Nothing goes exactly as planned. The same with launching an online marketplace. There will be some challenges. Understanding the everyday challenges of launching an online marketplace will prepare you for potential obstacles and setbacks.
Understanding the everyday challenges of launching an online marketplace will prepare you for potential obstacles and setbacks.
Some common challenges might include building a solid and engaged user base, establishing trust and safety measures, or differentiating the marketplace from competitors.
Discussing the common challenges can help you with some of the complexities and challenges involved in launching an online marketplace. It will encourage you to approach the process with realistic expectations and a clear understanding of the work and resources that will be required.
Take Grubhub. They had their challenges.
Attracting and retaining high-quality restaurants and customers was a significant challenge for Grubhub. To tackle the problem, Grubhub introduced a range of marketing and advertising programs, such as restaurant marketing campaigns, to help customers discover restaurants on the platform.
Attracting and retaining high-quality restaurants and customers was a significant challenge for Grubhub. To tackle the problem, Grubhub introduced a range of marketing and advertising programs, such as restaurant marketing campaigns, to help customers discover restaurants on the platform.
Grubhub also introduced the "That Grubhub Feeling," a campaign that aimed to evoke that wonderful when you finally get to enjoy the food you have been craving!
Or take Upwork. One of the biggest challenges Upwork faced was managing and resolving disputes between clients and freelancers.
The company ended up creating a dedicated customer support team to handle disputes. Upwork also implemented policies to protect clients and freelancers and introduced various payment protection programs to increase trust in the platform.
Retaining Users on Your Platform, the Key to Growth.
A common launch challenge is retaining users (buyers or sellers). You need to attract a sufficient number of users to create a viable platform. Retaining users becomes difficult if your marketplace does not offer a unique or compelling value proposition. Or if your marketplace faces intense competition from established players.
You need to attract a sufficient number of users to create a viable platform. Retaining users becomes difficult if your marketplace does not offer a unique or compelling value proposition. Or if your marketplace faces intense competition from established players.
By retaining existing users, your online marketplace continues to grow.
- 90% - that's the customer retention rate of Amazon, one of the biggest eCommerce platforms today.
- 76 out of 100 – that's eBay's American Customer Satisfaction Index (ACSI) points for 2021.
- 80+% of Etsy's customers make repeat purchases on the platform (high compared to other retailers)
- 46% of sellers move away from an online marketplace because of insufficient competitive differentiation.
- 32% voted buyer retention, and 29% voted buyer acquisition for the Top 2 and 3 customer-facing challenges, according to The State and Future of Digital Marketplaces.
One example of an online marketplace that successfully increased its customer retention rate is Etsy. Etsy faced challenges with customer retention in the early 2010s due to a lack of investment in its technology infrastructure. The lack of investment led to a slow and cumbersome shopping experience for its users.
Etsy faced challenges with customer retention in the early 2010s due to a lack of investment in its technology infrastructure. The lack of investment led to a slow and cumbersome shopping experience for its users.
Etsy made several changes to its platform to address this issue, including investing in its technology infrastructure. Thereby improving the overall shopping experience for its users. The company's Chief Technology Officer at that time, Chad Dickerson, started to build out Etsy's engineering team. It paid off!
Forty-three million buyers in 2020 who were either existing or returning to the platform purchased on Etsy. Be prepared to pivot as you learn what your users really need.
Be prepared to pivot as you learn what your users really need.
Effortless Ease, Providing the Ultimate User Experience
A seamless user interface (UI) – can be challenging to accomplish! A seamless UI ensures that the website or app is intuitive and easy to navigate.
You will want a range of features and tools that make it easy for users to find products, communicate with sellers, and complete transactions. You will want functionality such as advanced search and filter options, messaging and communication tools, and secure payment options.
You will want a range of features and tools that make it easy for users to find products, communicate with sellers, and complete transactions. You will want functionality such as advanced search and filter options, messaging and communication tools, and secure payment options.
- 400% more - that's how much a frictionless UX design could potentially increase a company's conversion rate, according to Forrester Research.
- 52% of users report that they will not return to a website due to poor aesthetics and design.
- 43% of visitors will not return to a website if it has a slow loading time.
- 86% of buyers will pay more for a better customer experience, according to data from a CEI survey.
- 94% of people listed lousy design as the main reason they do not trust a website.
One example of an online marketplace that initially had a bad user experience was Amazon! In the early days of its business, Amazon's website was not particularly user-friendly (no siree).
However, over time, Amazon has invested significantly in its UI UX design, technology infrastructure, and user experience.
In the early days of its business, Amazon's website was not particularly user-friendly. However, over time, Amazon has invested significantly in its UI UX design, technology infrastructure, and user experience.
Essential were items such as introducing features like customer reviews, personalized recommendations, and one-click ordering. These efforts helped to significantly improve the user experience on Amazon's platform, making it easier for customers to find and purchase the products they were looking for.
Several ways to improve your user experience include implementing robust security measures. Or provide easy-to-use search and navigation tools to help customers quickly find what they're looking for. Further, paying attention to user experience (UX) design (see link for more information).
A seamless user interface (UI) often includes clean layouts (often white), minimizing the number of steps required to complete a task, and using consistent design elements throughout the platform.
Planning and Guiding Your Online Marketplace Operations, A Recipe for Success
Logistics? An online marketplace? You might say we're not e-commerce; we don't need logistics. Well, yes and no.
Managing the operations of the sellers can be a common challenge when launching an online marketplace.
Managing the operations of the sellers can be a common challenge when launching an online marketplace.
While you aren't holding inventory, you may need to provide control over things such as:
- Manage disputes and refunds policies
- Require minimum delivery/shipping requirements
- Manage terms of service
- Manage fraud claims
Check out these statistics:
- 53% of shoppers consider delivery speed to be a deciding factor in placing an online order, according to research by Arvato.
- 8 out of 10 merchants have experienced an increase in friendly or chargeback fraud, according to a Chargeback911 Field Report in 2021.
- 39% of online shoppers in the UK, Australia, and the United States said they report more disputes these days than before the pandemic.
- 92% of online consumers reported that a hassle-free return policy makes them more likely to shop at a store again.
For your online marketplace, you need to establish clear policies and procedures. Procedures include creating guidelines for handling returns, exchanges, and customer inquiries.
A fourth challenge since 2023: the rules marketplaces must now follow
When this post was first published, compliance was something only large platforms worried about. Since then, new laws in the US, the EU and the UK make marketplace operators, and not only sellers, responsible for knowing who sells on their site. If you are launching now, build these rules into seller onboarding from the start. Adding them later, after you already have hundreds of sellers, is much harder.
| Rule | Applies since | What it requires of the marketplace |
|---|---|---|
| US INFORM Consumers Act | June 27, 2023 | For 'high-volume' sellers (200+ sales of new or unused consumer products and $5,000+ in gross revenue in any continuous 12 months during the past 24, counting only sales made through your platform and paid through it), you must collect bank details, a tax ID and contact details within 10 days, verify them within 10 days, and have sellers recertify every year. Sellers with $20,000+ a year in sales on your platform must show their name, physical address and contact details to buyers. Civil penalties are $53,088 per violation (FTC guidance, amount updated January 2025). |
| EU Digital Services Act (DSA) | February 17, 2024 | Marketplaces must verify and display sellers' contact details, make reasonable efforts to run random checks on products, and give users an easy way to report illegal goods or services. Micro and small companies have lighter requirements. Fines can reach 6% of global annual turnover (European Commission, DSA Q&A). |
| UK reporting rules for digital platforms | Guidance first published August 2024 | Platforms must register with HMRC and report sellers who supply goods or services through them. Sellers with 2,000 euros (about £1,700) or less from fewer than 30 sales of goods a year are excluded, but that exclusion does not apply to services or rentals (GOV.UK). |
A practical launch checklist
- Decide whether you process payments. INFORM thresholds count only sales made through your platform and paid through it. A pure listings site, where buyers pay sellers directly, is in a different position from a marketplace that takes payment, so check your model with a lawyer before you launch.
- Collect seller identity at sign-up for business sellers (legal name, address, phone, tax ID where required) rather than chasing it later.
- Add a 'report this listing' button on every ad and a written process for handling reports. The DSA expects one, and it is also your best defence against fraud.
- Publish clear terms of service covering prohibited items, disputes and refunds, and keep a record of the actions you take against listings or accounts.
- Plan for tax reporting if you have sellers in the UK or EU and you know what they earn through your platform.
None of this has to stop a small marketplace from launching, but it belongs in your plan next to user retention, UX and operations.
Summary
Launching your online marketplace business might present a few challenges. Retaining users is vital, as is providing a seamless user experience for your users.
Launching your online marketplace business might present a few challenges. Retaining users is vital, as is providing a seamless user experience for your users.
Also, challenges include making it easy for customers to find what they're looking for, providing fast and reliable delivery options, and ensuring clear policies and procedures for the issues that come up.
Thinking of other challenges? Please, share your thoughts with us!
- What are some of the biggest challenges in launching an online marketplace?
- What are the other ways in which your favorite online marketplace can improve the user experience for you?
- Do you have ideas for features in an online marketplace that would add to its appeal for you as a consumer? If so, what are those?
