I'm launching an online marketplace What are the most important aspects overlooked and critical to success?

Most companies overlook how they will get sellers and buyers cost effectively to the site. They just build stuff without knowing their cost structure, thinking that their marketplace so cool and have such awesome features that everyone will start immediately using them, forgetting that they are building one tree in a forest of trees.

Hello!

Here below 8 important steps you should follow to be on the right track to build your marketplace.

I’m summarising what’s inside the article “Eight steps to follow to build a successful marketplace”.

• Choose a viable Industry
  What you’ve got to figure out at this stage is whether a critical mass for your product exists and the frequency of buyers purchasing through your platform.

• Define your unique value proposition. Figure out if your solution brings disruption over (at least) one of these 3 points:
  • Market Access, offering a bigger customers-base to suppliers and wider suppliers-base to customers
  • Reducing Price, bringing a leaner process for the transaction to be happening
  • Reducing time of interactions between suppliers and buyers

• Assess your Market Size. A smart research here will solve this step

• Design the distribution Model
  • Online Distribution, more suitable for the buying side; don’t forget the costs and potential ROI of each strategy
  • Offline Distribution, more suitable for the supply side; again, keep in mind costs and potential conversion when deciding the sub-strategies.
  • Third point NOT to forget. It’s a great practice to add some sorts of referral program, incentivising both sides to onboard several fellows.

• Choose the Right Business Model and assess the Economics
  It can be performed through several models, and once this's been sorted, you’ve got to figure out, with great approximation, which are the CPA (Cost per Acquisition) and LTV (Lifetime Value).
  • Commission model (transactions)
  • Pack of actions model (leads)
  • Highlight model (leads)
  • Subscription + actions + commission + highlight + co-branding + fee per item + CPC (leads + transactions)
    
• Make a 10X better product
  Your experience in the field you’re disrupting, combined with great product skills and latest technologies will make you achieve the 10X.

• Build Trust on both sides
  Leverage the so-called trustbuilders:
  • Lots of pictures / video
  • Over-document / Over-explain
  • Show ratings, reviews and other forms of reliabilities
  • Show authenticity

• Safeguard and Grow Your Realm
  This means using tried and tested possibilities to drive sales such as price alerts, flash promos, exclusive discounts for frequent buyers and other initiatives that primarily focus on repeat purchases by buyers.

Thanks for reading,

Paolo

I assume you are following Lean methodology for your startup. If not, you must follow. You can read more about it here.

The important advice is to prepare a separate lean canvas for each side (buyer and seller). This will force you to layout a clear value proposition for buyer and supplier and help you validate it quickly.

Many times, founder solves one side of marketplace and assumes that another side will come automatically do not validate another side. Eventually, they fail to convince them to join and if some of them join they are hard to retain.

Hello,

I would start with defining the processes you would like to have in your marketplace. Try to have a big process like search / find/ buy some object and here you have already 3 different processes... I think you will see the overlooked aspects right away.

Hope it helped

Think hard about how you'll monetize. The dynamics seem really tough to get right or at least keep all sides happy.

My business is the buyer in a marketplace that recently enabled sellers to customize their content (the marketplace takes a cut of sales). This seems like it could be a 3x win, but has been a slew of growing pains because the marketplace is actively under development which breaks the sellers custom content, and the buyer is left with broken goods. The worst situation for all is when the buyer doesn't have a clear person to go to to get things fixed. The marketplace says the seller needs to fix things; the seller blames the marketplace for the release, and the 3rd leg of the stool -- the buyer -- will leave.

There's three pieces to all marketplaces - getting buyers to the marketplace, getting sellers to the marketplace, and making the match between the two sides. Matchmaking can take many forms, and this drives most of the technical product development.

For example, Etsy is buyer-led. Sellers passively list inventory, and Etsy provides an Etsy-wide search engine for buyers to browse upon. There's no ability for sellers to promote into the buyer base. Buyer searches are always globally scoped and driven by product - you don't filter by attribute of seller (seller based in specific locale, seller is own/led by a particular demographic). These decisions make Etsy what it is. Then there's the search function, which is a really, really hard data science problem.

Acquiring buyers and sellers is typically framed as a network effect problem. But I think there's more than that. For sellers, do you attract buyers of a demographic that is more desirable for them than the general public? For buyers, what are the features fulfill a specific use case? Keep in mind that only big-ticket items warrant agonizing over the purchase, or even being able to specify customization on the platform. So if your marketplace has mostly cheap, fungible stuff, what differentiates your market? Maybe fulfillment of fungible requirements on a time periodicity (like monthly) that automatically fulfills from the cheapest seller each month? There's all sorts of things that you can do.

Decide what your hook is. Build from there. I personally have been wanting to build a CustomMade competitor for years.

The question, as well as most answers, point to the work of an Experience consultant or capable User Experience designer. A lot of businesses make the mistake to think of UX as an afterthought. If you bring in that expertise from the start, they work out the answers to this question together with you *and with customers*. It is part of UX research to not only look at the market place, but also at what customers want and what their intent is. Looking at this and learning from it, rather than “what did others miss”, will provide you with a solid foundation for building a successful product. Through a proper UX research and analysis process you will find the missing parts others may have overlooked.

The first question to answer is why would a consumer spend money at your site? Why will your site be their choice?

I know that there are going to be a few that disagree. I am a big believer in proof of concept. If you there an application or platform that you can use and customize to prove the model, use it first.

In your case, I would look at sharetribe https://www.sharetribe.com. You basically have a marketplace in box. You may be further along and already built something. If so, you will still benefit from all the case studies of marketplaces built using sharetribe.com

Make sure you have taken the necessary legal prep for your business and your site including trademark.