A marketplace business model has enormous potential. Buyers prefer them to other online stores because they can buy practically everything they need, instead of having to make several purchases in different places. How to create a marketplace app?
Brands and manufacturers prefer to work with marketplaces because they have high traffic and more opportunities to attract customers. It is also a profitable format for businesses because part of the operations can be outsourced to suppliers. They manage their own catalog, handle sales of their products, and sometimes take over shipping. In such a situation, launching your own e-commerce platform seems like a worthwhile investment.
If your company works in a related field — for example, logistics — you can use your own base and create a marketplace for customers as additional value. By reallocating resources, you will reduce your marketing budget and take your place in the marketplace. It’s harder to build a project from scratch without a customer base or other resources. But it is possible.
Let’s break down all the components of such a platform in detail.
Business plan and monetization
Creating a marketplace app is a risky and investment-intensive process. Planning a business plan and monetization methods will help answer the three main questions that business owners and investors usually ask:
- What is the minimum number of users you need to attract in order to generate the desired revenue stream;
- how much money will be needed to attract the first stream of users;
- when the investment will start to pay for itself.
Some people think that a business plan is only needed to attract investment money. But it is not: it helps objectively assess any idea and understand how viable it is in the real market. The structure of the document may be different for each project, but there are generally accepted points that can be taken as a basis.
Monitoring the state of the e-commerce sphere, global and regional trends, study of competitors and evaluation of demand will help to understand what profit can be obtained in a particular period of time and what opportunities for scaling the application can be used in the future.
The functionality of the application depends on the direction, budget, and timing. Developing a basic or “boxed” set of functions will take much less time and will cost less — you will learn more about this later in the text. Custom development based on the customer’s requirements may be several times more expensive and take 3-5 months.
Regardless of the option you choose, you may implement the following launch functions in the marketplace app:
Registration and authorization
The user should be able to create a personal account, where all the information about their orders will be stored. Usually, registration can be done using mail, phone numbers, and social networks. For security, a two-factor authentication function is introduced during authorization. There should also be a password recovery screen.
Seller and Buyer Profile Management
Buyers can edit personal data, change passwords, and upload profile pictures. Sellers can add company information, upload product images and product descriptions, create roles of administrator, owner, and manager, and limit access rights for certain functions. Also, the seller can track transactions, delivery status, dispute resolution, and download statistics and analytics for each product.
The system of convenient filters and product comparison is the main advantage of the marketplace app. You can add a simple search to the basic version and later implement additional options: auto-complete, hinting, correcting mistakes and typos in the user text, saving the history of requests, etc.
Communication between customers and vendors
It is implemented in the form of collaborative chats, the ability to put “likes”, modules with feedback, ratings, and evaluations.
Push notifications are a part of marketing tools: they help to tell you about new products and promotions, track order status, or remind you about yourself if the user hasn’t been to the application for a long time.
Entering the data of bank cards, viewing, and managing purchases, canceling payments, and payment history.
Security of every payment on the platform is one of the important requirements. For smooth financial settlements between buyer and seller in the app, you need to use a secure payment gateway — a service that processes bank card transactions by encrypting sensitive user data.
The more securely you protect customers’ personal information and the more often you tell them about it, the more people will start to trust the new app. Add personal and banking security information to the shopping cart and checkout screen to motivate people to make a purchase.
Basic marketplace app models
By commerce participants
- B2C is a business-to-customer relationship model. The parties in this interaction are not equal; the relationship between them is strictly formalized.
- B2B – Business to Business model. The participants of the exchange are equal, but the relationship is also formalized through contracts. These platforms allow businesses to offer goods and services to each other in bulk and on favorable terms.
- C2C – “Customer to Customer” model. The most democratic type of marketplace. There is no clear delineation of roles; users can buy and sell their own goods, and negotiate personally for more convenient terms and discounts.
By subject matter
The technical component
Only a multifunctional thought-out system will allow you to competently conduct business, quickly react to any changes in the market, manage processes, etc.
The main subsystems:
- MMS — the core module of administration.
- MAS — Vendor Cabinet.
- PIM — content management.
- OMS — order management.
- Billing — managing financial relations.
- R&A — reports and analytics.
To make things work properly, you need employees who will be personally responsible for all processes. A specific person should be responsible for each part of the business. Some are responsible for updating content; others work with vendors and partners, and still, others work to promote and attract new customers, both buyers and sellers.
More than just an app
The Marketplace app is not just a big online store. It is a complex online structure with numerous complex integrations. To understand the logic and create the right scalable architecture, it is necessary to answer a few questions at the start, which will become its basis. Let’s look at possible implementations for each of these points.
Developing a marketplace app is a much more complicated process than building an ordinary online store. To begin with, the timing and cost of implementation are almost not affected by the number of products or the complexity of the design. It is not just a site, but a complex backend; a system with numerous integrations, and not always simple logic.
The complexity of development depends on the conditions at the startup, the scheme of interaction with partners, and the cycle of tasks that the future marketplace is prepared to solve.
The marketplace app may be created from scratch, or may be expanded because of expanding the capabilities of an existing franchise network site or a separate online store.
How to show products in the catalog?
There are two approaches. One is implemented more easily, and therefore more convenient for the owner, and the second requires a large investment in development and compliance with a lot of rules.
In the first case, each seller uploads its own catalog of products, with its own descriptions and characteristics of products. As a result, the same products can occur in the catalog many, many times with different photos, names, and prices.
In small niche projects with a limited range of products, catalog positions are created centrally, and sellers add only their prices and stock for them. You can display offers from different sellers with their own prices in the product card.
How will sellers upload items?
Sellers want to connect to the site without too much hassle. But this means that the cost of connecting sellers has to be borne by the marketplace, or rather, it falls on its IT service or contractors.
The ideal option for the seller is to transfer goods directly from their ERP. This means the marketplace will have to write integrations with dozens of different systems. If there aren’t many partners, you can try. But if the business model involves rapid growth, it’s not the best option.
If there is an impact on the vendors (for example, if they are subsidiaries), you can use the primary database in ERP — you can load goods, prices, and residues from vendors into it. To do this you will have to agree with everyone to use the same articles, and then combine the goods.
Another option is the loading of data from a file of a given format. With a lot of parameters, you can check the unloading automatically. If you intend to load goods via feeds, be prepared for the expense of validation.
The easiest option for the marketplace — is to make an interface for sellers, so they can create products manually through the admin panel (CMS): upload photos, set descriptions, prices, inventory, etc. But this works for areas where sellers have a very small assortment.
How do I place orders?
The user gets items from several sellers at once to the cart. If the site doesn’t have its own logistics service, each seller takes care of delivery. In this case, the developers need to provide for splitting the order into parts, so that the goods of each vendor can be made out and paid for separately.
What about the money?
A business benefits when all payments for orders come into its account. You can hold the money until the sellers withdraw it. But this requires an in-house accounting department with a decent staff — money will have to be transferred to sellers in manual or, at best, semi-automatic mode.
Automatic withdrawal of funds is a risk, in case of an attack or hacking of the site, you can be left without all the money in the account. Large projects transfer money to sellers through their accounting department, no matter how time-consuming it is. By the way, with this approach, it is important to work very carefully on contracts with partners, so as not to get double taxation.
What to do about shipping?
In fact, this is the first question that must be solved, even before the start of development. The most popular sites have become popular precisely because of their own network of logistics centers and pickup points.
If your own logistics can not afford it, the task can be simplified — to agree with vendors to use a particular delivery service, and choose one that has a network of pick-up locations and postal terminals. Then it will be possible to limit overall integration, which saves time and money.
Discounts and promotions
Marketplace apps can hold its own promotions, sales, and other activities aimed at involving customers and increasing sales.
If sellers will launch their own promotions, it is necessary to think over more options in a personal cabinet: a rather sophisticated interface is needed, so that it is possible to set up different types of discounts — for an item, a category, or an arbitrary group of products.
Besides, with this approach, it won’t be possible to use many discount mechanics, such as promo codes, a discount on the amount in the cart, or offer free delivery on an order of a certain amount.
MVP (Minimal Viable Product) is a minimally viable version of an application. In our case, it’s a test version to evaluate its demand and functionality. MVP greatly reduces development costs and risks in general. If the product at the testing stage proves to be popular among users, it is finalized and the project is further developed. If the customer doesn’t get the desired result, he/she at least spends less money than he/she would in the case of full-blown application development.
In the MVP version, they develop only the most necessary things, analyzing the users’ travel maps and distinguishing the main touch points. The main goal is to test the idea at the lowest cost, collect feedback from the first users, and make the first sales.
Developing a test application usually involves the following steps:
- Identify the target audience. You don’t need to cover everyone at once. It is better to focus on a narrow group of users who need your product first.
- Make a list of features. Highlight the most important stages of the user journey and add them to the MVP. Implement the rest if the launch is successful.
- Conduct user testing. Let real people evaluate the app and analyze the feedback.
How to test MVPs
Services are usually tested in several approaches with alpha and beta testing.
Alpha is an internal stage. After development the application is tested inside the team. If there are no errors, they pass it to beta-testing. At this time, download statistics, behavioral analytics, user journey, feedback, and suggestions are collected. Then the mobile service is given back to development and testing.
After a few such iterations, it is possible to arrive at the optimal version of the product and schedule a full-fledged release.
What not to do when starting an MVP
Trying to make it perfect. Endless editing and button drawing will take a long time and waste your budget. Stop at a “good enough” product. If your idea is relevant to the market, poor design or lack of speed won’t ruin demand.
Chaotically gather feedback. At the stage of MVP development, you should immediately determine the metrics of the project’s success: the number of downloads, the number of registered users, the customer retention rate, etc.
Announce the marketplace ahead of time. When the product is almost ready, you want to tell about all the features and even promise something that is not yet there. Be realistic in your estimation of the initial service. It is better to be more modest in the beginning than to make excuses to users for unfulfilled agreements.
Developing a marketplace app — conclusions
Marketplace is an online marketplace that connects buyers and sellers. They began to rapidly gain popularity in 2020 — in the pandemic, the sphere of online commerce has grown several times, and by 2024 the volume of sales is predicted to grow to 7 trillion dollars.
People can compare products from different manufacturers and choose the best option without spending time researching each store individually. Manufacturers get an additional sales channel with a warm audience, as well as the opportunity to save on marketing and developing their website. If you have an idea for a new project, now is the time to fill a vacant niche.
Now the market is really open for marketplace apps, but only professionally developed projects can hold their positions for a long time. For several years, users have become accustomed to the quality service of large companies, so a raw product will not attract anyone.
The cost of developing the marketplace depends on many factors: the type of marketplace, the number of unique pages, the required level of design, complexity and amount of functionality, integration, synchronization, what traffic and loads the resource must withstand, what development technology, etc.