In 2018, the top online marketplaces in the world sold over $1.66 trillion. Unsurprisingly, sales on marketplace sites accounted for more than 50% of global web sales in 2018. For this reason, online marketplaces are becoming more and more prevalent. If you are thinking about running a thriving online marketplace, you have big competition with the likes of Alibaba, Amazon, and eBay already playing in this space.
Online mentors Darren Ewert and Mike Dreher of Vancouver, British Columbia, have been working as mentors and business coaches online for more than a decade, and have learned the ins-and-outs of running a successful online marketplace. Covering everything from what an online marketplace is to how to run it successfully, Darren and Mike share insider tips.
What is an Online Marketplace?
Darren and Mike define an online marketplace as an e-commerce store where multiple merchants can sell goods or services to customers. Some key examples include Etsy and Airbnb. These e-commerce websites are considered online marketplaces because they have hundreds of thousands of merchants who sell their products or services to customers browsing the website.
With multiple merchants, there are various brands, numerous options, but one cohesive platform. On an online marketplace, there is one checkout experience, even if you are buying multiple products from different retailers.
Know Your Audience
If you are just getting started, Darren and Mike suggest having an intensive brainstorm around the niche market you want to serve. It is, of course, an essential step in deciding who your merchants will be.
If you want to be a real disruptor in the sector you are engaging, you should consider the following: choose a viable industry, define your unique value proposition, building trust on both sides, and thoughtfully design your distribution model. Focus in on a minimum viable product for your online marketplace, and don’t think about scaling your online marketplace to service millions of customers right away. It takes a lot of time to develop an online marketplace and a loyal audience, so be patient and focus on building something impactful from the outset. Your online marketplace will only be truly successful if it solves a real problem for your users.
Choose Your Business Model
That brings us to what type of business model your online marketplace will utilize. There are various business models currently in existence, and they include: commission-based, membership/subscription fee, listing fee, lead fee, featured listing & ads, and any combination of the above.
The type of business model you choose will, of course, depend on the industry you are in, and the intended end-user. The most common business model is the commission-based model, which means that you will earn a commission from every transaction that takes place on your website.
Engage with Your Users
One of the first things you will want to do once your online marketplace is up and running is to engage thoughtfully with your early users to gather their feedback on the platform. As you start to scale, the most important thing is the user experience. As the online marketplace is built for the user, they need to be actively engaged in its development.
Ensure that feedback is deeply embedded in your business model. Having a smart search function that considers all of the variables associated with your niche industry will be crucial. Additionally, being able to browse effectively will enhance the utility of your online marketplace, thus maximizing overall use. It would help if you also thought about creating user-profiles and how users will be able to message and interact with one another.
Darren and Mike on Building Trust
Lastly, online mentors, Darren and Mike suggest instilling trust within your visitors from the outset. Some of the best ways to accomplish this are to make a great first impression. How your website looks, the merchants, your about page, and your FAQ section all build trust in your consumers. You want to be as transparent as possible from the beginning and might even consider adding a reviews section to your website, being open and honest in how you address real concerns.
By bearing these aspects in mind, Darren and Mike believe that you will set yourself up to build a viable online marketplace.