So, what is an online marketplace and how to launch your own multi vendor eCommerce marketplace from scratch?
An online marketplace is an eCommerce website where multiple independent sellers offer their products on a common storefront. This e-tail model has become quite popular in recent years. The reasons are 1) lower prices than in traditional e-shops because of the competition and 2) a much wider range of products than in single-seller stores and brick and mortar retail.
Marketplace sales are now increasing every year: 59% of B2C online retail spend came from marketplaces in 2018. And the number is increasing. This is the right time to start wondering how to launch your own online marketplace.
Whether you’re expanding your business to an eCommerce multi vendor marketplace or starting a new Fiverr, Etsy, or Airbnb, you have to be ready to face some challenges. When you ask Google how to build an online marketplace from scratch, you should be aware that starting an online mall is a big deal and it requires a clean-cut scheme, investments, and a bit of luck.
In this guide, we will teach you essentials on how to start an eCommerce marketplace from scratch. Make sure you follow these steps adapting them to your circumstances.
Step #1. Invent an Idea and Test It
Many entrepreneurs don’t really know how to start an eCommerce mall. They literally don’t know what to start from.
Every project starts with a concept and an eCommerce marketplace is no exception. Before thinking about a business model, what software to choose, how to attract vendors and customers, you have to invent your marketplace idea and finetune it.
3 essential tips on how to come up with a good marketplace idea:
- Make sure your marketplace will solve painful problems for both your customers and vendors.
- Find out about what your competitors do. This will help you finetune the idea.
- Find out about what your competitors do. This will help you finetune the idea.
There’s no reason to launch an eCommerce marketplace if no one needs it. So, before moving further, you must prove the demand. Proving the demand is really one of the key aspects of the question about how to build a successful multi-vendor marketplace.
The next step is to validate the idea. You can build a perfect-looking, super-convenient online shopping mall but it will become a “desert platform” if your idea doesn’t work. Lots of projects drowned because of it.
Another reason why you should test your marketplace idea is that usually entrepreneurs fall in love with their ideas and consider them genius ignoring people’s feedback. They think their project will become successful—they just need to work hard. This is not how things work here. No matter how hard you work—if your idea doesn’t solve customer problems, your marketplace is doomed.
2 powerful methods on how to validate your multivendor marketplace idea:
- Conduct interviews with your potential customers and vendors. Talking to people is the best way to find out about their needs and problems. It’s important that you speak with them personally, ask them well-thought questions, and react to their answers with more questions. This is a powerful tool to test your idea on your way to launching an eCommerce mall.
Here in CS-Cart, we regularly conduct interviews with our customers and we have to admit that for now, this is the best way to know a customer better. Also, record every interview so that you could listen to it later and recall the details.
Once you prove your idea to be viable, you can tell the interviewee about your project and ask for feedback.
- Study the search data. Use SEO tools such as Semrush to learn what people are searching online globally and in your region, what keywords they use most often. This way, you can learn more about the demand, your competitors, and your customer needs.
Step #2. Think Over a Business Model
A marketplace business model comprises user experience policies, commission model, and overall functionality of your electronic marketplace. In the beginning, focus on 3 essential things thinking over your business model.
1. Choose what business segment you will work in
There are three main segments you should look at when starting your virtual mall—B2C, B2B, and C2C. There are also various B2X2X segments but they are quite specific.
- B2C (Business-to-Consumer). This is the most popular segment for now. In the B2C segment, companies sell products to end customers. Amazon, eBay, Aliexpress, and a great number of other global online marketplaces work in B2C. The segment is very competitive.
- B2B (Business-to-Business). This is the second popular segment in eCommerce. In B2B, companies sell products to other companies. For example, a company that produces machine tools sells them to factories. Alibaba is a great example of a large global B2B marketplace. The competition here is lower.
- C2C (Consumer-to-Consumer). In C2C, consumers sell or exchange products with each other. For example, Craigslist is a C2C marketplace. Also, eBay is partly a C2C marketplace, too.
2. Choose a commission model
Commissions are the main source of income for the marketplace owner. As a rule, the owner takes commissions for every vendor’s sale. There are also other methods of monetizing a marketplace:
- Commission—a rate per transaction. For a physical product shopping mall with a wide goods selection, a commission is usually small. Often, the commission depends on the type of products sold.
- Subscription—paid subscription plans for sellers with different conditions, the maximum number of products, monthly revenue, categories, and others. A subscription gives vendors particular benefits—promoted listings or free advertising within an eCommerce marketplace.
- Freemium—revenue flow comes from additional services and value-added features for sellers: advertising, shipping labels, ability to send special offers to shoppers, and many others.
- Listing fee—the best fit for vendors who sell only a part of their catalog, and is active at some particular time of the year.
For example, Etsy uses a fee and commission options as an affordable model to encourage new sellers. So, if you’re looking for an answer on how to build a successful online marketplace like Etsy, check it out:
Once you decide on your monetization model, think about how you will organize the money flow on your virtual eCommerce mall. There are three main methods of money distribution:
1. All the money from orders goes to the marketplace owner. The owner then distributes the vendors’ shares at the end of the payment period.
2. The money is distributed among the owner and vendors automatically from every order. This will require setting up a split payment system such as PayPal for Marketplaces or Stripe Connect.
3. All the money from orders goes to vendors and they pay to the marketplace owner at the end of the payment period.
3. Research the eCommerce software market for a reliable platform
A multivendor software platform is one of the most crucial marketplace elements. Your daily operations and transactions, speed of work, amount, and variety of tools available for vendors and customers fully depend on the marketplace script.
A good multi-store eCommerce platform can provide all the functionality you need to attract even well-established sellers and customers to your marketplace—from various payment options to the ability to set up a separate online shop for each vendor.
When choosing the best eCommerce marketplace software, focus on three aspects:
1. Price/functionality value. You don’t want to spend thousands of dollars on a super complicated platform, neither you don’t need a cheap marketplace platform with little functionality. Research the market, test the multivendor software, watch demos and video guides to get an idea about the platform’s functionality. And then, think whether the price is fair.
2. Quick start and easy of use. When you’re done with planning the business model, your next step will be to launch the marketplace MVP. And you won’t be able to do it if the platform requires much time to deploy and configure. So, make sure you can deploy and make the basic configuration of the marketplace software in one day at least.
3. User feedback. User reviews are very helpful. You can learn the advantages and disadvantages of the multi vendor solution, its pitfalls, and lifehacks. So don’t hesitate to research popular user review platforms such as Capterra, SourceForge, and G2.
Step #3. Launch the Marketplace MVP
MVP stands for Minimum Viable Platform. This is a test version of your online marketplace platform that will give you an image of your project. MVP allows you to test your idea in action without spending much time and money. MVP is a crucial part of building a multi-vendor eCommerce marketplace.
The key aspect of an MVP is that you need to launch it as fast as possible. So, you may want to use a ready-made multi-vendor software solution instead of learning how to code the marketplace platform from scratch.
When choosing the online mall platform, make sure you’ll be able to launch an MVP in one day. To find out about if the platform is MVP-friendly, get answers to these questions for the marketplace software developers:
1. Does the marketplace solution developer offer technical support, regular updates, installation, and maintenance services?
If you’re not a tech-savvy person, you should leave all the technical details to the multivendor script developer. Make sure the company helps you with the platform installation, updating, and maintenance. Technical support is very important as well—if you face any challenges while setting up your MVP, the technical support team should help you solve your problems fast.
Unfortunately, many entrepreneurs think that installing and configuring the marketplace software is as simple as installing a regular application on iPhone. It is not so—installing software on a server requires some minor technical knowledge. So, make sure you’ll get assistance from the platform devs.
2. Does the multi vendor marketplace software allow you to scale the platform?
MVP is only the initial stage of your big and successful project. When you launch it for the public, it will grow over time. And at a certain point, you will understand that it is no longer an MVP and it needs to be expanded.
So, make sure you can expand the functionality via add-ons or code modifications. Also, it’s important that your multi vendor software is ready for high loads because you need this feature to grow your business.
3. What’s the cost?
The multi-vendor eCommerce platform must be affordable to get started with an MVP. You should avoid a big payment upfront investing in development, design, and costly servers. This will restrain the launch and lead to high risk.
The best option is a marketplace solution sold for a one-time fee with a money-back guarantee. In this case, you will be able to launch your MVP, test it for some time and if you think it doesn’t work—just delete the marketplace and request a refund from the developer. For example, you can do it with CS-Cart Multi-Vendor.
If you’re looking for a SaaS marketplace solution, then choose the cheapest plan for your MVP—no need to invest much at the initial stage.
Step #4: Find Sellers and Buyers
Find sellers and buyers before launching a marketplace. You will need them to initially fill your multi-vendor eCommerce website with users and put it into action. Also, a ready pull of sellers and buyers for your future marketplace can help you overcome the “chicken and egg” problem.
How to attract sellers?
Start acquiring the first sellers to build an attractive offer for your Internet marketplace buyers when they come. You can attract both existing sellers and potential sellers.
To acquire existing sellers, contact vendors that are already active in similar web marketplaces and other relevant online platforms like social media and communities.
To get potential sellers, use online and offline resources to connect with them: business directories and aggregators, hobby clubs, networking groups, trade associations, online forums, offline stores, and workshops.
More information about how to attract sellers to your multi-vendor marketplace is in our Marketplace Academy.
How to attract buyers?
To find customers, collect email addresses of potential buyers before a marketplace launch, using pre-launch campaigns and landing pages.
Understand who your potential early adopter customers are, and where they hang out online and offline:
- Existing communities—join the group and participate in the discussions, mentioning your marketplace platform model and asking for feedback
- Major community influencers—convince well-known bloggers to advertise the Internet shopping mall to their audiences
- Create your own community through a blog, social media or a forum, and host offline meetups or events
Step #5: Launch Your Marketplace
Okay, you tested your MVP, acquired some sellers and buyers and you’re ready for a big launch. Just remember that the product launch is not the hardest thing. On the contrary—it is one of the easiest.
After the launch, you will need to promote your marketplace, build trust, build supply and demand, and many other things.
1. Polish the marketplace according to the user feedback
But now, you’re on the initial stage of your live marketplace. Test the initial marketplace version with early adopters—a small segment of your target audience. After a short period of usage, they’ll provide feedback about the necessary improvements that you need to polish for a bigger crowd to come.
2. Spread the word about your online marketplace via the press
Then, spread the word about your eCommerce marketplace. You can use your early adopters’ resources or get press coverage. Getting good press coverage is a very powerful PR method and it is very difficult to get a publication mentioning your marketplace. To increase your chances, make friends with journalists, use PR platforms such as Help a Reporter, and speak about your multi-vendor eCommerce platform everywhere.
Step #6: Promote Your Marketplace
Now that your eCommerce mall is picking up speed, focus your resources on promoting the platform.
To effectively promote your online multi-vendor mall, focus on your customers to get a detailed picture of your audience, their interests and needs. With this in mind, you can easily define how your online trading platform can fit those needs, and select marketing instruments accordingly.
1. Understand your customers to build flawless marketing campaigns
Align your special offers and sales to customer’s buying behavior. This would help you put items that your clients would love to buy right in front of them exactly at the time they are able to do it.
Using customer’s buying behavior data, the marketplace team found out that clients purchasing activities are boosted during their everyday commute back home from the office. The virtual mall leveraged this traffic-jam issue and turned time-wasting into a daily fun-time in a way that clients can’t wait to begin.
Also, they considered their audience—Indian consumers—core demographic characteristics and habits. A traditional way of shopping at local and street-side open markets on their way back home from work was taken into account.
As a result, the company established a daily sale offer from 6 to 8 pm to embrace the time customers spend in traffic, feeling bored and tired. To fix that, the marketplace offered its customers tempting and refreshing sales exactly at the time that clients were eager to buy.
The campaign brought a 40% rise in traffic in the first two weeks.
It demonstrates how the initial understanding of your customers can increase your engagement with them and boost your sales.
2. Use your sellers’ resources to promote the platform
The idea is to teach the sellers to promote themselves and your marketplace too. Share with them guidelines and tips on how to boost sales, teach them promotional strategies that proved their effectiveness. That’s how you’ll make their advertising budgets bring a double-income for your vendors’ business growth and for your online mall traffic numbers.
Email marketing is still one of the most powerful promotional tools. So, show your sellers how to create effective email marketing campaigns so they could use this knowledge to create their own email strategies. And as a result—to motivate and encourage their customers to visit your web marketplace and buy their goods.
3. Adopt your competitors’ ideas and enhance them
Taking the existing marketing strategies that proved their effectiveness is another of hundreds of promotional methods. It’s okay to take advantage of what your competitors already have done for their success.
For example, Amazon added a wedding registry option to the multi vendor marketplace.
Amazon Wedding Registry is helping couples create a desirable list of gifts and share it with their future wedding guests. It provides a guarantee to couples and guests, that gifts purchased are a perfect match to a couple’s taste and needs.
The company strengthens the offer with free shipping and the ability to create a “thank you” list to the guests using the marketplace data.
This approach increases traffic and revenue, building a feeling of an individual approach among customers and helping to turn them into life-time clients.
More information on how to promote your multi-vendor marketplace is in our Marketplace Academy.
How to start an eCommerce marketplace from scratch?
1. Invent an idea and test it
2. Think over a business model:
- Choose what business segment you will work in
- Choose a commission model
- Research the eCommerce marketplace software market for a reliable platform
3. Launch the Marketplace MVP
4. Find sellers and buyers
5. Launch your marketplace
- Polish the marketplace according to the user feedback
- Spread the word about your online marketplace via the press
6. Promote your marketplace
- Understand your customers to build flawless marketing campaigns
- Use your sellers’ resources to promote the platform
- Adopt your competitors’ ideas and enhance them