How to Scale Marketplace: Focus Points and Metrics

Lots of points to consider and reconsider many times during the launch. But the real challenge comes next, after the launch and first sales.

To grow, recover the costs, and increase profits, you have to scale your marketplace. You stop—you die, simple as that.

You need a greater marketplace scale, not only to get more money from your marketplace. New marketplaces pop up here and there every day. Most of them don’t survive, but those that do, can strongly compete with your business. That’s why you need to open more categories, penetrate new markets, and even go global if started locally. That’s all about scaling marketplaces.

In this article, we go through the main question a marketplace owner needs to answer: how to kickstart and scale a marketplace business, expand in the right direction, points you need to focus on when scaling, and metrics you need to track.

How to Plan Marketplace Scaling

Scaling a marketplace requires a plan. Here is a quick overview of activities to be done before, during and after scaling.

Do Market Research and Assess Your Current Position

• Identify Constraints: determine if your marketplace is supply or demand side constrained. This will give you a clue on the marketplace growth potential.
• Apply Network Effects: understand whether your marketplace benefits from global or local network effects, which will influence your expansion strategy.

Prepare for Implementing Growth Strategies

• Identify Tracking Targets For Rapid Growth: define what to focus on first: user acquisition targets or revenue milestones.
• Calculate Unit Economy: unit economics refers to the direct revenues and costs associated with a single unit of product or service. Understanding unit economics is required for evaluating profitability and scalability. 
• Identify an Optimal Take Rate: the take rate is the percentage of each transaction that the marketplace retains as revenue. For example, eBay typically charges a take rate of around 10% on sales, which is crucial for maintaining profitability. A well-structured take rate can incentivize vendors while ensuring the marketplace remains financially viable.
• Find Financing: securing venture capital or exploring non-dilutive funding options such as grants and crowdfunding can provide the necessary capital for scaling efforts. Kickstarter exemplifies successful crowdfunding, enabling countless projects to launch without traditional equity financing. Instacart raised significant capital through equity financing to scale its grocery delivery service rapidly.

Decide on How to Scale

Broadly, scaling strategies can be subdivided into three groups: 

1. Scaling by Location

Expanding into new geographic areas can help tap into different customer segments. Zalando, a European fashion marketplace, successfully scaled by entering multiple countries, tailoring its offerings to local fashion trends.

2. Scaling by Customer Segment

Identifying high-value users and tailoring offerings to specific customer segments can enhance product-market fit. Grubhub focuses on urban dwellers who prioritize convenience, enhancing its marketing and delivery strategies accordingly.

3. Scaling by Category

Focusing on specific product categories allows for targeted marketing and resource allocation. Wayfair specializes in home goods, allowing it to dominate this niche and optimize its supply chain.

Monitor Key Online Marketplace Metrics

Focus on core online marketplace metrics that drive economic value, such as transaction volume, revenue per user, and customer acquisition costs. Regularly review performance data to refine your growth levers and make informed decisions.

Iterate and Improve

• Gather Feedback: continuously solicit feedback from users to identify areas for improvement in your marketplace. Canva iterated on user opinions to refine its design tool, successfully transitioning from the problem/solution fit stage to the product/market fit to create a strong offering.
• Do Your Playbook Adaptation: be flexible and make changes in your scaling strategy playbook based on market trends and user needs.

Essential Metrics To Track Online Marketplace Growth

To track the growth of your marketplace, you need to focus on three groups of metrics:

Usage metrics	Transaction metrics	Business metrics
These metrics show you how many visitors your marketplace has and how they spend time on your platform.	These metrics show the dynamics of transactions in your marketplace.	These are general metrics that show revenue, profitability, and customer acquisition.

Usage Metrics

• Monthly Active Users: count how many unique visitors came to your marketplace at least once during a certain period. This number should grow to indicate the usage growth of your platform.
• On-Site Time: if a customer spends much time browsing your marketplace, they are more likely to purchase something. But it’s not always a good indicator. Sometimes, customers spend too much time on the site because they can’t find what they need.
• Bounce Rate: “bounced” visitors are those who came to your marketplace and left right away without doing anything. You can have millions of visitors, but if the bounce rate is high, there’s no usage growth. Keep the bounce rate as low as possible.

Pro tip: Google Analytics is a convenient and effective tool to measure usage data.

Transaction Metrics

• Liquidity: you need to measure seller and buyer liquidity separately. Seller liquidity is the percentage of listings that lead to transactions within a certain time period. To measure customer liquidity, calculate how many visits you get in a given month and how many transactions you get in the same period. 30-60% is a good indicator (not counting bounced visitors).
• Repeat Purchase Ratio: how big a percentage of your transactions are repeat purchases. It’s good to keep it high—it means you can spend more money on acquiring a new customer, as they are likely to purchase more.
• Seller-to-Buyer Ratio: this metric shows how many customers a seller can serve. The more buyers a seller can serve, the more you should focus on supply in the beginning.

Business Metrics

• Gross Merchandise Volume: the total direct sales value on your marketplace during a certain period. The bigger, the better.
• Customer Acquisition Cost: the price for getting a new buyer. In a perfect world, this number should be zero. In the real world—the lower, the better.
• Customer Lifetime Value: the total amount of revenue you expect to get from each customer. It may depend on the customer retention period, customer repeat purchases, and the size of your average transaction.

Net Promoter Score (NPS)

NPS shows the overall satisfaction of your customers. If you want to use only one metric to measure user satisfaction, NPS is the best choice for a marketplace.

You obtain NPS by asking your customers how likely they would recommend your marketplace to a friend. The answer is a number from 0 to 10. NPS works great because a customer can recommend your marketplace only if they are satisfied with it themselves.

The respondents are divided into three groups:

• Detractors—unhappy customers (0-6)
• Passives—satisfied but not enthusiastic customers (7-8)
• Promoters—happy customers (9-10)

NPS respondents division and formula to calculate the NPS score, HubSpot

NPS above zero is good. NPS +50 is considered excellent.

Top Marketplace Growth Strategies

Expanding a multivendor marketplace may open unique opportunities. We’ve collected the most viral growth strategies and effective marketplace growth hacks for you.

Expand Inside One Market

This is the dilemma all marketplace founders face when they get a strong core in one market. Is it better to open new markets or add more categories to focus on depth in the current market? 

Staying in your current market and going deeper is the easiest and fastest way to scale. You know your market, your audience, and your competitive advantage. You succeeded with your current business model. The only thing you need to do for growing is to expand your product range by adding more categories. But this approach has a big disadvantage: you will reach your growth limit fast. And eventually, you will have to expand to new markets anyway.

Go to New Markets

Expanding to new markets is more difficult but more resultant. You can experiment with different business models. Here, it’s way harder to reach your growth limit—there are dozens of markets and niches you can expand to. The disadvantage of this way is that there is much more risk. You can spread yourself too thin in many markets and niches, spend a fortune, and get nothing.

Founder of the popular Canada’s classifieds website Kijiji.ca Janet Bannister recommends mixing these the first and the second market scaling methods. Bannister says that the most efficient and low-risk way to scale a marketplace is to enter several key markets and secure a toehold there. Once you feel comfortable in these markets, you can then open more categories.

By entering several key markets, you can use proven tactics and adjust them on-the-go to find better product market fit in a specific locale. It would be much easier for you to expand product categories then.

That’s how Uber was scaling their service. First, Uber started in San Francisco and after 10 months—in New York. They used the same business tactics, and they succeeded in the new location. Then Uber kept up with the same tactics to launch the service in Chicago, and finally they went internationally with Paris with the same model and tactics.

Once Uber gained critical mass in key cities in North America, they started to focus on depth. In 2014, Uber launched UberEats—a food ordering and delivery service, which was a whole new service category for them.

UberEats—food ordering and delivery service by Uber

Focus on breadth to enter several key markets, then focus on depth to expand product categories.

Use Network Effects For Rapid Growth

Encourage user interactions to create a self-reinforcing cycle of growth. The more users you have, the more valuable the platform becomes.

Uber and Lyft benefit from network effects, where more drivers lead to shorter wait times for passengers, attracting even more riders.

Introduce Freemium as a Fast Go-to-Market Strategy

A well-defined go-to-market strategy is essential for reaching target audiences effectively. Slack utilized a freemium model to penetrate the market, allowing teams to adopt the platform organically before converting to paid plans.

Optimize SEO

Utilizing keyword selection and search engine optimization (SEO) can enhance organic traffic and visibility. Balancing organic scaling methods with paid customer acquisition strategies is essential. Dropbox famously used a referral program to drive organic growth, while also investing in search engine marketing to attract new users.

Etsy effectively uses SEO to drive traffic to its listings, helping sellers reach a broader audience. Thumbtack credits up to 90% of its growth to effective local SEO strategies, targeting specific service-related keywords.

Do Content Marketing

Create valuable content that resonates with your total addressable market to build authority and trust. Etsy utilizes blogs and guides to engage its community, driving traffic and encouraging sellers to join.

Engage in Partnerships and Collaborations

Form strategic alliances with complementary businesses to expand reach and enhance the value proposition. Airbnb partnered with local tourism boards to promote featured listings and attract more travelers.

Consider Referral Programs

Implement referral incentives to encourage existing users to bring in new customers. Uber offered drivers up to $1,500 for referring new drivers to the platform, significantly increasing their supply base.

Use Customer Loyalty Programs

Reward loyal customers to encourage repeat business and increase retention.

Starbucks has a robust loyalty program that incentivizes repeat purchases, which can be adapted for marketplace models.

Conduct Localized Marketing

Tailor your marketing efforts to address the specific needs and preferences of local markets. DoorDash uses localized advertising strategies, including stickers in restaurants to promote delivery services.

Apply Tech Adaptations

Leveraging technology penetration and making necessary tech adaptations can streamline operations. For example, CS-Cart’s software provides tools for merchants to create online stores easily, adapting to the needs of small and medium-sized businesses.

Administrative panel for vendors in CS-Cart

Automate Processes

Streamline operations through automation to reduce costs and improve efficiency. BabyQuip uses automation for onboarding partners, drastically reducing the time and resources required for training.

Make Data-Driven Decisions

Use analytics to inform your strategies and optimize user experiences. Zillow analyzes user behavior to refine its property recommendations and improve user engagement.

Best Scale On The Market: Practices You Should Focus On When Expanding Your Marketplace

Scaling is all about optimizing your resources for long-term and constant growth. You need to allocate and optimize the necessary resources in order to achieve a long-lasting success with your marketplace. Let’s see what resources you should focus on in the first place to effectively scale.

1. Balance Supply and Demand

Balancing supply and demand in a marketplace is similar to the classic chicken-and-egg problem: you need customers to attract sellers, but without sellers, customers won’t come. Customers are the key users of your marketplace. The marketplace is all about customers: no customers—the marketplace dies. Industry giants have proven that customers won’t come if there are no sellers on the platform. So, to get more customers, you may focus on your supply first.
Grow initial supply by attracting more sellers to your marketplace. There are tons of ways to attract sellers, build strong marketplace supply, and balance sellers and customers on the two-sided marketplace. For instance, existing marketplaces like Airbnb focused on supply at an early stage, enabling hosts to cross-post listings on Craigslist, significantly boosting their available rentals, while Uber subsidized drivers to ensure sufficient supply to meet rising demand, fostering a strong network effect. Notably, Airbnb’s growth phase from 2009 to 2011 exemplifies this dynamic, expanding from 2,000 to over 50,000 listings by optimizing existing Craigslist listings, thereby highlighting the effectiveness of network effects. 

Alternatively, you can define from the start that your marketplace is demand constrained. The demand-constrained marketplaces like Rover quickly identified their challenge due to a high number of eager dog walkers, prompting them to implement marketing strategies aimed at attracting pet owners. Postmates initially faced a demand constraint, as they needed both restaurants and customers to join the platform. To overcome the chicken-and-egg problem, they subsidized delivery costs, making it attractive for customers to order from restaurants. This approach helped stimulate demand while ensuring that restaurants saw value in partnering with the service.

What to focus on first is one problem. But even in a well-defined strategy, there is a place for black swans. For example, during the COVID-19 pandemic, Amazon faced supply-side inflation due to increased shipping costs and higher demand for essential goods. This led to increased prices for consumers and required careful management of vendor relationships to maintain a balanced marketplace.

The foundation of a marketplace lies in its vendor and client framework. It’s important to nurture relationships between both parties to ensure a healthy marketplace ecosystem.

Pro tip: Yelp, Indeed, Goodreads collected data to their platforms from the web to strengthen their supply side at the start. No manual work involved—the data collection was automated.

2. Grow Your Own Customer Base

Attracting customers is a fairly easy task: make a newsletter, launch some marketing campaigns and you have new customers. The difficult part is to retain buyers and form a base of loyal customers. By attracting new customers and making them loyal buyers, you grow your user base.
You can start with a small group of customers and then expand. In 1995, Craig Newmark launched Craigslist. It’s now one of the world’s most known C2C marketplace—a classifieds website covering 70 different countries. Back then, Craigslist was just an email distribution service among Craig’s friends.

Craigslist in 2024

One of the most effective ways to grow your customer base is to build trust on your marketplace. We have covered this topic in detail on our blog, don’t hesitate to read this guide.

You can effectively build trust through reviews and ratings. For example, Uber has rating systems for both drivers and riders. Once a driver’s rating falls down, Uber gets rid of them. Similarly, drivers can check the rider’s rating to get to know about them before accepting an order.

Uber driver rating, Reddit

Pro tip: Use one customer group to influence other customers. These “power” customers can convince others to join your marketplace. For example, the marketing lead of Tinder personally went to several campuses and convinced the girls to join their platform. When members of male fraternities saw a lot of familiar faces on the app, they joined, too.

3. Enter New Niches

Now you know that the best way to scale online is to secure a toehold in key markets and then open new categories. So, you narrow your focus. Once you build a strong core in all the key markets you wanted, you can now expand your initial niche with new product categories.

It’s always better to start small and grow. That’s how big players came to their success stories. For example, Flipkart’s initial market involved only books when they started in 2007. They grew a customer base, established its name, and opened new categories. Now, it’s one of the largest marketplaces in India. Remember Amazon—the same scenario.

Pro tip: To enter a new niche, you can open new categories. But that’s boring. There’s a next-level thing you can do: open a separate storefront of your marketplace devoted to only this niche. For example, if you run a book marketplace, you can open a storefront on a different URL and sell something absolutely different—lighting for comfortable reading, for example. That would look as a separate niche marketplace. To implement a separate storefront, you need your marketplace software to support this functionality.

4. Expand Internationally 

Go global—sounds easy. But that’s far from the truth. If you started locally, it will involve much work to expand your marketplace to other countries. But in the end, the marketplace “globalization” can result in huge income opportunities.

Two things you have to consider when going global are:

1. Shipping To International Markets. Your sellers get access to a huge audience, not limited by the region a seller is based. But international shipping means longer delivery periods, higher costs, and dealing with third-party international carriers.
2. Regional Laws. You have to be very careful with the orders your sellers ship to other countries. There are regulations, restrictions, and prohibited items that vary from country to country. And you have to constantly keep track of any changes in regulations.

For instance, PayPal has navigated online payment regulations and data privacy laws regulations globally, ensuring secure transactions and building consumer trust.

Pro tip: When going global, focus on international shipping, regional regulations, and also national context.

5. Open Multiple Storefronts

Some marketplace software platforms such as CS-Cart Multi-Vendor allow you to open multiple independent storefronts and manage them in a single admin panel. These storefronts can have different categories, sellers, currencies, and other attributes. And they usually look different, just like separate marketplaces.

It’s a great tool to scale your marketplace app: reach new customers, enter new markets, and go in new niches. Here are a couple of examples of how you can use multiple marketplace storefronts in your favor.

1. Start a hybrid marketplace—B2C+B2B	2. Open multiple storefronts for different niches	3. Open a separate storefront for each country you ship to.
If you’re initially selling to end customers, a great way to scale is to invest in the B2B marketplace growth. According to BigCommerce, 61% of B2B transactions start online in 2021. More companies start purchasing products online because it’s much easier to make an online purchase in one place than from multiple offline suppliers. If the marketplace software supports multiple storefronts, you can start an additional storefront for B2B customers.	Let’s say, you run a marketplace for mobile devices. You can open a separate storefront to sell spare parts for electronic device repair. New niche, new customers.	A separate storefront for each county you work in is the next level of personalization. Imagine: customers from Italy, Spain, Germany, and France can comfortably shop on your marketplace, seeing the interface in their native languages and pay with the most convenient methods in their countries. You can also differentiate products and categories for countries. More freedom!

Pro tip: An additional storefront is a perfect tool to test a new product category. Open a storefront, drive target customers and see how the products perform. Perform well—keep the storefront and develop it further. Perform not as good as expected—close the storefront with minimal efforts.

6. Generate Community Around Your Marketplace

Turning your marketplace into an active community can help to grow a base of loyal customers and in the end be beneficial to a great extent. It’s a great way to get close to your audience, generate activity, and exchange knowledge.

Besides, a community is often an integral part of online marketplace users’ lives. It’s one of the reasons why productive sellers are leaving popular online shopping malls in favor of those that offer a more professional and benevolent community.

Online marketplaces use different strategies to generate community and scale online business.

For example, Yelp throws a lot of parties all over the United States for the “Yelp Elites”. It influences a lot of people to join their Elite community. Etsy built up its platform on the basis of an active and large artisans’ community that already existed. BlaBlaCar educated the targeted audience about its former brand-new car-sharing service, to form a dedicated community from scratch.

Niche marketplace companies can get even closer to their customers and make a stronger community of early adopters thanks to a more loyal audience. 

Example: a niche marketplace Goimagine built on CS-Cart sells hand-made products. They formed a strong community showing how to effectively apply niche marketing and scale multichannel selling on Instagram, Facebook, and even their own social network through awesome stories and social media ads.

Maker Circle is a social network developed by Goimagine, designed specifically for makers and artists to connect, collaborate, and grow their handmade businesses.

You can learn techniques and best practices for building a community around your marketplace in our detailed guide on the blog.

Pro tip: Communication is one of the most strong keys to scaling a business and building a successful community. Keep in touch with your audience, generate discussions, make surveys and ask for advice.

7. Choose The Right Marketplace Software

Marketplace software is the very base of your business. You can scale if the platform allows you to. So, when building your marketplace, keep in mind that you will need to grow and scale in the future. Choose the marketplace software that allows you to grow.

Sustainable growth means expanding your marketplace’s functionality, tweaking it to perform well under high load, and adapting it to your changing business processes and marketplace needs. CS-Cart Multi-Vendor is a low-code marketplace platform that allows for all these things.

CS-Cart can help you start relatively fast and scale your business in the future. Thanks to open code, 2,000 of ready add-ons and themes, multiple storefronts, and advanced vendor management tools.

CS-Cart Multi-Vendor admin dashboard

CS-Cart is a self-hosted solution, which is super flexible in terms of rapid expansion and scalability compared to SaaS solutions. And all the data is on your side, which guarantees security of the marketplace.

Conclusion

Scaling a marketplace is a journey that requires strategic planning, consistent effort, and adaptability. From balancing supply and demand to applying data-driven insights and expanding into new markets or categories, the growth process is multi-faceted. By focusing on essential metrics, building trust within your community, and choosing scalable software, you can create a resilient platform ready to thrive in a competitive landscape. Remember, scaling isn’t just about growing bigger—it’s about growing smarter to ensure long-term success.

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