How to create an online marketplace

How to Create an Online Marketplace – Blueprint, Examples and Case Studies

Do you have a blockbuster idea which can be the new Airbnb, Etsy or Fiverr? Your gut feeling and all your friends and family are telling you that you have a unique solution to a specific problem? But you’re stuck in analysis paralysis, and you don’t know where to start building your own online marketplace!

Worry not, we’ve written this article to tell you all there is to know about online marketplaces. We’ve included a blueprint – with all the stages you’ll need to go through to build a successful marketplace, and a few examples and case studies to help you visualize your dream.

So what exactly is an Online Marketplace?

You’ve been reading about marketplaces and different words are being thrown at you – two-sided marketplaces, peer-to-peer marketplaces etc. And it has given you a headache! But when we break down the concept to its core, it is a very simple idea –

A marketplace is where buyers buy products from sellers.”

As simple as that! There are people who want to buy stuff – the buyers, and there are people who enlist on your marketplace to sell their products – the sellers. Which makes it a two-sided affair, and hence the term two-sided marketplace.

There are a number of marketplaces that you can create –

  • Peer-to-Peer or Switch Marketplaces – like Airbnb and OLX
  • SaaS Marketplaces – like Fiverr and Upwork
  • Mobile Commerce – apps
  • Crowdfunding – like Kickstarter
  • Business-to-Business Marketplaces – like Alibaba
  • Business-to-Customer Marketplaces – like Amazon, Aliexpress
  • Auction Platforms – like eBay
  • Horizontal Marketplaces – like, Uber
  • Vertical Marketplaces – like AirBnB

Figure out which marketplace type your idea falls into and start planning your business accordingly. But before you do that, let’s discuss the different stages you’ll need to go through to create an online marketplace. Once you know about these stages, you’ll be able to plan ahead and launch successfully.

The Online Marketplace Blueprint

You’ll need to consider and plan for the following stages:

Validating Your Idea

What good is an idea which doesn’t resonate with your target audience? You’ll ask, how do I validate my idea without even having a real product? Well, there are many ways you can use to see if your target audience will react to your proposed solution or not. You don’t want to be in a position where you’ve spent time and money to create a marketplace but it is not taking off at all.

To start with, ask yourself – is my idea of solving a real problem? Is there an unmet need in the market? Are people looking for a solution/product to satisfy that need? Find a product-market fit for your idea. Create a proposal – what value are you going to add and who is going to be your target audience?

You’ll have to think up assumptions and create your proposal for two sets of the audience – buyers and sellers.

  • Value Proposition for Buyers – What problem are the buyers facing and where do they go for a solution today? Write down how your product is going to address these issues and give them a one-stop solution.
  • Value Proposition for Sellers – Are your target sellers looking to create an online presence? If yes, how are they doing it now? Write down how your product is going to make their life easy.

Now take your proposals and interview your target audience. Nothing blasts away wrong assumptions as quickly as frank opinions from people already in the industry. You can do this by conducting market research, surveys, or even one-to-one interviews on the street.

Collect opinions and feedbacks. Re-evaluate your value proposition and re-design your product idea if need be.


Building a Business Model

So you’ve got your idea validated and re-designed to meet the needs of your target segments. But how are you going to earn money? And how are you going to manage cash burn?

Creating a successful marketplace is like running a marathon. It can be a few months before your marketplace starts finding traction with users. Do you have enough resources to last and cross the finish line?

Choose a business model which will let you make money and keep your marketplace afloat the first few tough months. The business model you choose should support long-term sustenance and scalability. You don’t want to start a marketplace based on a revenue model which doesn’t let you scale rapidly later on.

You can choose one of the following business models for your online marketplace:

  • Commission: You can charge a flat rate per transaction or take a percentage of all the transactions that take place in your marketplace. You should use a commission business model wherever possible. Many popular marketplaces use commission model, like Amazon, Airbnb and Fiverr. There are two cases when you can’t charge a commission fee. When the transaction value is large, you can’t justify the percentage you’re charging. Or you may have a marketplace where people find other people for sharing stuff – no money is exchanged.
  • Membership/Subscription Fee: You can charge a membership or a subscription fee when it is not possible to facilitate transactions between buyers and sellers. The challenge with asking for an upfront fee is that you need to provide enough value. There should be enough buyers on the platform to attract sellers. And there should be enough sellers on the platform to provide variety and a unique experience to the buyers. You can also ask for a membership fee when you’re starting out and later change the business model to a commission based model. This way you can get enough starter funds to help build your minimal viable product (MVP).
  • Listing Fee: There are times when a seller doesn’t want to pay a subscription fee. They’d rather want to sell only a small part of their catalog and only at particular times of the year. You don’t want to miss out on the revenue you can make from these sellers. You can make your business model a combination of subscription and listing fees. When you’re charging a fee for a listing to be posted on your marketplace, you can’t keep the fee too high. Listings don’t guarantee product sale, and you’d find it hard to justify and retain sellers if the performance remains low for a sustained period of time.

Building a Minimal Viable Product

A minimal viable product (MVP) is the most basic version of your marketplace product which offers all its core benefits. Once you’ve validated your idea and thought of a business model, you’ll need to commit to the product. The process of building an MVP will depend on the following factors:

  • Are you technically proficient to code? – If you’re a technical person and can write your own lines of code for the marketplace, this is the time to get started. Give yourself a timeline and stick to it.
  • Are you non-technical but are internet skilled? – If you’re not a technical person but you can do basic stuff on the computer and internet, you can use existing platforms to build your marketplace.
  • Whether you want to spend time on the technical stuff or not? – Regardless of you being technical or not – if you want to spend more time on strategy and planning out the launch, you can outsource the creation of your product to an agency.

Remember, creating an online marketplace is not just about uploading your code to the web server. There are many challenges that you’ll face along the way. For example, your marketplace website can go down and you won’t know what hit you. Or the payment gateway integration is not working properly and no transactions can be performed on the marketplace.

Your sellers depend on you for their business. Downtime on your marketplace means them losing orders and profits. You also risk buyer dissatisfaction. You don’t want negative reputation so early in the game.

For these issues, you need professional support. So that when there is a technical issue, you’ve got yourself covered. If all you’ve got is your idea, and you wait for a great CTO to join you-you lose the first mover benefit.

At Humcommerce, we’ve got an elite team of Magento developers who’ve built hundreds of stores and marketplaces for a number of businesses. We make it our personal responsibility to take care of all the technical aspects of running an online marketplace so that you can focus on the business aspect of it.

Be it hosting, automatic updates, backups or server monitoring – we excel at what we do. Talk to us to get your marketplace up and running within 4 weeks – guaranteed.


Creating Demand for Your Marketplace

When you’re starting out and you don’t have buyers or sellers on your marketplace, the best idea is to start with the sellers. Create an inventory of products/services – through sellers – to offer to your buyers. You’ll find it hard if you go about creating demand on both fronts. Buyers don’t come to a marketplace with no sellers, and sellers don’t enlist on a marketplace with no buyers.

So, start with building inventory. Pitch to sellers to come enlist on your marketplace. Lie about the inventory you already have if you need to. Just get them onboard!

Here are a few ways to find your first sellers:

  • Find them on other marketplaces: Chances are that the sellers you want to target are already active on other marketplaces. All you need to do is approach them with your value proposition and point of difference benefit. Lure them in by telling them how you are way better than all the other options they’ve tried up till now. Give them some sort of joining incentive, waver your first 2 months commission or your initial subscription fee maybe. A marketplace without sellers is no good.
  • Find them on Google, Classifieds and Offline: You can search for all kinds of products and service providers on Google, Classifieds and Yellow pages. If you’ve got a marketplace idea for which sellers are not online yet, go find them offline. Go to their stores, offices, and workplaces and talk to them about your new cool idea. Pitch them your value proposition and get them onboard.
  • Find them on online forums and social media groups: It might still be that you aren’t able to find the sellers you want because your marketplace niche is too unique, new or narrow. Try online forums and social media groups to find people who own the products/services which you want to make a commodity on your online marketplace.

When you’ve found the sellers you want in your marketplace, you need to entice them. You can do this by Exclusivity and by creating what is called a Single player mode.

Exclusivity is when you handpick sellers for your marketplace. When you tell someone that they’ve been offered a seat based on merit, you give them importance and recognition.

As you know that an online marketplace is a two-sided affair which involves buyers and sellers. To get your first sellers onboard, you can create some sort of value system or offering which will help the sellers even without the buyers.

Let’s say, you want to create a marketplace for all the doctors in your region and offer their services to the end users. Initially, you won’t have the sort of traffic which you can boast off and get new doctors to enlist with you. What you can do is, give them a way to manage their appointments on your platform as your initial value offering. This is called the Single player mode, where only one player of your marketplace is active.


Testing MVP on a Small Audience and Tweaking your MVP

Now that you’ve got the initial version of your online marketplace ready and you’ve built a bit of inventory on the marketplace, you need to put it to test. Select a small segment of your target buyer audience and ask them to try out your marketplace. See what their reaction is and tweak your product accordingly.

Nothing is built perfect from the get-go. You need to refine things as you move on in your product journey. Try to eliminate as many pain points from the design and usability perspective as you can. Test whether the payments are working and the flow of transactions on your marketplace is good. Do this before the big launch and you save yourself from a glitchy start.



There are two parts to launching your online marketplace – a product launch and a marketing launch.

Product launch is when you invite a group of buyers from your mailing list who are enthusiastic to come on board. Keep your product launch low key. Let your product be open to public a few weeks before you do a big bang marketing launch.

Say you still have some issues with the flow of transactions on your marketplace. Or the idea is not gaining traction with the target customers – you might want to make changes before the marketing launch.

Then you do the marketing launch. The goal of your marketing launch is to get attention – a whole lot of it. Make your marketplace open for all, facilitate transactions and be agile. Fix things as you move with speed during the first few weeks.

You can use the following resources and channels to gain attention:

  • Mailing List: Use your mailing list to invite people. Add a personal note, or some kind of an early bird offer to increase conversions.
  • Press and PPC: If you’ve got enough resources, you can use press ads and pay-per-click campaigns to invite people to your marketplace. Again include some sort of incentive to encourage them to enlist on your marketplace.
  • Influencers: Does your niche have influencers you can use? Contact them, give them a free trial. Ask them to review the your platform and promote it. You can pay them to do it or give them a complimentary gift.

Be creative. Your marketing campaign should tell your audience why you’ve started the marketplace, how is it going to help them and what they should be doing to get in. Your marketing effort should be full of personality and should put across the value proposition clearly.


AirBnB Case Study

GrowthHackers have published a thorough case study of how Brian Chesky and Joe Gebbia started out to create AirBnB. This case study covers all the major points of a marketplace journey that we’ve discussed in this article. From initial struggles to refining your idea and product, you’ll need to do it all. And still do more to create a successful online marketplace.

Putting it all together

Creating your own online marketplace is easy, if you follow the steps we’ve discussed. Validate your idea with your peers, then with your target audience. Plan out how you’re going to monetize the marketplace. Test it out before going live and then launch!

Remember, launch of your online marketplace is just the start of your journey. You’ll need to constantly observe, learn, tweak and change course according to the feedbacks and results.

We hope you’ve taken something valuable from the article. If you want to create a marketplace, feel free to contact us and we’d be more than happy to help you out.

Editorial Staff

The editorial staff takes care of growth strategies, content creation, and outreach within the community for HumCommerce.

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