In today’s e-business environment the emphasis on attracting and retaining customers has become the key to business growth. When a prospective customer searches online for a product or service, the emphasis is on providing all possible products or service in the category that a customer is searching for in one platform.
This will allow the marketplace platform provider to attract and retain the customer. This form of providing a complete set of product or service on an online marketplace or marketplace platform has replaced the traditional market space.
What is a Marketplace Platform?
The online marketplace provides a virtual place for multiple sellers to put their products or service for sale. The virtual place is expected to be uniform and can be accessed by numerous buyers from multiple locations.
This uniform platform acts as a base for buyers and sellers to transact virtually in their comfort zones rather than being present physically. It thus forms the foundation on which the entire marketplace (buying/selling process) operates and this is referred to as marketplace platform.
For what kind of people, products, and services is the Marketplace Platform useful?
The list of users of a marketplace platform is endless, or let’s put it this way, everybody across the entire economic pyramid can use and benefit from it.
From a simple stationery supplier to an automobile dealer or a musician selling his/her work to a large medical goods manufacturer retailing high-end precision equipment – Any person trying to express a message, or wanting to sell a product or service requires a marketplace Platform.
The advantages of choosing a Marketplace Platform
Key takeaways for the seller:
- A key advantage for both, the entity hosting the marketplace and the seller, is that of Zero inventory stock management.
- The Marketplace Platform offers a broad customer base and an additional pathway over and above the traditional brick and mortar business.
- Marketing cost, both in terms of people and promotion, is negated to a large extent.
- It offers new avenues for sale, both domestic and overseas.
- Reviews and ratings from customers play a crucial role in attracting more buyers. This is because a prospective buyer looks for references from peers before making a decision. Good ratings by other people will boost sales.
Key takeaways for the buyer:
- The Marketplace Platform offers convenience for comparing prices across various sellers of the similar product. Further, it also provides an opportunity for the buyer to evaluate among product alternatives.
- Peer Reviews and ratings instill confidence and provide adequate information to the customer, both on the product as well as about the seller.
- Level of transparency is higher as details are accessible in the public environment.
Building a Marketplace Platform? Here’s how you can go about it
With numerous innovations in the business of building and operating a marketplace, there is an excellent demand for marketplace entrepreneurs. However, creating a marketplace platform is by no means a trivial task. Various parameters have to be considered before one can plunge into the task of building one.
Here’s what you need to consider beforehand
One has to have an appropriate strategic plan and also follow the best practices involved in building and maintaining a marketplace. Things like transparency, adequate and quality product information, quality controls etc must be looked into to ensure proper functioning.
2. Validation of the idea
The segment that one is targeting has to be identified and validated, in short, the holistic notion needs validation.
There are various tools available for validation, such as the Business model canvas, where one can map multiple business aspects such as value propositions, segments of customers, revenue streams, distribution logistics, etc.
This will help in identifying the assumptions and to further narrow them in building the platform.
About the Validation Process
- Once the assumptions are in place, the validation process begins with the following questions:
- What is the problem that is in need of a solution?
- Who are the people facing the problem and how is it presently dealt with?
- What is the solution?
- In what way is this solution better than others in the market?
- Who are the competitors?
Once the assumptions are validated, it can be broken down into a number of business aspects discussed above, such as customer segment, revenue stream, etc.
3. Analyze search data
This is an important step to know how many people will find this particular marketplace through search engines.
For instance, a keyword tool helps to optimize finding the marketplace online. It has a free version and one can sign up to create an account.
4. Clarity of purpose
There should be sufficient clarity on the What, Why and How aspects of a marketplace platform. In other words, the entity must be clear about why it needs to build a marketplace platform and what it plans to achieve through the idea of building one.
The platform can be built for the purpose of incubating an entrepreneurship idea or for expansion of existing line of products etc. Whatever be the reason the purpose of building a platform should be clearly envisaged.
5. Minimum Viable Product(MVP)
There is no point in loading the marketplace platform with products that are irrelevant to the central theme of the marketplace. It could start with a minimum product line with all viable features required to solve the user’s demand without risking enormous capital investment.
A global vision can be envisaged subsequently. For instance, the MVP can be a prototype of the actual product that can help validate the demand before placing the product to the customers. Dropbox a file storage device is an example of how they sold their product to customers through a product video first before forging ahead with the complete version.
A working prototype can also be launched first to gauge demand if not much efforts are needed for the same. Based on demand the full model can be launched later in the platform and the product line can be expanded gradually.
4 Ways to build a Marketplace Platform
Though a marketplace platform can be created in numerous ways, here are some of the primary methods to create them:
1. Bottom-up approach
This approach primarily starts with coding. Either the marketplace developer can develop the source code or outsource the code development.
The advantage of adopting this method is that it can be customized precisely as per the business idea. There are also no licensing and subscription costs involved in this method.
However managing, maintaining and regularly updating the site involves tremendous work if you are doing it all in-house. It must also be remembered that in case the code development is outsourced the developer becomes the owner of the code.
This approach is suitable for a tech-savvy person who wants to have control of the entire process of building a platform right from scratch.
2. Top-Down approach 01 – Self-Hosting
Here, one can use ready-to-use solutions available in the market. Such sourced software solutions can be further fine-tuned to meet the needs and can be hosted in one’s own server.
A one-time fee has to be paid, which is still better than paying a price to another person to develop from scratch. However, there are monthly costs involved in terms of hosting and licensing fee, which may have to be renewed regularly.
3. Top-Down approach 02 – Build on existing software
You can pay someone to build it using existing software available for a marketplace. Alternatively, the entire maintenance, hosting, and updating can be outsourced to a third party.
Here one uses the help of a third party to build the site using the software available in the market. The main benefit is that no technical skills are required as the programming agency takes charge of the entire work and it can be developed faster.
This process also involves less cost as compared to building it from scratch. However one has to spend time finding a dependable agency and be willing to pay retainer fees.
4. Using Software-as-a-Service (SaaS) toolkit
This is a new method in the software model that runs on the lines of cloud computing, platform/infrastructure as a service (IaaS, PaaS) model. It offers a better alternative compared to traditional software models. Here a third party hosts the application and makes them available through the Internet.
This differs from the traditional software packages as follows:
While conventional software packages involve the outright purchase and are loaded onto a computer device, SaaS is a subscription-based model. Here users pay subscription fees predominantly on a monthly basis instead of purchasing the complete software. Hence, there are no upfront fees involved.
The subscription can be terminated when it is no longer needed. The files are saved in the cloud rather than independent machines.
This has a lot of advantages in terms of maintaining zero hardware or set-up costs, and the data can be accessed from any location on any device such as desktops, mobiles, etc. This is particularly useful for short-term usage.
Factors to consider for choosing the right method for building a Marketplace
With enormous options available for developing the marketplace platform, how does one choose the right one? For this one has to decide based on the following factors:
1. Budget availability
Low Budget (Less than $5K)
If one has a relatively low budget say less than $5K then it is difficult to pay a third party developer and build the platform from the base. In such cases, existing software could be used to create or build from scratch. One can use the Saas software solution or any other existing solutions available for this purpose in the market. A technically skilled person can instead choose another viable option of developing and coding the platform himself from scratch.
Mid size Budget (Between $5k to $50k)
A person with a mid-size budget can set up a marketplace on existing platforms with the help of freelancers. Of course one has to incur hosting and maintenance costs and also have some amount handy for improvisation of the platform.
Strong Budget (Greater than $50k)
A strong budget lets you find companies that offer customized platforms that can be built from a base or by using existing software. There are various options and one can choose according to their goals.
2. Technical skills
Zero Technical Skills
If one lacks technical skills, then he should look out for a solution that requires no coding skills or complex customization. He ca look out for easy solutions like Saas or hire a third party developer.
Moderately Tech Savvy
A moderately technical person can be more adventurous by using an open source software. Such persons can build on the open source software by editing some codes and customizing their payment gateway.
Highly Tech Savvy
A strong technical person can create of course develop the platform from a scratch and can customize it to merge with his ideas and goals.
3. The time required for launching the Marketplace Platform
As early as possible or do you want to take it slowly? The lesser time available for launching, higher is the need for one to use SaaS or third-party developers.
4. Evaluating and arriving at the right choice
In addition to choosing the right method discussed above, one must determine and evaluate the platform before coming to a final conclusion. This requires an understanding of where one wants to head in the next five years.
One must forecast the growth, factor in the changes in business scenarios, and analyze the following to be sure that the platform can deliver in future:
- Does the platform have the capacity to grow and evolve with time?
- Cost of updating and adding modern features.
- The adaptability of the platform to mold itself to the inherent changes in business and consumer dynamics.
- Total ownership cost.
- Does the platform support various business models like B2B, B2C?
Analyzing all these aspects is imperative before taking a plunge into the maze of marketplace platforms.
To sum up..
A thorough analysis by considering all the above factors coupled with proper evaluation helps in securing the right fit. Once all these aspects are looked into one can have a proper marketplace platform operating in no time!
Apart from the above listed factors adding in-app chat can also help optimize user experience, leading to increase in the user engagement & user retention of the marketplace platform. See how: 3 Ways to use real-time messaging to optimize marketplace user experience.
Check out how real-time chat can help boost the engagement & transactions of your Marketplace website: