A marketplace brings buyers and sellers together and then processes transactions between these two parties. This business model works well on a large scale, as demonstrated by marketplaces such as eBay, Uber, and Airbnb. However, building a marketplace to that level is extremely challenging.
This process is a classic chicken-and-egg problem, as buyers will leave a marketplace if it has few sellers and vice versa. Marketplaces, therefore, require substantial time to gain traction while their buyer and seller communities are built out. The following six tips are some of the best practices for building a marketplace.
1. Narrow The Focus.
A marketplace must appeal to a specific group of people, at least in the beginning. Narrow the focus of your marketplace by targeting a particular community, geography or vertical market. A marketplace that attempts to appeal to multiple markets at the same time will probably fail to gain the suppliers or develop the community that’s essential to early growth.
Assume for this example that you’re trying to create a marketplace for all types of products over an entire county. You’ll probably find it difficult to obtain a large supply of products in a particular area. Focus instead on find suppliers for a specific type of product in one area such as bicycles in Dallas. Sharing a particular product becomes more compelling if that product is expensive or rare.
Related: 5 Hacks To Optimize Marketplace SEO
2. Build Up Your Suppliers.
Begin acquiring suppliers for your marketplace once you have narrowed its focus. You need to get an inventory of people who can provide goods and services before you make strong matches between buyers and sellers. The most effective method of doing this with a new marketplace is to leverage your connections and personal expertise. This process is easier when you’re truly passionate about your marketplace’s focus.
For example, assume that you’re already an expert on cars and own several used car lots. It won’t be that much of a leap to create a marketplace for cars because you already have many connections with car dealers. It would then be a relatively simple matter to connect those dealers with people who want to rent or buy cars. You could even attract buyers to your marketplace by renting your own cars through it.
3. Create A Community.
It’s possible to build a community for your marketplace from scratch, but this by far the most difficult way to do it. This is another reason why you need to be a domain expert or least partner with such an expert when creating a marketplace. Continuing with the car example, you’re likely to know people in this business who might want to start their own marketplace for cars. This possibility could allow you to create a micro-marketplace franchise within your car rental marketplace.
4. Acquire New Users.
Gaining new users for a new marketplace is typically expensive. Cost-effective methods of accomplishing this task include the heavy use of social media and volunteering for events related to your marketplace. It’s also a common practice for marketplace owners to incentivize referrals from existing users.
You must also use the press to spread the word about your new marketplace. Tell them what makes your marketplace different from the others in that domain, and make it sound so interesting that they have to report it. Hosting your own events is an effective method of gaining the press’s attention.
5. Build The Trust.
The ability to create a good reputation through favorable reviews is one of the most beneficial features of a peer-to-peer marketplace. This capability allows you to inform your marketplace users of the experiences others have had with a particular seller before completing a transaction with that seller. For example, Airbnb sends review requests to both hosts and guest as soon as a stay has been completed. This marketplace also relies heavily on profiles to get a feel for their users’ online reputations.
6. Add Value Beyond The Transaction.
A marketplace’s business model requires it to take a percentage of each transaction, so you need to provide value beyond merely creating matches and providing a payment mechanism for the resulting transaction. You must, therefore, attract users in a way that makes them want to conduct their transactions within your marketplace, rather than through some other means. Possibilities in this area include providing superior customer service, transaction insurance, or a unique product or service.