A Simple Guide To Help You Get Started With Your Marketplace Business Idea
Sometimes the best Get Started With Your Marketplace Business Idea fail to generate enough traction. More often than not, instead of digging into basics, entrepreneurs end up closing all operations in the survival stage itself. While many ascribe this failure to tough competition, the actual reasons are all over the place: different market requirements, flawed research, unsustainable business model, and inefficient software choices. So how exactly do we identify and address these challenges to raise a successful and constantly evolving marketplace business?
Building an online marketplace might come across as one of the easiest tasks, but it isn’t. Naturally, any business comes with its own set of challenges to overcome, but they won’t necessarily be the deal-breakers. So if you are passionate about building your online marketplace, all you need to do is set out a feasible business model and carry through it. One step at a time is all that you need to build something.
But before we help you reach there, here are some challenges that will keep you on your toes while building your business online.
Top challenges to building an online marketplace platform
- Convincing Merchants & Customers
The biggest challenge is getting both merchants and customers to use your marketplace platform. Instilling faith and confidence within merchants and customers to sell or buy on your platform is going to be challenging. The biggest dilemma for marketplace owners is, who will join the marketplace first, merchants or buyers?
Well, it’s always a good idea to get providers on board first because once you build the inventory supply, customers will be automatically convinced to forego the existing marketplace platforms for new ones. To find merchants, consider reaching out to people who are already selling on other multi-vendor marketplace platforms.
2. Tough Market Competition
The increasingly tough market competition is one of the major hindrances to business growth. However, careful market analysis will help you make better business decisions.
Merchants and customers must have good reasons to make a switch. Therefore you must ensure that the platform has something unique to offer. You can try competing on price, quality, the number of foreign brands and platform efficiency to win over customers. Such unique selling points will give your online marketplace an edge over the competition.
Even if you aren’t sure whether there is direct competition with your idea, it’s always safe to make your platform as efficient, faster, and reliable as possible. Customers value unique services, top-class brands, and seamless communication.
3. Unexpected Drops in conversion rates
The unexpected drops and low conversions can result from several factors; however, in most cases, it occurs if the business model is of little significance to customers and merchants. The problem can also arise if the users can’t find the products or services they are exactly looking for as per your initial commitments.
Online marketplaces can only be successful long term if they benefit both merchants and customers simultaneously. Hence business owners must validate their idea before investing too much capital upfront. If the ideas are valid and can withstand the test of time, then the online marketplace is more likely to generate more business and benefit customers in the long run.
4. Financial Impediments
No matter how efficient your business plan is, everything boils down to the finances. Most businesses lack a sustainable financial setup, which results in either massive amounts of debt or closed operations. However, to derive profits, you need a viable economic strategy that benefits customers, merchants, and marketplace owners.
For this, you need to pay attention to the number of transactions that occur on your platform even if the users sign up ratio is relatively higher. Marketplace owners also need to charge a commission on every transaction, and most importantly, they need to think about how well are the merchants and customers benefiting from the services. Satisfying services mean better funding and more revenue.
Steps to build your online marketplace platform
- Market Research
- Assess the market
- Identify your users
- Understand your target audience and needs
According to a study conducted by CBInsights, no market need is the top reason for startup failure. Starting any business and especially an online marketplace, without clearly understanding the market requirements and your target audience takes away the sole purpose of building an online marketplace.
To build an attractive and viable online marketplace platform, you need a clear understanding of the market values, the latest trends, and evolving customer and merchant requirements. Remember, you can only outperform your competition with a critical market analysis. Once you know what’s lacking in the existing order of services, you will integrate it into your marketplace platform.
2. Decide your online marketplace niche
Deciding your marketplace niche is an important step in the process of building your marketplace platform. The marketplace business caters to specific niches that you will have to narrow down for both merchants and customers. Without the use-case in mind, your marketplace platform will have no direction, and you will not know how to get users and merchants to avail your services.
3. Establish a budget to start an online marketplace
As we mentioned earlier, financial impediments could become a significant block in the marketplace building process. You must not wait to set a budget until after you’ve decided everything about your marketplace business, right from business model to operations or features.
However, the bright side about starting an online marketplace business is that you don’t have to buy the inventory to sell, which is a massive relief if you’re just starting. The budget must include the marketplace platform’s cost and cost of advertising for merchants and customers, whether its Facebook ads, Google ads, Instagram ads, or sponsored articles. Plenty of outreach is a must in getting your platform up and running.
4. Choose the right business model
After conducting thorough market research, the next step is choosing the right business model. The right business model is the one that qualifies your business requirements and helps you generate profit in the long run. Online marketplace businesses are long term initiatives.
Hence to build a sustainable marketplace platform, you need a revenue model that will finance its operations. While in most cases, funding comes from the users of your site, picking a business model that is convenient to both merchants and users ensures long term stability. The most prominent business models that most online marketplace platforms use are:
· Membership/Subscription Fee
· Listing Fee
· Lead Fee
· Featured listings and ads
Note: Well, remember to not keep your hopes up for at least a few years. The leading e-commerce giants that you look up to also took their own sweet time in turning a profit. However, their business strategies were remarkable. Amazon, the leading e-commerce marketplace, took almost six years to start turning a profit. Even Etsy, which was founded in the year 2005, had its first profit in 2010. Surprising, isn’t it?
5. Plan your marketplace operations
- Managing sellers
- Managing products
- Payment processing
- Order management
- Marketing and content management
- Seller and customer relationship management
Multi-vendor marketplace platforms can be too much to handle sometimes. From convincing new sellers to join your platform, keeping existing sellers happy, managing products, selecting an attractive and convenient layout, optimizing product lists, payment processing to handling complex logistics regularly, the process is lengthy and tiring. However, the right platform with the right features will have everything under control. It will streamline and automate all operations to offer a seamless selling and buying experience.
6. Outline the essential marketplace features
Integrating features that add no substantial value to your business is an absolute waste of time and budget. Sometimes users need a completely different set of features, and sometimes, you just need an upgrade. Well, the key is to evolve as you grow. For this to happen, you must keep abreast of the many developments in this area, such as the latest trends, business models, and evolving merchant/user requirements.
Some of the essential marketplace features include browsing and listing, advanced ordering and store management, automated logistics, efficient payment processing, seamless checkout, customized notifications, live chat windows, and a reliable support system or discussion forums. Here’s a complete feature list from one of the best online marketplace platforms for your perusal.
7. Create an MVP (Minimum Value Product)
While you can draw inspiration from some of the leading marketplaces such as Amazon or Airbnb for building your own online marketplace business, creating an MVP (Minimum Viable Product) before reaching out to the masses is highly recommended. An MVP is a read-to-use version of a platform, with the most important features that can be offered to early adopters or a small subset of a niche market who offer their suggestions and feedback for the services.
An MVP approach helps you decide whether you have chosen the vital features, and if yes, which of them can attract merchants and customers to the platform. This also helps find out the project’s flaws that can be worked upon before laying out the final structure.
8. Choosing a viable marketplace platform
Now that you have a feasible business model, operations framework, and a complete list of features that you’d want for your marketplace, it’s finally time to start building your marketplace platform. But wait. Unlike the conventional marketplace building techniques, you now have a chance to create your multi-vendor marketplace in less than a day with no lengthy codes and zero setup fees. That’s correct!
Marketplace building software such as Yelo has eliminated the need to build a marketplace from scratch. The platforms’ services have inspired many businesses worldwide to create a feature-rich, online customized market that suits their unique business requirements. Yelo also offers a free 14-day trial that can be available anytime to determine whether it fits your business criteria.
Well, this was your ultimate guide to building the best online marketplace platform in less than a day. But remember, exceptional results come with time and the right services, which only a few marketplace building platforms offer.
The right features and the right strategy could take your business from nothing to one of the leading. With free trial services, you certainly have an edge in deciding what fits perfectly into your business requirements. So, if you’re all set up, here are some great marketplace ideas for you in the new year!