Nowadays technology is developing rapidly. Online business has become very popular over the last few years. Some entrepreneurs are switching from brick-and-mortar stores to an online format, while others prefer to start their business right in a digital environment by building a marketplace platform.
Due to the pandemic, the number of online stores has increased significantly. eCommerce in general has become a promising area for business. Along with ordinary online stores, marketplaces are a profitable business, too.
In this article, we will have a look at marketplace classifications, how to build marketplace platforms, and tricky issues related to eCommerce business.
What is a marketplace?
Marketplace is a branch of eCommerce; it is an online platform for buying and selling products. Owners of different stores can place their products or offer services there, others can buy them.
The main difference between a marketplace and a common online store is that an online store has products and services from one provider; an administrator of a store and a seller are the same person. There is an administrator on a marketplace and a lot of sellers with their production.
Examples of marketplaces:
These platforms are very different. This is due to the difference in characteristics. They all belong to various types of marketplace classifications.
Classification of marketplaces
You need to know what options there are to figure out which marketplace to create. There are several different classifications:
By the business type:
- B2C—Business-to-Customer—it is a business model in which business and an individual become participants in business relationships.
- B2B—Business-to-Business—takes place when a business relationship develops between two or more businesses.
- C2C—Customer-to-Customer—business format when the buyer and seller are represented by individuals.
- Global coverage—this means that the marketplace operates in several countries. In those countries, a marketplace is available and products can be shipped. Do not confuse this point with global marketplaces from the classification by product categories.
- Local coverage—the marketplace operates in a certain territory. This territory can vary from a certain district of the city to the whole country.
By marketplace object:
- Products—a marketplace offer physical goods
- Services—there are different types of services which can be offered.
-Booking services (car sharing, apartments booking)
-Subscription related (services for watching film, reading books)
-Money related (loans and other transactions)
-Certain skills (creative, professional, helping, educational)
By software type:
- Cloud platforms. With this type of platform, no download or installation of special programs is required. The marketplace will be hosted on the provider's server. This type of marketplace platform builders help to launch an online website or a marketplace quickly and easily. They do not require special technical knowledge to manage. Backend optimization is undertaken by a provider and a user part can be configured natively without additional training by an entrepreneur.
Cloud platforms are well suited for MVP testing. However, for an advanced and developing business, this type of platform may not be suitable because it often does not have the necessary add-ons for development. Different modules are organized by a provider. There might not be add-ons for your marketplace and modification of this platform with pure code is impossible.
- On-premise platform. An entrepreneur has to download and install a program to launch a marketplace. In comparison to cloud platforms, building a marketplace platform on on-premise software is a bit difficult at the beginning. Yet, they offer a greater level of Independence as there is a possibility to add parts on pure code. This means that entrepreneurs can manage important issues such as security or add-on development themselves.
By the type of product categories:
- Vertical marketplace—these marketplaces focus on one specific type of product. Often there are a large number of similar products that differ in quality and features. These are highly specialized multi-vendor stores. For example, it could be a knife or book marketplace.
- Horizontal marketplace—this type includes several categories of products united by one similar characteristic. Often this is something like “thematic” marketplaces, but they are not as highly specialized as vertical ones. For example, it could be an electronics or cosmetics marketplace. In the first case, you can find microwaves, kettles, and computers in the consumer electronics store, but all these products can be described as electronic devices.
- Global marketplace—in this type, all categories of products are available and they are not necessarily united by one common feature. Here you can find radically different categories of products from toys to household appliances. The best examples of this type are eBay and Amazon.
By payment type:
- Subscription—this type of subscription is typical for Cloud platforms. The price of a marketplace subscription usually starts at $10 per month. The maximum price for subscription is unlimited, however it averages around $400 per month.
- One-time payment—When you buy an application, it is yours without any additional payments forever. You can see prices for CS-Cart Multi-Vendor, its prices are below the market average.
It may seem that a one-time payment is not a profitable investment. An on-premise platform with a one-time payment usually justifies its price within 3-4 years. This happens so quickly because even with the basic version, entrepreneurs can create their own marketplace professionally. This does not work with Cloud platforms, the basic payment plan is not enough to create your own marketplace user-friendly and you have to switch to more expensive ones.
How to build a marketplace platform?
Specific steps of how to invent a business concept to launch, you can read in this article. In this block we focus on essential issues and problems when launching a marketplace. We will go through the questions of how and on what software to create a marketplace and whether it is worth making online marketplaces on pure code.
You can create a marketplace from scratch
This implies building a marketplace platform on pure code. You definitely can find a specialist for this purpose, but it is almost impossible to do such a large project alone in a short time. To finish it at least within 2-3 months, you will have to hire a development team. It's quite expensive. In addition to development, customization and updating after creation will also be quite expensive and time-consuming projects.
This method has become obsolete. Today there are many simpler, cheaper and more reliable methods on the market to create a b2b marketplace or your own online store. There are many companies specializing in this type of product.
Marketplace on a software
Let's analyze how companies which focus on the creation and operation of online platforms work in the example of CS-Cart Multi-Vendor which is a marketplace platform builder. The features can vary from one company to another.
What can CS-Cart Multi-Vendor offer?
- On-premise platform
- One-time payment
- Detailed instruction is documentation, video, and forum chat
- Technical support
- Open code
- 2000+ add-ons
- Integration with QuickBooks, PayPall, StripeConnect and other services
- Integration via API for enterprises
- 26 languages
- Opportunity to create a mobile app for IOS and Android
Should you create a mobile app?
Over the last few years, people have begun to use mobile phones more than ever. Phones are always with us and most people have access to the Internet. Online shopping has become much easier and faster via mobile applications or a mobile browser. Let's have a glance at the mobile phone statistics.
The popularity of mobile phones has grown incredibly. The trend towards using phones will only grow. Today everything strives for simplicity and speed, that is why phones have become so popular.
We did a little research to compare the time when the desktop version of a marketplace and its application were created. The later the marketplace is created, the earlier the mobile application is created.
Developing a mobile application from scratch is an expensive deal. A price can vary from $10000 to $150000 and mostly depends on how you are going to develop it: from the ground or use low-code technology. Most of CS-Cart Multi-Vendor payment plans include mobile applications for IOS and Android, so that our users have all opportunities for developing. It is a very useful option.
How do marketplace platforms make money?
A marketplace usually takes a fee for using a platform. This payment may vary from 5 to 25% from the purchase. This fee may be paid by vendors to a marketplace at the end of a month or vice versa or even be divided automatically.
How long does it take to build a marketplace?
Timing fully depends on a platform type, entrepreneurs preferences, and number of required features. Yet, on average a marketplace can be made within 1 week.
What's the best way to build a multi-vendor marketplace?
Starting a marketplace on pure code is a time and money-consuming deal. We recommend starting a marketplace on a software platform. Check one of the leading software platforms on the market CS-Cart Multi-Vendor.
How much does it cost to build an online platform?
It depends on the payment method. Subscription type payments vary from $10 to $400 per month while one-time payment starts from around $1500.
All in all, eCommerce is a growing sphere. Modern technologies allow you to create convenient and beautiful platforms quickly. Classification of marketplaces will help you decide which platform is right for you.
If you still do not know how to build a marketplace platform in a relevant way, we suggest you read the article on how to choose the right niche.
Cloud platforms are a great choice for beginners, but for all the benefits of cloud platforms, on-premise ones are still more suitable for rapidly growing startups and developed businesses.