer engagement, and the technical aspects of SEO and data analytics.

Branding is vital as it sets your marketplace apart in a competitive industry. A strong, consistent brand identity can boost customer loyalty and attract new users. Enhance your brand by ensuring that every interaction with your marketplace reflects its values, user experience, and quality.

Maintaining consistency as you grow is challenging but critical. This can be achieved through comprehensive operational guidelines, training programs, and quality control systems.

Regular monitoring and audits, along with cultivating a strong, shared culture, help ensure that your marketplace maintains the standards that made it successful.

Financial indicators that you're ready for expansion include consistent profitability, robust cash flow, and meeting or exceeding sales forecasts over a considerable period.

Additionally, having a scalable business model and the operational capacity to support growth is essential.

Collaborations with other businesses and participation in industry events can introduce your marketplace to new users and sectors. These opportunities allow for innovative collaboration, community engagement, and increased visibility, all contributing to your marketplace's growth.

Scaling your platform to meet increased demand involves considerations such as technology upgrades, efficient user and vendor management, and possibly expanding your team. Ensuring that your infrastructure can handle the increased traffic and transactions without compromising quality or user experience is key.

Ultimately, it's crucial that your expansion efforts remain aligned with your marketplace's core values and long-term objectives. Growth should not compromise the essence of what made your platform successful.

Regularly revisiting your business plan and values can help ensure that your expansion strategies are in harmony with your vision and mission, preserving the core of your marketplace as it evolves.

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The Marketplace Business Model – A Complete Guide

Amazon, eBay, Airbnb , or Uber are just a few of many companies operating as an online marketplace. Customers love them for their abundance of choice and shopping convenience.

What you may not know is that these examples (as well as many other marketplaces) have become some of the biggest and most valuable companies in the world.

This article will shed some light into what constitutes an online marketplace, the different types, pros and cons, as well as how to track their success.

Online Marketplace Definition

Online marketplaces connect buyers and sellers on a proprietary and centralized platform. Oftentimes, the marketplace operator does not hold any type of inventory, but helps the buyers and sellers to facilitate a transaction.

His or her duties may include tasks such as handling logistics or facilitating the payment. Sellers can then focus on their core competency, that is providing customers with the most relevant products and services.

Marketplaces come in many shapes or forms, but are often separated between two categories: horizontal or vertical.

Horizontal marketplaces offer products across different categories with a similar level of service. For instance, customers can buy products on eBay ranging from clothing to electronics.

On the other hand, vertical marketplaces focus on one product category, but offers many services attached to it. For instance, rare sneaker marketplace StockX handles aspects such as authentication and quality checks of the product, payment process, or the transportation. It allows them to serve as a trusted source for interested customers.

The Chicken And Egg Problem Of Marketplaces

Marketplaces are built on the premise of buyers and sellers transacting with each other. But when you start, you have none of those. So how do you convince sellers to join a platform without buyers and vice versa?

This problem is referred to as the chicken and egg problem of online marketplaces. Similar to the debate of whether the chicken or egg came first, marketplace enthusiasts face the challenge of figuring out which side to build first.

The more sellers you can attract, the greater value you can provide to your customers. Higher value leads to more buyers, which in turn increase the value for sellers.

So whether you attract buyers or sellers first (or even simultaneously), there’s a few tactics you can employ in order to make your marketplace more attractive.

Tactics To Attract Buyers

Monetary incentives. You can give customers rewards for joining or making purchases on your platform. For instance, a sign-up comes with a 10$ gift card or 10 percent discount on baskets above a certain threshold.

Act as producer . Some marketplaces such as Lazada have begun their marketplace journey by selling their own products first and only then attracting sellers. That way you can make sure to give customers the best buying experience. Supplier can then join a platform with a proven and active customer base.

Have an appealing mission. Other marketplaces have started with a great market-oriented mission to solve a pressing problem. The bigger your customer pain is, the easier it will be for you to attract customers.

For instance, Uber and Lyft solved many of the problems plaguing the taxi experience. These ranged from delayed cabs to dangerous and hostile drivers. These businesses created a safer and more convenient way of booking a ride, and as such had customers sign up immediately.  Hence, Lyft’s mission is to “ improve people’s lives with the world’s best transportation. ”

Tactics To Attract Sellers

Make it simple. The easier it is for a merchant to sell on your platform, the likelier are they going to figure out this process and start selling. Said convenience also decreases the cost and time spend for setting up a shop, which in turn encourages more people to sell.

Seller programs. Create dedicated seller programs (e.g. through online courses or assigned key account managers) to show sellers the possibilities of your platform. The more people are educated about your product, the likelier are they engaging with it.

Marketplace Business Model Examples

Marketplaces come in many shapes and forms. While most people probably think of online e-commerce companies such as Amazon or eBay, it certainly isn’t the only area and industry of application.

These are the five different types of marketplaces we see nowadays:

Commission Model

Subscription model, freemium model, listing model, featured ad placement.

Probably the most widespread form of marketplace approaches in which a commission is charged on each successful transaction. The platform operator then imposes either a fixed or variable fee on the product or service being transacted.

The operator of the platform normally handles the payment and logistics aspects of it while sellers focus on providing high-quality products or services. A key aspect of this model is that anyone (both buyers and sellers) can join the platform for free. The marketplace operator then benefits from all the value creation occurring on the platform.

Examples include companies such as Amazon, eBay, Etsy, or Airbnb. All of these companies charge a commission per transaction and have sellers offering various products on their platform.

In the subscription revenue model , either or both buyers and sellers are charged a reoccurring fee to access the marketplace. The selling point for customers is that they gain access to a great experience or can simply save money. Sellers, on the other hand, can acquire customers that are likelier to spend money.  

The biggest challenge in charging a reoccurring subscription is that the platform has to become valuable enough so that both customers and sellers gain enough benefits from using it. You’d need enough users to convince sellers to pay. And potential customers won’t sign up if they don’t see immediate benefits by joining you.

One example of a successful marketplace is LinkedIn’s B2B solutions. Here, recruiting companies pay a monthly fee to be able to access the platform and get in contact with potential employees. Conversely, customers (in that case employees) can also gain access to LinkedIn’s premium subscription. It allows them to directly get in contact with others or access its learning platform for free.

Within the freemium model , the marketplace can be used free of charge for both buyers and sellers. Monetization occurs by offering additional features, premium subscriptions, or by cross-selling other services.

The thinking behind this model is that your free platform gets the users hooked, which doesn’t leave him or her a choice but to buy your premium features. The challenge is to find the right balance between your free and premium features, so that people don’t leave you immediately.

A great example is stock photo provider Unsplash . Photos are offered by the sellers while users can access a subset of them for free. If they want to have complete access to all available stock images, they pay a monthly subscription fee or compensate the photographer directly.

In the listing model, sellers are charged for every offer they upload on the platform. This model is utilized when sellers list high-ticket items such as cars or houses. Since resources are scarce, sellers profit from having more of them listed.

Furthermore, the purchasing transaction oftentimes does not occur on the platform, but after meeting with the seller and seeing the listed object. Therefore, listing marketplace normally don’t facilitate the transaction (in terms of payment processing) due to the complexity of the item listed.

The biggest selling point of listing marketplaces is the fact that they drive a lot of traffic to the platform, and as such, allow providers to gain more visibility on their listings.

One of the challenges of this model is to price the listing fee accordingly. If it is to high, sellers will stay away from listing on the platform.

Furthermore, these sites have to be able to drive high volumes of traffic to justify their listing fees. Therefore, they are often at the mercy of Google’s algorithm to show them on top for any given search query.

Examples of this business model include websites such as Trulia.com or Realtor.com.

Featured ads are oftentimes part of other marketplaces such as the commission or listing models. In this scenario, a seller can opt in to pay an additional fee to have their listing displayed before others.

Again, the main challenge is to drive enough visitors to the site so that sellers are willing to pay for these ads.

One example of a company utilizing this is the classifieds division of eBay. Listing and selling on their platform is free, but users pay a flat fee if they want their offering to be displayed first.

Marketplace Business Model – Pros and Cons

Marketplace models are very complex to build and operate, but once scale is achieved, can create many benefits for their operator.

The following chapter lists the many pros and cons of operating an online marketplace.

Marketplace Business Model – Advantages

Network effects. Once there are enough buyers and sellers on the platform, the marketplace can grow through the strength of its own network. Whether it’s buyers recommending the platform to their friends or users providing engaging feedback – if your platform is engaging and beneficial to the intended customer demographic, new users will come in automatically.

Defensibility. Once the network is built, users will most likely stick to the platform. If competitors want to overtake you, they’d not only need a better product and brand, but also build a similar sized network. This is both very costly and time consuming. As such, established marketplaces are hard to dethrone from their premier position.

Just take Craigslist , for instance. Even after over 20 years of being in business, it has not bothered with updating its user interface nor adding the necessary safety measures for customers to transact on the platform. This is because the nodes on its network are so strong that encourages people to come back despite a presumably poor user experience as well as risks of being mugged or even killed.

High user engagement. Marketplaces focusing on repeated purchases (e.g. Poshmark ) oftentimes have high engaging users. As the marketplace facilitates communication and discovery, customers may get intrigued to find the best deals or simply browse the stores. On the other hand, sellers want to get ahead of their competition and therefore study the marketplace extensively.

High margins. If a marketplace becomes the dominant player in its segment (and thus has to spend less on marketing), the profit margins on each transactions can become very high. When buyers get to know you as the go-to destination for their shopping needs, your spend to motivate them shopping greatly decreases.

Pricing monopoly. While ethically questionable, dominant marketplaces have the ability to dictate the commissions and fees they charge. Since being on the platform is so lucrative for sellers, they are often charged more over time. If there is no comparable marketplace around, sellers often have to swallow those rate increases.

Data creation. Marketplaces generate a lot of (consumer) data, which operators can use to either sell or take advantage off by setting foot in a new industry. Amazon, for instance, analyzes its sellers data and can then sell it under its own branded Amazon Basic brand. Oftentimes, sellers are left behind as the company’s own products are favored.  

Marketplace Business Model – Disadvantages

High set up cost. Building the necessary technology stack, advertising to attract buyers and suppliers, and hiring the right employees are just some of the costly activities involved in setting up a marketplace. It may take a substantial amount of investment and time to build up a sizeable revenue side.

Dependence on other platforms. Some marketplaces are characterized by fewer purchase frequency (e.g. house or car listings), thus having a harder time to build a brand. They therefore you to keep advertising on platforms such as Google or Facebook to be found by customers. The few touchpoints make it a lot harder to build a brand through repeated interactions.

Many competitors. Because the marketplace model can be financially lucrative, competition is often very intense. While setting up a marketplace may be costly, more and more investors are willing to pour in the financial resources to help startups compete.

Varying seller quality. Sellers and the quality of products or services they offer may vary greatly. This may become especially problematic when sellers are also responsible for aspects such as delivery. Marketplace operators have to account for that and invest in their seller side. That involves duties such as authenticating products and sellers or building a logistics network to facilitate transportation.

Network pollution. Network pollution refers to marketplace participants, whether it’s buyers or sellers, who try to game the system for their own gain. For example, on fashion marketplace Depop , sellers would offer fake products. On cashback platform ShopBack , buyers have repeatedly made ‘fake’ purchases (which they would cancel later on) in hopes of pocketing those rewards.

As such, some marketplaces have to invest millions of dollars in vetting their content or authenticating products and services. One of the most prominent examples is the previously mentioned StockX, which employs its own team of trained authenticators. Other means of vetting include features like user reviews or working directly together with sellers.

Marketplace Metrics & KPIs

Marketplaces come in many shapes and forms. Companies may focus on other businesses (B2B) or private consumers  (B2C), operate locally or globally and are integrated either horizontally or vertically.

So how do you as a founder know if you’re on the right? One part of the solution is tracking a few key metrics to assess your growth. These include:

• Gross Merchandise Value (GMV)

Rake (Take Rate)

Net revenue.

• Average Order Value (AOV)

Gross & Contribution Margin

• Customer Acquisition Cost (CAC)
• Repeat Purchase Rate (RPR)
• Net Promoter Score (NPS)

Gross Merchandise Value

GMV gives you the total of the goods and services transacted. It is calculated by multiplying the average value of the order by the number of sales.

GMV = Average Order Value x Total Sales

So if your platform facilitates one million sales with an average value of 5 USD, then your GMV is $5 million. If you want to get a more accurate representation of your GMV, you have to calculate it after subtracting cancelations and returns. You therefore calculate based on delivered goods rather than bookings.

The Take Rate is the metric that compliments GMV and helps us understand how healthy the marketplace operates. As the name indicates, the take rate shows how much the business takes home from every transaction.

It is the revenue from the commissions and fees (or other income streams) divided by the total amount of sales.

Rake = (Commission + Fees) ÷ Total Sales

If a marketplace sells 10,000 goods in a given period and earns 500 USD in each commissions and fees, then the Take Rate is (1000 + 1000) ÷ 10,000 = 10 percent. So the business obtains 20 percent of every transactions conducted on the platform.

Take Rates often vary greatly, depending on the type of goods transacted and the value your marketplace provides. For instance, digital freelance platform Fiverr charges 5 to 20 percent on every transaction. On the other hand, eBay charges a maximum of 12 percent on its marketplace.

Net revenue represents the actual revenue the marketplace generates in a given period. It is calculated by multiplying GMV with the Take Rate.

Net Revenue = GMV x Take Rate

So if we stick to the results of our previous examples, we receive a net revenue of $5 million x 20 percent = $1 million.

Average Order Value

Similar to net revenue, the average order value helps us understand how much the company earns – in this case on the transaction level. AOV results by dividing the total value of transactions by the amount of sales on the platform.

AOV = Total Transaction Value ÷ Total Sales

So if you sell goods worth $10 million and your total sales amount to one million, then the average value of a transaction is $10.

AOV helps us to understand how competitors are performing by comparing their AOV to yours. Furthermore, we can assess how hard it will be to attract buyers to the marketplace. The higher a good or service is priced, the fewer customers are potentially willing to spend.

The gross margin is a company’s net revenue subtracted by the cost of selling goods (COGS). While it gives us a good indication of how profitable we are, businesses should use the contribution margin for a more detailed view.

To calculate the contribution margin, we not only subtract COGS, but other variable cost such as customer service, research, hiring employees and so forth. The contribution margin is one of the best indicators to assess how profitable the marketplace is overall.

Liquidity is what keeps the engine that is our marketplace running. It indicates how active the marketplace is at any given moment in time. For liquidity, we look at measures such as:

• Amount of buyers and sellers registered on the platform
• Number of listings
• Number of purchases and returns
• Geographic diversity (in how many different locations we sell)

This list is not exclusive and should be adapted to the specifics of each marketplace model and industry.

As a marketplace business, our goal is to maximize liquidity. The more possibilities for transaction we offer to our customers, the likelier they are to engage with the product.

Customer Acquisition Cost

Our CAC tells us how expensive it is for our business to acquire both buyers and sellers to the platform. It is calculated by summarizing the cost for marketing and sales and divide that by the total amount of new customers.

CAC = Sales & Marketing Costs ÷ New Customers

So if we spend $2,000 on Facebook ads and that yields us 100 new customers, our CAC is $2,000 ÷ 100 new customers = 20 $ per new customer.

One important distinction has to be made between CAC for buyers and sellers on the marketplace. Oftentimes, different marketing channels are utilized to build these two sides.

Your goal is to minimize CAC. The more you spend to acquire a customer or seller, the more value he or she has to generate on the platform to break even.

Repeat Purchase Rate

Acquiring new customers is expensive. So best case, you want to sell to the ones who are already registered on your platform.

As opposed to paying for ads, you can use more cost-effective marketing solutions such as email or push notifications. And you can do this once the user is already in your ecosystem.

The repeat purchase rate gives you the percentage of your existing customer base that purchased for a second time. It is therefore calculated by dividing the total number of customers by the number of customers you had two transactions or more.

RPR = No. Of Customers With > 1 Purchase ÷ Total Number Of Customers

You should do that calculation on a periodic basis, i.e. for a given year or month. Let’s say you have 50,000 customers with at least two transactions and a total of 1 million buyers on the platform. Then your RPR is equal to 50,000 ÷ 1,000,000 = 5 percent.

You can also measure this rate on your supplier side, for instance how repeatedly sellers upload listings on the platform.

The higher this percentage, the more you can spend on acquiring new customers. This is best achieved in an industry with many repeat purchases. Examples include books taxi rides (e.g. Uber and Lyft). On the other hand, a platform selling used cars would have to create a lot more revenue as purchases are very infrequent.

Net Promoter Score

Another important metric to measure customer satisfaction and retention is using NPS. The score is obtained by asking the question of “on a scale of 0 to 10, how likely are you to recommend to a friend?” .

Depending on the score that is given to the question, three categories of people can be defined:

• Promoters = score of 9 or 10 given
• Passives = score of 8 or 7 given
• Detractors = score of 0 to 7 given

NPS is then calculated as the difference between the percentage of promoters (customers who would recommend you) and detractors (customers who wouldn’t recommend you).  

NPS = % Promoters – % Detractors

For instance, if you have 35% promoters, 50% passives and 15% detractors, NPS will be +20. A NPS score above 50 is considered excellent.

One of the important aspects of NPS is to measure it frequently to see how satisfied your customers are over time.

Viktor Hendelmann

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.

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Last Updated on January 5, 2023 by Viktor Hendelmann

How to Build the Effective Business Plan and Revenue Model for Online Marketplace?

If you’re engaged in digital business, you're probably aware that to produce the world-known project, you should sweat well not only on its technical realization but take into consideration its business logic too. In this article, we’ll unveil what is so special about the creation of online marketplace business plan.

We offer you to check out how to develop online marketplace business model canvas and the answers to 'how to monetize a marketplace platform?' question.

Let’s consider marketplace model examples . How is each marketplace platform business model unique and different?

Currently, the marketplace world revolves around 3 major business types, which are B2B (business-to-business), B2C (business-to-community), and C2C/P2P (peer-to-peer).

Online marketplace business plan for B2B, B2C or C2C solutions might be different. Let’s see why.

First of all, for building a B2B or B2C or C2C platform, you should learn a particular marketplace model example meticulously. For instance,

B2B audience - there’s always a supplier and a manufacturer/producer. A manufacturer and a supplier can list on a single platform and offer their services. It usually works like this:

B2C - a company/organization which offers their product(s) directly to the end user. 

This includes dropshipping companies that don’t actually handle or ship their products themselves. With that said, an EDI solution for dropshippers is still necessary to send and receive data, so it isn’t as if dropshipping is completely hands-off. 

C2C - users can buy and sell things from each other

If we drill a bit deeper, we find out that marketplace types can be divided to horizontal (marketplaces of universal scope, where we can buy and sell anything, i.e. Alibaba, Amazon,etc.) and vertical (niche-oriented, single-focused, i.e. Hertz, Booking.com). Below we can see the examples of several popular marketplace solutions:

By the way, you can check out Meals Unite in our 'Portfolio' section and try it on your Android device .

Building your two-sided marketplace platform. Let’s craft online marketplace business model canvas for your project

The ‘startline’ is where you determine what kind of marketplace platform you want. Is it supposed to be B2B or B2C or C2C project?

What we’re going to do, is to draft a simple online marketplace business plan for the P2P web/mobile shared economy solution. This is a two-sided marketplace platform where the users can offer comic book rarities to exchange or sell.

First, we determine the category of people we create our marketplace model example for.

- Adult comic book enthusiasts and readers who want to sell, exchange the specific comic book issue or the entire collections between each other

- Original authors and/or artists of comic books, who want to showcase and sell their own already written, drawn, printed, and published works.

Several ideas on what customers’ demands we should fulfill to make our product more ‘distributive’

(note: this is just a sample, so we recommend to not take it too seriously :) )

We can get a better picture of how to monetize our marketplace project by detecting our users’ needs, first of all.

Comic book enthusiasts and readers

- I should have the opportunity to establish my own reader’s profile via different methods. Add comics collections and attachments effortlessly, preview them, browse other readers’ profiles and get the preview of their comic book collections.

- I need a worldwide platform, where I can sell and ship my comic book issues to other comic book enthusiasts like me

- I need a worldwide platform, where I can exchange my comic book issues to the comic books other users have listed on their profile

- I need a marketplace platform, which would supply me with different payment and shipping options

- I need to be available to store and read the purchased or exchanged comic book in my collection/archive for unlimited number of days

- Analytics to monitor my earnings, purchases and views.

- Chatroom and messaging options to make connections

- I need to see pricing options of your platform, to determine which one fits my needs

- 'Comic book near me' - look for various comic book shops/events near you.

Comics authors and artists

- I want to be signed in as an original comic book author and comic book distributor/seller

- I need to enlist my creation in your platform to offer it for purchase to the comic book readers

- Various payment-receiving options would be great

- Analytics is a must-have to browse my profile views and selling stats.

- Chatroom and messaging options

- Privacy Policy and sensitive data proper protection

- Author’s rights ( watermark , trademark, brief preview, unavailability to download image, etc.)

- Pricing plan for comic book authors

- [Possible feature] switch between reader and author profile categories comic books related events, and exhibitions near me

Now, what is the functionality that can satisfy our customers’ needs?

The solution a P2P platform for comics purchase & exchange can offer:

OAuth, authorization methods via G+, Facebook, e-mail and/or phone number

Ability to choose between profile types: you can create the ‘reader’ profile to list your comic books rarities for selling and for the exchange. Or if you’re a comic book author, you can create the ‘author’ profile and start selling and showcasing your comic books.

Various payment methods available: PayPal, Stripe, Credit/Debit card (Visa, Mastercard), SEPA. Secure payments

Cooperation of the marketplace with delivery services to ship the orders inside and outside the country.

User’s dashboard, where they can add, edit their personal and public information. Access to my comic book showroom, where they can list comic book issues for sale or exchange

Embedded analytics which allows users to monitor page/profile views, comic books exchange, purchasing and sell performance

Cloud storage where you can keep your purchased comics for the unlimited number of days

The so-called ‘virtual reader system’, where users can read purchased comic books

Chat and messaging functionality

GPS and tracking functionality for such features: ‘comic book near me’ and for finding comic books related events

Pricing plans for each user category

Author’s rights protection and impossible comic book leakage

As you can see crafting the well-detailed online marketplace business plan can help us foresee the scope of our product’s distribution.

How to monetize a marketplace project? App monetization strategy and ideas for B2B, B2C, or C2C solutions

Here are several online marketplace revenue models that would help you earn money on your project.

Let’s consider P2P marketplace app monetization strategy for our comic books exchange, buy, and sell platform. We’ve chosen to implement 3 Pricing Plans, one of which is Free plan, the second is extended for readers, and the last one is for comic book authors. Next, the user has to pay or upgrade to the specific pricing plan to get access to such special features, as:

Virtual reader option

Comic book near me option and looking for comic books related events

Add the unlimited number of comic book issues/collections

Possible: expanded author’s rights options

You can consider other app monetization strategies, which include:

Fee collection per sold item/completed work (think of Etsy, Upwork)

In-app purchases

Implementation of in-app advertisement

Provide your users with the opportunity to use trials to try out the product before the purchase

Paid subscriptions. Let your users get access to specific functionality only after they’ve subscribed

When you apply a certain online marketplace revenue model, remember that it should be based on such factors:

Monitor your customer’s preferences, level of interest, and attitude towards your product. Create questionnaires, A/B testing, and introduce beta features to try. Based on the collected results, think of how your users can get even more from your marketplace platform.

Follow the trends but at the same time stay true to your own uniqueness. Want it or not, but people will always follow trends. You can be a certain trend follower too. Or you can start your own mainstream thing that people will monitor and follow.

Visit your industry-related events and make new connections

Mix up several revenue models and see what your customers’ response will be

We hope that this article and C2C marketplace app development extended example have helped you to clarify how to monetize an app idea and line up more clearly an online marketplace business plan. Determine the direction towards which your marketplace should move, think about the people you’re creating your solution for and get it going.

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Online Marketplace Business Plan Template

Download this Online Marketplace Business Plan Template Design in Word, Google Docs, PDF, Apple Pages Format. Easily Editable, Printable, Downloadable.

Present a fact-based e-commerce business proposal without spending money or starting from blank. Use this Online Marketplace Business Plan Template to create an ecommerce business plan document within minutes. From the executive summary to the financial plan, every important aspect is outlined in this template for your convenience.   

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How to create a successful marketplace. Fast.

This guide helps you build an online marketplace in ten practical steps . You’ll learn to identify a great marketplace idea, build a marketplace platform, and scale to new markets. Along the way, you’ll get dozens of examples from successful marketplace founders.

Each piece of advice is based on a decade of working with online marketplaces.

Let’s get started!

Introduction

What is an online marketplace.

Amazon , Airbnb , Etsy , Uber , and Upwork are all examples of online marketplaces.

What sets marketplaces apart from traditional eCommerce is that they are two-sided. An online store has one seller. A marketplace has several.

The platform matches the right seller with the right buyer and facilitates transactions – that is: exchange of value – between them. Everyone wins!

The marketplace trend began in the C2C sphere (think Craigslist and Airbnb) and has since found new opportunities in B2C and B2B. Based on what’s being sold, marketplaces are often divided into:

• Product marketplaces: like Amazon , Ebay , Alibaba , Etsy , and Poshmark .
• Service marketplaces: Upwork , Fiverr , Thumbtack .
• Rental marketplaces: Airbnb , Turo , VRBO , Booking.com .
• Event and ticketing marketplaces: Eventbrite , SeatGeek , Ticketmaster .

In short: whatever niche and audience you can think of, there could be potential for a marketplace.

Why create an online marketplace?

There’s never been a better time to start a marketplace.

Online marketplaces are getting a bigger and bigger share of eCommerce each year. In 2021, marketplace sales accounted for 67% of all global eCommerce . The top 100 marketplaces alone brought in over $3.2 trillion dollars of revenue.

By 2027 , third-party sales through online marketplaces will be the largest and fastest-growing retail channel globally .

More than ever, people are open to reselling things, renting property, and sharing their skills through online platforms. A marketplace can easily be the cheapest, most convenient, and environmentally friendly way to make a purchase.

If that’s not enough to convince you, how about this: to start a marketplace business, you don’t need your own inventory . You can start the company from your couch or run it on the beach.

Finally, building a marketplace has become easy and affordable : no-code marketplace software , ways to automate tasks, easily accessible online services, and so on.

To put it simply: marketplaces are the future. And creating your own marketplace platform has never been easier.

Key takeaways of this article

Create a marketplace in ten steps.

There are many paths to building a marketplace business. These are the steps we've seen work time and time again.

• Identify a strong marketplace idea : Focus on ideas that address real problems for both sellers and buyers, target a significant market, exist in a fragmented industry, and have potential for frequent use. Successful founders often spot these ideas through personal experiences, identifying underused assets, or recognizing niche markets poorly served by existing platforms.
• Choose the right marketplace business model : The world's most successful marketplaces use one or several of six business models: commission, subscription, listing fees, lead fees, freemium models, and featured listings. The most common and potentially lucrative model is commission, but the choice depends on your specific marketplace.
• Start with a focused scope : Begin with a narrow focus to quickly learn and adapt. This approach helps you offer a great user experience for your initial audience, get your first transactions, and iterate and learn without burning lots of money.
• Pre-validate your marketplace idea : Validate your assumptions about the problem, solution, and business model with both sellers and buyers. Get out of the building, talk to people, and build relationships with your user base.
• Build a marketplace platform – start with an MVP : Build a Minimum Viable Platform that efficiently solves core problems for both sellers and buyers. Use no-code tools or a specialized no-code marketplace builder (like ours at Sharetribe) for a quick and cost-effective solution.
• Onboard your first sellers : Solve the chicken-and-egg problem by focusing first on the supply side. Use strategies like targeting specific online communities, offering incentives, and emphasizing potential customer reach.
• Launch your marketplace : Bring the first customers onboard as soon as possible to start facilitating transactions and learning from real-world interactions. Begin with a small group of early adopters before considering a bigger marketing launch.
• Reach problem-solution fit : Get your first transaction, then the second. Are users returning to your marketplace? Are you closer to reaching liquidity? Iterate on your business idea and platform based on user feedback.
• Reach product-market fit : Turn your MVP into a more powerful marketplace product. Grow your user base and work towards profitability. Pay close attention to liquidity and other key metrics, and invest in growth strategies tailored to your marketplace.
• Scale into new markets : Expand into new categories, locations, or customer segments. Tackle one new market at a time, reach product-market fit there – and move on to the next market.

Next, we’ll discuss each step in a bit more detail. Each section has links to further reading and inspiring examples of marketplace success stories. 

We also offer a ten-step video course on building a marketplace. The course draws from this marketplace guide and Sharetribe's other content, as well as top expert knowledge. Take the video course on building a successful marketplace business here at Marketplace Academy!

Or listen to the audio versions of our most popular articles on the Marketplace Academy Podcast !

Start your 14-day free trial

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How to identify a strong marketplace idea

In a nutshell, a great marketplace idea is the result of four factors:

• It solves a real problem for both sides of your marketplace (supply and demand).
• It targets a large enough market that matches your business goals.
• The market is fragmented (many suppliers and customers).
• There’s potential for frequent usage (repeat purchases).

At Sharetribe, we've found that successful founders often land on their ideas through three different routes.

• They identify a problem they have themselves . 
• They identify underused assets and inefficient buying processes or fragmented markets . 
• They identify a niche market that’s poorly served on existing platforms. 

For example, our customer Ana struggled to buy baby gear sustainably, so she founded The Octopus Club , a marketplace for secondhand baby, child, and maternity items. 

The Drive lah founders realized that privately owned cars sit idle most of the time while renting a car is extremely cumbersome. 

Myleah realized buying cosplay on existing platforms was extremely frustrating – and created Lumikha Cosplay Resale .

Find some resources and success stories below.

+ More on identifying marketplace ideas

How to choose your marketplace business model.

At Sharetribe, we studied how the top one hundred marketplaces in the world monetize . 

What we found is that all of them use one or several of six different business models: 

• Subscription
• Listing fees
• Freemium models
• Featured listings. 

Depending on your marketplace, any one of these models can work well for you alone or in combination with others.

Commission (also known as transaction fee, take rate, or rake) is the most common marketplace revenue model. And with good reason:

• It’s great for users. They only pay you when they get value themselves. Before that, using the platform is free.
• It’s usually the most lucrative for the marketplace founder. You get a piece of all the value – GMV – that passes through your marketplace. And as you grow, your commission profits do too.

If you choose the commission model, you need to consider three things:

• Will you charge the supply or demand side of your marketplace? 
• How big will your commission be?  
• How do you prevent users from circumventing your payments?  

Choosing a business model, pricing strategy, and payment system is a huge decision. Below are some more resources to help you navigate.

+ More on marketplace business models, pricing, and payments

How to start a marketplace with a focused scope.

It’s pretty intuitive to think that the broader your marketplace’s focus, the bigger the potential user base. The bigger the user base, the faster your marketplace will grow. 

But this is not necessarily true. 

According to research by Lenny Rachitsky , almost every single one of today's most successful marketplaces initially constrained their offering. They either focused on a small geographic location (city or neighborhood) or a single category.

Starting small lets you:

• Appeal to strongly to a small group of users.
• Get your first transactions and repeat purchases faster.
• Iterate and change direction fast if needed.
• Burn less money in the early days.
• Make learning from mistakes less expensive.

So: dream big, but start small. 

As startup guru Paul Graham told Airbnb founder Brian Chesky : “It's better to have 100 people love you than a million people sort of like you.”

More on the huge benefits of starting small below.

+ More on constraining your marketplace

How to pre-validate your marketplace idea.

In a nutshell, pre-validating your marketplace idea means making sure you’ve made the right assumptions about:

• The problem you think sellers and buyers have
• The solution you have to the problem
• Your plan to monetize solving the problem (your business model).

Here are the steps:

• Find and talk to your target audience in person and online. 
• Ask if people have the problem you think – and how they’re solving it now. Then, pitch a prototype of your idea and listen to their feedback.
• If the feedback shows some of your assumptions were wrong, change your approach and validate again! 

Starting small makes finding your first target audience a lot easier. You can engage them in online forums and groups, or meet them live in your initial location. 

In terms of what you should ask them, open-ended questions tend to work best. Some great questions could be:

• How do you currently find the product or service? Is it easy?
• How do you compare different sellers?
• Could you take in more customers than you currently have?
• How do your customers currently find you?

More on pre-validating a marketplace idea below.

+ More on validating your marketplace idea:

How to build a marketplace platform.

The best way to build a marketplace platform is in stages.

The first version can be extremely simple. It only needs to do two things really well: 

• Solve your suppliers’ core problem. 
• Solve your customers’ core problem.

This version is called the Minimum Viable Platform, or MVP .

In the MVP stage, it’s ok to do things manually – even if you plan to automate them later. Many successful marketplace founders have first connected supply with demand manually. As a bonus, you learn a lot faster because you’re interacting with early adopters.

How do you go about actually building an MVP? There are a few options:

• Hire a freelancer or an agency to build your MVP from scratch.
• Find a technical co-founder to build an MVP for free.
• Build the MVP yourself with no-code tools.

The first two are either expensive, time-consuming, difficult – or all these things. I recommend the last option. Even if you know how to code, no-code get your first version live a lot faster. 

Here's list of no-code tools you can use to build your MVP

• Create a custom landing page with Webflow .
• Collect data from your users via Typeform .
• Organize the data into a database with Airtable .
• Set up a simple calendar booking and payment with Calendly .
• Use MailChimp for marketing automation.
• Connect the workflows between all these tools with Zapier .
• Or use Sharetribe to build a fully functional marketplace with a single tool.

The benefit of a no-code marketplace builder (like ours at Sharetribe) is that it has all the essential marketplace features like automated user creation, matching, and online payments built in. You can launch fast and with less manual work – and focus on building your business.

You can also extend your Sharetribe-powered platform endlessly with code whenever needed.

Below, you'll find some more resources on building MVPs – and some great stories of successful and unsuccessful marketplace MVPs.

+ More on how to build a marketplace MVP

Prefer books.

This guide is also available as an Amazon bestseller, ebook or hardcover.

How to onboard your first sellers

Your marketplace is ready for its first users. But how do you get suppliers without customers and how do you get customers without suppliers?

This is the classic marketplace chicken-and-egg problem . Most successful marketplaces have solved it by focusing first on the supply. 

There are many ways to build marketplace supply :

• Find them in online forums and groups
• Visit local meetups and events
• Visit them in person
• Maybe become a supplier yourself
• Fake initial supply (scrape listings from the web or find the listing your customer booked manually)

There are also many ways to convince early supply to join before you have any customers:

• Offer them a better supplier experience than existing marketplaces
• Offer discounts or deals to early adopters
• Offer exclusivity: communicate that you only accept the very best suppliers
• Communicate buyer potential (if you have an existing pool, such as a community you’re a part of)
• Build a community first and then develop the marketplace business around it.
• Start with a single-player mode: offer a SaaS tool first and building a marketplace around it later.

This is an area where learning from founders who have made it is especially useful. Find some great resources below.

+ More on building marketplace supply

How to launch your marketplace.

After your initial supply is onboard, you should launch to a small group of customers.

(By “launching”, I don’t mean a big-bang marketing and PR launch yet! Make the first launch a smaller product launch that opens your platform to customers.)

The faster you launch, the faster you’ll know if your marketplace has real potential. 

So, how to find the first customers? Hopefully, you’ve accumulated some initial customer interest at the pre-validation stage. A few additional sources can be:

• Online groups and communities (e.g. Facebook groups, subreddits, etc.)
• Offline groups and communities (e.g. local flea markets, gyms, day care centers, etc.)
• Using paid search engine ads (with a small budget)
• For B2B customers: cold-calling, direct sales, visiting the companies, and taking part in related conferences and events.

After your product launch, the right time for a marketing launch is when you know that your platform works for the small initial group.

More on launching your marketplace below.

+ More on launching your marketplace

How to reach problem-solution fit.

When you have both sellers and buyers on your platform, you can start working towards problem-solution fit.

Problem/solution fit is a stage where you:

• consistently facilitate transactions between supply and demand and
• collect revenue from those transactions.

This doesn’t mean your marketplace needs to be profitable. But there should be promising signals that it can be. 

But what if problem-solution fit isn’t there? What if you have fifty users on your marketplace, but no transactions?

Don’t lose faith – this simply means you need to iterate. Contact your users and ask them what’s wrong.

• Did they not understand what the site was for? Look into how you’re communicating your value proposition. 
• Was nothing they wanted on offer? You need more suppliers.
• Was it too difficult to find what they were looking for? Time to rethink your matching process. 
• Or perhaps they found something but did not complete a transaction. You may need to redesign your transaction flow or think about your pricing.

It’s important to not strive for too ambitious growth yet. Growing too early amplifies flaws in the business model, making them harder to fix. 

However, you do need to start growing beyond your initial user base to get enough data to guide your iterations. 

Below are some practical resources and inspiring stories for this stage.

+ More on finding problem-solution fit for your marketplace

How to reach product-market fit .

Once you’ve reached problem-solution fit, the next goal in your journey is product-market fit.

You need to prove your marketplace can become profitable in your initial category or location. In short, that means:

• being in a good market 
• with a product that can satisfy that market. 

You can track whether you’ve reached product-market fit by paying close attention to key marketplace metrics : 

• Repeat-purchase rate
• GMV retention
• Unit economics (customer acquisition costs vs. customer lifetime value)

The most important metric is liquidity . It measures the likelihood that a seller gets their listing sold and that a buyer finds what they’re looking for. 

To get those numbers up, it’s time to build a growth engine for your marketplace . Choose the strategies that work best for you. You have a huge number of options from marketplace SEO to viral marketing, from direct sales to hyperlocal offline marketing. See if you can start noticing and leveraging network effects .

From a product perspective, a manual MVP likely won’t cut it at this stage. You’ll need to invest some time and money in product development.

If your marketplace is powered by Sharetribe, adding custom-coded elements on top of the no-code builder is very easy. If you used more general tools, this is a stage where you’ll need to invest in re-building your platform.

Find some essential reading for marketplace founders in the product-market fit stage below.

+ More on reaching marketplace product-market fit

How to scale your marketplace into new markets.

Scaling a marketplace means expanding into new markets. There are three ways a marketplace can scale:

• By adding a new location.
• By adding a new category.
• By adding a new customer segment.

Reaching product-market fit before scaling is essential because you’ll use those learnings to succeed in new markets.

In a nutshell, the steps to scale a marketplace successfully are:

• Scale one market at a time.
• Reach product/market fit in that market.
• Create a playbook of what works.
• Repeat until your business goals are reached.

Decide your next market carefully. You’ll likely want to do some market research and consider how your second market differs from your first. Collect all the best strategies and knowledge you’ve learned when scaling to new markets and turn them into a playbook.

A playbook is also something to show potential investors to let them know you have a plan and know what you’re doing.

Some resources and inspiration for this exciting stage of your marketplace business below.

+ More on how to scale your marketplace

Final words, start building a marketplace today.

In this, article we went through the ten practical steps of building a marketplace. 

You learned how to validate your concept, develop a marketplace website, grow your user base, and, most importantly, facilitate transactions between your users. 

The article also shared a long list of additional resources for each step. You can read everything in one go to get a complete understanding of the marketplace founder journey. Or you can use the guide as a go-to source to refer to as you work on your business. 

If this guide helps you avoid even one of the mistakes we’ve made ourselves developing marketplace websites over the past ten years, we consider it a huge success.

But in the end, there’s only so much you can learn from others. The best way to learn is to start a marketplace business of your own.

Creating a marketplace is a challenge, but it’s also incredibly rewarding. Whatever happens, the things you’ll learn along the way about building a platform, a user base, and a community will stay with you for the rest of your life.

Best of luck with your marketplace business!

Learn by doing. Start a marketplace with Sharetribe today.