More than 2 billion people in the world buy goods or services online.
This resulted in global e-retail sales of over 4.2 trillion dollars.
And it doesn't look like it will change anytime soon.
In the US, for example, Amazon's first-quarter sales for 2022 reached more than 110 billion dollars, the majority of which were service sales.
Walmart jumped in on the trend rather late, but it managed to bring together more than 100,000 sellers after a couple of years, especially after the COVID-19 pandemic.
In the far east, TaoBao and Tmall generated the world's largest gross merchandise volume (GMV) in 2020 at around 600 billion dollars each.
And in Latin America, Mercado Libre is expected to cash in on a compound annual growth rate of about 66 percent.
This is what makes a marketplace website a valuable business idea.
But let’s get real. Today, there are more than 150 marketplace websites worldwide, excluding the massive ones like Amazon, eBay, and Etsy.
So how do you compete with them?
Here are three tips.
#1: Identify Your Marketplace Niche
The first step in standing out from the competition is to know where you fit in.
About 20% of small businesses fail in their first year, and a decade in, 70% will have failed.
One reason for failure is the lack of an identified niche.
With the proliferation of marketplace websites nowadays, you can't fall into the trap of generalizing your approach.
Your online marketplace should have:
• A clear purpose.
• A defined set of offered solutions; and
• Unique selling points.
Need help with those?
Start with what you excel in and what you like.
Now, what you're good at may not exactly be what you're interested in, but identify areas where they overlap.
For example, if you have excellent organization and coordination skills and like cars, you may want to start a marketplace website for curated travel experiences or tourist car rentals.
List as many as you can and trim your list later.
Next, identify the problems that you can solve.
Using your listed passions, write down the problems related to your specific interests and strengths.
And then think about how you can help provide a solution to those issues.
Next, assess which remaining items on your list will be profitable to hone in further.
Research your competition and start by testing your idea with a sample landing page aimed at your target market
#2: Streamline The Benefits That You Offer in Your Marketplace
The biggest challenge in launching a marketplace website is attracting not only sellers or buyers.
It’s that you need to attract both.
If you have a lot of sellers and no buyers, your sellers will pull out; and if you have many people ready to buy but not enough vendors, they’ll jump ship.
To generate interest from both groups, strengthen your value proposition with a list of benefits for both sides.
This is what Creative Market, a graphic design marketplace, did successfully.
They first targeted buyers by offering perks to those who will sign up, such as free-spending money on their website ($5) and a tiered referral program.
Then they approached content creators and invited them to showcase some of their works on their website for free; many agreed in exchange for exposure and a chance to show buyers what they could do.
Add in reasonable terms, and now they have over 4 million resources from artists in almost 200 countries.
To streamline your offered benefits and make a strong case for why your platform should be chosen among all the other marketplace websites, create a strong value proposition.
First, understand your target market.
The four main target market components that make up your target market are demographics (who they are), location (where they are), behaviors (what they do), and psychographics (what they think).
Similarly, it would be best if you put together a value map that encapsulates your offering’s unique selling points, how it can make your target market happy, and what problems you can solve for them.
Research conducted by CXL found that users spend more time reading a company’s value proposition than any other information.
#3: Choose a Suitable Revenue Model and Business Model.
Your chosen revenue model is how you can make money off of your marketplace website.
You must have a clear concept of the specific revenue stream you want to monetize.
There are five popular ways to earn money through an online marketplace: commissions, listing charges, subscriptions, advertising or sponsored listings, and freemium.
This is how popular websites like Amazon, Etsy, Zillow, and even okCupid generate revenue.
Creating cash depends on having a solid business model.
Your revenue model should be founded on a generally good business model.
According to digital entrepreneur Alok Keyrival, “A successful combination of a great Business Model and Revenue Model results in a Google of today or a Facebook of tomorrow. But if you place your Revenue Model on the throne and crown it as king, with your Business Model as its slave, you will land up with a Myspace of yesterday.”
Bonus: Invest in the Right Marketplace Software
Your marketplace website must be designed and developed with the right software to ensure a successful launch.
Sure, you can build your own from scratch, but that can cost up to $68,400.
And over 1300 hours.
Investing in marketplace software can radically cut the time and costs of launching your online marketplace.
When choosing the right software, first look for its offered functionality.
The right software should be able to address your technical requirements, like integrating it with several payment gateways or even designing a mobile app.
Additionally, it should allow for easy launching, even if you don’t have coding experience or don’t have the money to hire a development and design team.
And support should be available, especially after launching your marketplace website.
Yclas offers a user-friendly solution to get you started.