How to Create a Marketplace: Step-by-Step Guide

Online shopping is gradually replacing shopping in offline stores. More and more people use their smartphones and computers to order things online, which means that the demand for e-commerce websites is growing too. But what defines a successful marketplace, and what do you need to build one? In this article we will answer these questions and look at the key steps of developing a marketplace.

May 10, 2022

15 min

Technologies

Online retail has been steadily pushing out shopping in brick-and-mortar stores. People turn to their smartphones and desktop computers more and more often to order things, and their demands in terms of e-commerce quality are growing too. This has become especially evident since the pandemic outbreak of 2020 and partially explains the rising number of emerging marketplaces.

But what defines a successful online marketplace? Is it worth investing in building one today? And where do you begin if you decide to create a marketplace? On this page, we’ll walk you through all of the most often asked questions one by one.

Is It Commercially Viable to Create a Marketplace Website in 2022?

All in all, the e-commerce market has already shown an incredible leap in the past few years. And it’s only expected to flourish even further.

Recent statistics on the industry suggest that e-commerce sales in the USA are forecasted to pass the 1 trillion USD threshold in 2022, with global online retail sales estimated to reach 5 trillion USD.

E-commerce sales forecast for 2022

Marketplaces in particular have great potential too. They unite vendors and buyers, conveniently providing a single platform with a broad range of products and services under one roof. According to the March 2022 data, Amazon alone received over 2.4 billion site visits from users around the globe while eBay had 784.3 million.

So is it worth investing in the creation of a marketplace in 2022? The answer is a solid “YES”. With a worthwhile idea, due research, proper planning, and suitable tech solutions, an online marketplace can be profitable, drive sales, bring back expected ROI, and offer opportunities to scale the business. But the question of how to create а marketplace website that’ll succeed is still relevant.

How to Build a Marketplace Website: 6 Predevelopment Steps

It must be noted that, sadly, not all marketplaces can grow to the success of Amazon or Airbnb. Some of the main reasons for failure may be that the idea wasn’t as good as it seemed, it didn’t suit the market, or the platform didn’t answer to the needs of the parties.

Careful planning can help avoid this scenario. So before we move on to how to create a marketplace website, here are some predevelopment tips to get you started.

6 Preparation Steps for Building a Marketplace

1. Do Research: Validate Your Idea

First things first, what area will your online marketplace cover? Will it be a platform for lighting vendors or maybe a place for some kind of services?

You might think that you have a million-dollar idea but chances are that it has already been implemented. Is this a dead-end? No. You can adapt the idea or create a marketplace that’s better. Find out whether it has the due potential.

2. Assess the Market Volume

Market assessment is the next vital step. Do people need your solution? Will they use it? Is the market declining or going up?

Say, you’d like to create a platform uniting lawnmowers and house owners. While the service may be in demand in areas with many private homes, it might not be so popular in neighborhoods with densely standing multi-story apartment buildings. Study the market, dig deeper.

3. Find an Unoccupied Niche

Are there existing competitors or niche leaders? Probably, yes. Have they been around long? Investigate how they’ve brought their ideas to life. Do people enjoy what they provide? Both negative and positive feedback is key here.

Can you offer something more efficient? Think about how to build a marketplace website so it’ll surpass competitors and possibly lure away their clients.

4. Define Your Target Audience

Who is your audience? This question is no less important than how to create an online marketplace that’ll thrive.

You have to take all possible parties into account. Who are the sellers and who are the buyers? What are their needs and pain points? Try to create personas, describing each of the main participants in detail. 

5. Come up with a Unique Value Proposition

So you’ve studied the market and the competitors. What will set your online marketplace aside from the rest? How will it differ from the existing solutions and outperform them? Which pain points will it address and how? Answering these questions will help to define the core value proposition. 

Falling back on the lawn mowing example, maybe a personalized approach can make the platform a success? Imagine every candidate with a profile, star rating, hourly rates, availability, and feedback blocks. This is far better than a random listing with phone numbers, right?

6. Choose Your Marketplace Revenue Model

An online marketplace can make a profit in multiple ways. Give some thought to which one will fit you best. The most common scenarios are as follows:

Common Marketplace Monetization Models
  • Sign-up fees (charged straight on for a vendor to join the platform);
  • Subscriptions (for a membership that gives access to certain features, say, that aren’t available in the freemium plan);
  • Listing fees (may be charged for putting up a product on the marketplace or placing it higher on the list for more visibility);
  • Commissions (selling fees can come as a fixed price per transaction or some percent of the placed order total);
  • Advertisements (fees for placing an ad on the marketplace).

Each of them has peculiarities, and you should also mind the legal aspect as some of them may come with additional governmental regulations.

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How to Create a Marketplace Website in Terms of Development

If you’re thinking about how to build a marketplace, there are two main approaches:

  1. customizing a marketplace platform that offers ready-made builders, some in simple site constructor format (these are BigCommerce, Sharetribe, or CS-Cart Multi-Vendor to name a few);
  2. building a custom marketplace website from the ground up.

The chosen marketplace website development path will greatly predetermine the overall cost, feature set, and the time to market. Even if you’re only at the prototype stage.

If you go for the marketplace builder that comes as an extension or SaaS, you might build the website faster. But it has to be clear that you’ll be limited in flexibility and stuck with the builder’s tech stack. Do you need another marketplace just like the thousands that are already out there? Or would you rather focus on your unique approach?

The following 6 steps are relevant if you decide to settle on a custom solution. As when you create a marketplace from scratch, you put your vision to life instead of creating a different colored clone of existing platforms.

Step 1. Define the Core Marketplace Features

Most likely, you’ll begin with a prototype, move on to building an MVP, then monitor and analyze the results of the test launch, and afterward build on top of that, expanding the functionality.

Read more about how to develop a Minimum Viable Product 

In any case, based on the business requirements, you have to determine the basic marketplace features that your website should be equipped with. Here are some of the must-haves:

  • Registration (for account creation upon sign-up or sign-in; usually a pop-up or separate screen, offering express login via Google or Apple apart from manual data input);
  • User Account (the client area must include basic profile information);
  • Homepage (where users land; it should contain all the must-know information about the marketplace, vendors, services, etc.);
  • Filtering & Search (sophisticated filters and an advanced search area help users navigate the marketplace and quickly find what they need);
  • Category / Product Pages (eg., pages presenting available products, preferably with rating and review functionality);
  • Cart Area (a shopping cart should clearly show the added products \ services);
  • Checkout (has to logically display fields for personal details, the selected items, order summary, taxes, and payment options);
  • Content Management System (for sellers to easily handle their products, listings, orders, etc.).

Step 2. Choose the Tech Stack

The tech stack for creating an online marketplace will vary from case to case. Developers can advise you on how to build a marketplace website more effectively and which solutions are best for your tailor-made project. The ones listed below are top picks.

Front-end development:

  • Javascript;
  • ReactJS;
  • VueJS;
  • AngularJS.

Back-end development:

  • Python;
  • Django;
  • Laravel;
  • PHP;
  • Node.js;
  • MySQL for databases.

Step 3. Pay Attention to UX/UI

User-friendly UX/UI is vital for the success of an online marketplace. From this perspective, you have to not only think about the visual appeal but also about how to build a marketplace that users will actually enjoy. Make sure that all the elements on your mockups are simple and intuitive, and that the page designs aren't over-cramped.

Moreover, don’t forget about mobile adaptation as the share of mobile retail is continuously growing. Therefore, a decent mobile version is no less important than the desktop one.

Read also: Mobile App vs Mobile Website: The Detailed Comparison 
Mobile vs Desktop Marketplace UX/UI

Step 4. Develop a Marketplace Website

Creating an MVP (minimum viable product) can be the first complete milestone of your marketplace website development. The MVP development process involves the production of a stable version that can be presented to the audience.

It doesn’t have to be packed with advanced functionality straight away. Start by putting together an online marketplace with must-have features and gradually supplement it with more.

Step 5. Test and Launch Your Marketplace

It is crucial to carefully test the beta version or MVP before launching it. In fact, when you think that everything is perfect, run tests again to stay on the safe side

Once the product is released, collect feedback, monitor user behavior, and analyze the possible areas for improvement.

Step 6. Take Care of Maintenance

Now that you know the MVP’s strengths and weaknesses, it’s time to work on maintenance, fixes, changes, and adding additional marketplace features. It is best to have a detailed plan of the work ahead to keep things organized.

What to Remember When Creating a Marketplace

There are several additional things that an online marketplace can’t do without. You can obtain a domain name, web hosting, SSL Certificate, CRM, and other vitals by paying for them separately and integrating them into your solution. Alternatively, you may get package offers. Let’s go over each of them.

What Else Does a Marketplace Need

1. Find a Catchy Domain Name

It is crucial to settle on an online marketplace name and website domain that sticks. A lengthy website address or one that doesn’t associate with the brand won’t get you far. As such, “www.very-complicated-irrelevant-address-name.com” is not the way to go.

It should be simple for people to remember and allocate the platform. So look around to find an available short domain, without any special symbols and hyphens, preferably containing a relevant keyword. Domain.com is one of the places to browse.

You might even find free domains, while the pricing for some .coms goes up to thousands of dollars. But don’t worry, 10 to 20 USD per year is the average! What is more, sometimes a domain may be included in the hosting package, so keep an eye out for that.

2. Obtain an SSL Certificate

This certificate is required for data protection. It is needed to:

  • securely transfer data between servers and browsers;
  • safeguard data privacy;
  • and shield it from cyber-attacks.

This is especially important for an online marketplace that is responsible for safekeeping sensitive user information, such as payment details and account credentials. Topping that, search engines (including Google) tend to rank websites with enabled SSL higher.

For instance, you can get a Domain Validated Certificate with basic encryption on the SSL Store for 16.45 USD per year. It’ll ensure that you’ll get encryption and trust indicators like HTTPS, the padlock icon, and the site seal.

Once again, bear in mind that it is common that an SSL Certificate is covered in the hosting package, so you might not need to fetch one separately.

3. Take Care of Web Hosting

Your online marketplace will also need web hosting (a place to store all the data and files). Consider selecting a suitable hosting plan from one of the many providers. 

Depending on your necessities and volume, you can choose from various hosting options. For example, a Shared Hosting is appropriate for small websites while a Dedicated Server is a neat choice for large-scale ones. A Virtual Private Server (VPS) is the middle ground that you may begin with, but note that Cloud Servers are also available.

Keep in mind that the plans differ not only by price but also by features (like RAM, bandwidth, or storage size) and inclusions (eg., free domain name or SSL Certificate). To give you a few estimates on how much a VPS hosting plan can cost your marketplace per month, here are some partners that are well adapted to e-commerce:

4. Get a Flexible Content Management System

A substantial marketplace has to have a proper content management system. The CMS may encompass many “behind-the-scenes” features:

  • content management (such as for adding/amending products and for marketing assets, including SEO fields and promo banners);
  • order management (eg., order placement data, logistics matters, and delivery tracking);
  • customer relationship management (well-organized information on buyers and vendor-client communication functionality);
  • payment information (for instance, on transactions, fees, etc.);
  • analysis features (various dashboards and performance tools);
  • client areas (for example, accounts with personal information);
  • an FAQ section (such as vendor onboarding documentation or a marketplace support portal), among others.

That’s a lot to handle! And, of course, some plugins can be integrated for these purposes. You’ll have access to a ready CMS if you opt for Shopify, OpenCart, or Joomla. But there is a possibility that such multi-vendor extensions might not be flexible enough to provide your marketplace with specific functionality. This means that you might face the need to work on a custom CMS or some of its parts.

5. Select a Suitable Payment Solution

As shortly mentioned before, a convenient and secure payment system is one of the core marketplace features. For this reason, you have to make sure that you’re using the best payment system that both users and sellers find suitable.

The thing is that the matter of payments is more complex than with traditional e-commerce stores. As such, an online marketplace:

  • has to process payments from clients;
  • is accountable for issuing payouts to the sellers;
  • can receive money from the vendors (eg., transaction or subscription fees);
  • may get income from ads or other sources.

Due to this, the marketplace needs an all-embracing payment system that can deal with all the above. It may seem challenging, but there are several payment models to choose between.

Marketplace Payment Models
  • Direct
    The marketplace doesn’t participate in the transactions as they’re handled at checkout solely between the buyer and seller. This means that customers can’t purchase things from multiple sellers at once. Plus, it’ll be challenging for a marketplace to charge fees in this case (so if fees are the monetization basis, this option won’t do).
  • Aggregated
    A trickier model to manage. It implies that an online marketplace receives payments from clients who can buy things from many sellers but then the marketplace handles the payout distribution to corresponding vendors after the product or service is delivered. As the number of buyers and sellers grows, it can get pretty tough.
  • Parallel
    Perhaps the best choice for online marketplaces as it involves the integration of payment services like PayPal, Klarna, Braintree, or Stripe. Such gateways can process and split each payment by seller when a single order includes products from different vendors. The downside here is that they usually charge an additional fee.

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The Team Needed To Create a Marketplace

Those of you who’ll decide to settle on a custom marketplace approach (instead of configuring a template-based platform solution) will need to get a hold of an experienced team. There are several options here, you can:

Find more about Why Is It Hard To Find a Good Developer? Freelance vs Outsourcing Comparison

The chosen path will influence the overall cost to create a marketplace and may even affect its time to market and the quality you get as a result.

In essence, finding an in-house team is usually a more expensive undertaking as apart from the salaries, you’ll need to spend money and resources on recruitment, equipment, taxes, and other things. Teaming up with individual freelancers isn’t always a sustainable option in this case either because it often results in the need to change and replace multiple freelancers throughout the development process. And since creating a marketplace is a long-term and complex project, hiring a dedicated software development team may be a reasonable alternative.

Why is this so? A carefully chosen software outsourcing partner can get you one step closer to success. Web development companies with the due expertise in building marketplaces can spare you both resources and investment. You may even agree on paying by the hour.

By turning to a trustworthy software agency, you obtain a best-fit team from their pool. They’ll have the needed skills and expertise for creating an effective marketplace. Plus, the hired development team will be with you throughout the entire development process.

Who Might Be Part of the Marketplace Development Team?

It takes many specialists to get a custom marketplace project up and going. These are some of the possible roles:

Possible Marketplace Development Team Structure
  • Project Manager (is in control of the project);
  • Business Analyst (evaluates the business and makes adjustments to the plan);
  • UX/UI Designers (are in charge of the marketplace’s visual side);
  • Front-end Developers (create the code that’s seen on the user’s end);
  • Back-end Developers (work on the logic and code that keep the marketplace running);
  • QA Engineers (allocate bugs and test the code).

To Conclude

Marketplace website development is no easy task. Building a viable and scalable solution involves having a killer idea that fits the market, answers common audience pain points, and is simple to use. Such a platform has to be backed up by the best available tech that’s implemented by a professional development team, have intuitive UX/UI, and use secure payment systems. If your online marketplace ticks all the boxes, then it has all the opportunities to scale and become a favored choice of millions of users (just like Uber, Etsy, Amazon, and other big names did). And Upsilon will accompany you at every stage of your journey and help you create a marketplace that will rock!

Technologies

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