3 Steps to Online Marketplace Success
With online marketplaces dominating the global e-commerce market (accounting for about 60% of revenue) it’s a good business model to follow. However many online marketplace ventures fail due to lack of technical expertise, effective strategy and product/market fit. So we’ve put together some guidelines to ensure your marketplace business is a success.
Many marketplace startups spend too long in development and either never launch their product or realise users need a completely different set of features after they’ve launched. While other marketplace platforms are launched in just a few weeks with only basic functionality in place and then evolve and grow to fit the market.
Validate Your Idea
You need to make sure there is sufficient demand for your product or marketplace and something that differentiates it from the competition.
Keyword research to get an idea of how many people are searching for similar products, or words related to your product or service and who the competitors are.
- Google Keyword Planner gives information on keywords search volumes and alternative keywords or phrases that people are searching for on Google.
- Google Trends lists the most popular search terms by region and date. It also shows the popularity of keywords over time. So useful for dismissing any keywords or ideas that are dropping in popularity.
Social media research. Similar to keyword research but using Instagram, Twitter and YouTube to find the volume of conversations and mentions around your business idea and learn about your target audience.
- Research hashtags and trends related to your keywords.
- Identify influencers in your niche
- What type of conversations are going on related to your keywords
- Who is your target demographic?
Define your Unique Selling Proposition (USP) Assuming there are some competitors, what distinguishes your product from the alternatives? Is it easier to use? Does it offer a wider selection of products? Does it serve a different region or market?
Validate your idea. Or test the water. One way of doing this is to set up ads:
- Google Ads to determine the demand for your product before launch. Send visitors to a page where they can join a waiting list or sign up for a notification when the product or service is available.
- Social media ads. If you know the audience you’re targeting consider running Facebook, Instagram or LinkedIn adverts for a limited time to determine interest in your product.
Investors are more likely to back a company that has shown proven market demand by collecting pre-orders or signups from real consumers.
Identify and Prioritise Product Features
To avoid wasting time and budget on your project, only build the features your user actually needs. Start with a Minimum Viable Product (MVP) in the first phase of your project. These are the features we suggest including:
- Search bar, categories and filters – so buyers can find products easily
- Checkout – to make it easy for buyers to purchase from multiple sellers with a simple payment
- Payment solution – Stripe Connect is a popular choice, but you’ll need to research your customers to determine which solution will work best for your marketplace website.
- Order management – so buyers can view and track orders as well as get notifications when the order status is updated
- Way to communicate with sellers and ask questions before and after purchase and leave feedback
- An onboarding process to make it easy for sellers to sign up and manage their inventory
- Notifications and way to communicate with buyers – public questions and private messages
- Sales and marketing tools – to allow them to use discount codes and product promotion management
- Ability to collect seller fees or commission
- Way to moderate and manage everything
- Approval system to allow new sellers to set up their stores
- Ability to make changes sitewide like market-place wide promotions
There are many more advanced features to consider in the next phase of your projects like reporting tools, integration with third-party services and mobile apps, but these are not essential for launch.
Choose the Right Technology
Should you use a pre-built platform or custom solution? There’s a variety of online marketplace builders available including Sharetribe, WordPress+Woocommerce, Shopify and Magento – all offering prebuilt software and templates.
It’s tempting to go for one of these seemingly low-cost options to get your marketplace website up and running as quickly as possible, but it’s worth considering the benefits of a custom solution, as you’re likely to experience limitations in the long run if you don’t plan ahead and ensure you have all the features you need or at least make sure you have a platform you can scale and add additional features to in the future.
Advantages of a custom-built software solution:
- Specification – It will meet your exact specifications. Write a list of specifications first, then find a solution that meets all of these.
- Ownership – if you’re building the marketplace with the intention of selling the business in the future, then having a custom web application is almost certainly the best option, as investors are likely to expect ownership of the intellectual property (IP).
- Control – There is also a risk when using a third-party platform like Shopify, that rules and prices can change and you never actually have full control of your marketplace website or own the associated data.
- Cost – Although this might not look like the lowest cost option, by the time you factor in recurring monthly fees and other additional costs for plugins or other add on services, it might work out more cost-effective in the long run.
- Flexibility – It will be much easier how to adapt to a changing market or refresh the design of the site if you opt for a custom solution. Saving both time and expense in the future.
- Scalability – If you’re expecting a large number of users, you’ll need a platform you can scale quickly to accommodate an increasing number of users.
- Speed – By opting for a custom solution, you ensure up-front that the platform will be fast enough to guarantee a good experience for your seller and their customers and keep them coming back and recommending your marketplace
So if you can’t find a solution that meets your exact requirement, it’s worth having a custom solution built as it will work out more cost-effective in the long run and give you the flexibility to scale and adapt your online marketplace as the needs of your customers evolve.
Ready to turn your idea into a reality? Contact us for a no-obligation quote.