Published: May 23, 2014 Last updated: Nov 9, 2021 Yan Kulakov

What is an online marketplace?

Marketplaces have been here since the very beginning of civilization. Large squares with thousands of merchants offering hundreds of thousands of goods to citizens. Marketplaces are still popular today in some regions, especially in Eastern countries.

But in modern times, marketplaces have gone online. Starting a marketplace business has become super easy thanks to many software providers offering a marketplace web app for building a multi-vendor website.

So, what’s an online marketplace? This is a website on the internet that unites multiple independent sellers (thousands of them just like old brick and mortar marketplaces). These online merchants sell their products on a common storefront. Merchants get money for orders and pay commissions to the marketplaces owner.

In the modern world, you can compare an online marketplace to a mall that is available in any big city. A city mall is a large building with multiple shops (boutiques) that rent the space from the mall. An online marketplace is just the same thing but online.

Building a marketplace startup is so much easier than building a real brick and mortar mall. It’s way cheaper and faster and can bring you about the same income or even more.

What are the benefits of online marketplaces?

As we mentioned above, building marketplace is way easier than building a physical store or a mall. But it still requires some marketplace website development. And if you do it right, you can definitely benefit from your own multi-vendor eCommerce website.

So, what are the main benefits of running an online marketplace for you as a business owner? There are three of them:

  1. Business expansion. A marketplace platform development is a great way to enter new niches and markets, or even diversify your current business. Let’s say, your main business is logistics. You own a shipping company and this is the one and the only business you have. You see a great opportunity in starting an eCommerce business and integrate it with your current business—delivery. You start a marketplace—a totally new business direction for you and manage to reach a new audience, increase your total revenue, and improve your brand awareness.
  2. Product range expansion. With your own marketplace, you can expand your current product range without spending a fortune and growing your warehouses. Imagine you run an online store selling soap of different kinds. You came up with an awesome idea: to grow your product range with new types of neighboring products: some hand-made hipster eco shower gels and accessories. Or maybe even more types. What you need is to launch a marketplace and invite sellers who sell these products. They will bring their products to your platform, store and send products on their own. No need to spend money on filling up stock and storing products in warehouses.
  3. International expansion. An online marketplace development can help you reach foreign audiences. For example, your business is based in the US. You start an online marketplace with headquarters in the US and with additional independent storefronts in European countries. You get the major part of traffic from the United States and extra buyers from Europe.

There are also benefits for sellers. One of the main benefits for them is the opportunity to expand the sales territory to the whole country or even globally. Some businesses start online marketplaces for local small businesses and individual entrepreneurs so that they can go online and start selling their products globally.

So, let’s sum it all up. There are three major benefits for a marketplace owner:

  • Business expansion: entering new markets, niches, regions
  • Growing product range without much investments
  • Expanding globally

The main benefit for sellers is reaching new audiences and going online.

Marketplace classification

An online marketplace can be classified by a business model and product types. So, before initiating a custom marketplace development, it’s important to know what type of a marketplace you are going to run and make sure the marketplace system design supports the ability to scale the marketplace to new types.

You can classify a marketplace by a business model: b2c, b2b, c2c, and mixed. And by product type: vertical or horizontal. Let’s get into this classification a bit deeper.

By business model

A marketplace can sell to end customers and other businesses. When a marketplace sells to end buyers, it works by a b2c (Business-to-Consumer) model. When a marketplace sells to other companies, it means it works by a b2b (Business-to-Business) model. But there is a case when an individual sells to another individual on a marketplace. This is the c2c (consumer to consumer) model.

The world's largest B2C marketplace Amazon

When you order a marketplace development from a web agency, your marketplace website developers must know upfront what business model you will run. That’s because the functionality differs much for these types of businesses.

For example, for a B2C marketplace, the standard eCommerce marketplace features will be enough to run a business.

And for B2B, there are additional specific features that are used by companies when they shop on a marketplace. An example of this kind of feature can be a customer’s account that supports multiple users. In companies, more than one person is involved in purchasing products for the company: procurement manager, account manager, logistic manager, etc. All of them need access to the marketplace customer account.

C2C is also a totally different story. The C2C model requires functionality that simplifies working with taxes and delivery. That’s because individual sellers that are not entrepreneurs are not used to doing business like companies do.

One of the oldest C2C marketplaces Craigslist

By product type

Another classification is by products. There are two types: vertical marketplaces and horizontal marketplaces. In this case, a marketplace development doesn’t depend much on these types. Let’s see how they differ.

A vertical marketplace aimed at a certain industry, market, niche, or demographic. The number of customers and products is usually smaller than on horizontal marketplaces. Vertical marketplaces simplify marketing and provide more value to customers. This type of marketplaces is easier to maintain, and it is also easier to keep customer retention on a high level.

Due to its particularities, a vertical marketplace brings less transactions and less revenue. And it also requires neat and informative product descriptions, especially for niche products. Usually, customers on vertical marketplaces are more demanding than on horizontal.

When starting a vertical marketplace, you need to be sure to choose the right niche to stand out from your competition.

A horizontal marketplace appeals to the largest target audience possible. These marketplaces usually have as many product categories as possible and usually sell goods that are in the largest demand. The biggest advantage of this type of marketplace is a big number of transactions that results in a bigger revenue.

The main disadvantage of a horizontal marketplace is strong competition. There are thousands of horizontal marketplaces out there and it’s really difficult to develop an effective business strategy and value proposition to stand out from the competition. It’s also more difficult to provide good customer support and service and the traffic is always large and the audience is very diverse.

How to develop an eCommerce marketplace?

These days, the market offers you plenty of options to build your own multi-vendor website. These options differ in terms of complexity, scalability, money investments, and of course your goals. If you’re starting a small marketplace to test your business idea, there’s no need for complex development and custom solutions. If you’re building a big project with a clear idea and business goals in mind, then it’s better to go with a specialized marketplace solution or even a custom platform.

In this section, we’ll review the most common options for web development of a marketplace and what you need to keep in mind when choosing eCommerce marketplace developers for your custom marketplace project.

So, basically, you have three options for building your own multi-vendor eCommerce website:

  • Code the software platform from scratch
  • Use a pre-built specialized marketplace platform
  • Use a versatile website builder with multi-vendor plugins

Code from scratch

When it comes to web development marketplace is the hardest thing to develop from scratch. A marketplace is usually built on a software platform—multi-vendor software. You can buy ready-made software or code your own.

Coding the platform from scratch is the best option if you have a big budget, a team of online marketplace developers, and lots of time. If you do, then you can build a marketplace of your dreams. It will perfectly follow your business goals and support your business processes.

The problem is that you usually need to launch a marketplace fast. Time is your enemy because your competitors can launch fast and take over the market.

If you decide to code the marketplace platform from scratch, you need to keep in mind that the platform must be scalable to support your business growth in the future. It must be easy to modify and adapt to new processes. And finally, your marketplace platform must handle all the transactions smoothly so that you don’t lose customers and sellers because of problems and delays in transactions.

To gather the right team of online marketplace software developers, you need to get familiar with the technology used to build marketplaces. The most common technology stack is PHP + MySQL. So, you’ll need to hire developers who know these technologies flawlessly.

Use a ready-made platform

There are plenty of ready marketplace solutions out there. For example, CS-Cart Multi-Vendor, which is a standalone marketplace software for fast start and quick growth. These platforms are usually developed by an experienced online marketplace development company that has expertise in this kind of products.

This is the best option to go with if you want to launch fast and grow your business further. CS-Cart Multi-Vendor ships with three main components for a marketplace—the storefront, the admin panel, and space for sellers (vendor panel and micro store). You only need to deploy the platform on a server and start working right away.

CS-Cart Multi-Vendor—ready marketplace platform for fast start and growth

There are not many downsides of this option: it’s cheaper than coding the platform from scratch, it’s faster to start a marketplace with a ready solution, and it is ready marketplace software always tailored for building a true marketplace business. Ready platforms are usually well-supported by the developers, and get updates with new features and integrations on a regular basis.

Use a website builder with plugins

Another option is to use a versatile website builder and expand its functionality with multi-vendor plugins to build a marketplace out of it. It’s a pretty easy way to launch a marketplace as there are lots of no-code or low-code website builders such as Wix or Wordpress. This could be a good option if you’re on a tight budget or just experimenting with your ideas.

The main downside of this option is that versatile website builders are not tailored to launching a marketplace, which means they are not ready to handle heavy traffic and work with sellers. You can add vendor administration functionality to the builder with third-party plugins (a great example is WooCommerce for Wordpress), but you will never solve the “high load” problem.

Going with a website builder expanded with plugins can work if you’re starting a small niche marketplace with low traffic and no plans to scale in the future. It’s also a great option to save money while testing a hypothesis because there are free website builders out there that you can use for your experiments.

What features should you consider developing for your marketplace?

Even if you’re starting a marketplace business in a ready-made marketplace platform, it doesn’t mean you won’t need a marketplace platform development in the near future. Although these platforms usually come with all the necessary functionality, you will probably need some specific features for your business. Every business is unique, right?

Whether you’re developing a marketplace web app from scratch or using a ready-made solution, make sure that your future marketplace has all the basic features used for marketplace management, vendor administration, marketing, and scalability:

  • Easy and fast onboarding for sellers: Your marketplace should be easy to sign up and use for sellers. Demonstrate to your sellers how to do business on your platform.
  • Convenient and attractive storefront: For buyers, it’s important that the marketplace storefront is easy to navigate. Make sure buyers can easily find products via filters and manues.
  • Integration with the right payment gateways: Offer buyers and sellers several ways to pay for orders and accept payments. When building marketplace, make sure you integrate it with the most popular payment services in your region.
  • Integration with popular carriers: When building a marketplace startup, integrate your website with the proven and reliable delivery services. This one is especially important because fast and safe delivery of products is crucial for building your customer retention strategy.
  • Marketing tools: Your vendors should be able to cross-sell, upsell, start loyalty programs, create VIP customer groups, and get reviews from customers. Don’t forget about SEO tools—you need to be able to easily optimize your marketplace for search engines so that it performs better in Google.
  • Customizable checkout page: The checkout page is the most important page of your marketplace. This is the final step for placing an order before you get the money from the customer. Make checkout a one-step process. The page should be 100% customizable without coding so that you could test different layouts of the page to find the most converting one.
  • Flexible catalog management: Your sellers need convenient tools to manage their products. First of all, make sure your marketplace has the product import features so that your sellers could add thousands of products at once. Also, the sellers should be able to set up product filters, features, and variations.

How much does it cost to develop a marketplace?

If you’re building a long-term project, then online marketplace development will require a budget. Don’t believe those ads that promise you building marketplace for free. It’s just impossible.

But with the right tools and wise budget planning, you can save on marketplace web development costs and still build a long-term successful multi-vendor eCommerce website.

$0-$1,000

This is a budget for starting a marketplace MVP on a free versatile website builder with some paid plugins. If you only have this budget, you won’t be able to build a large long-term project—only a small marketplace aimed for experimenting with your ideas and testing hypotheses.

$1,000-$50,000

This is not the budget for coding a custom marketplace platform from scratch but it’s possible to buy a licensed ready-made marketplace platform. For example, CS-Cart Multi-Vendor fits this budget and you will still have money for marketing and hiring managers. With a ready-made solution you get the set of essential eCommerce marketplace features and a well-working system supported by developers.

$50,000-$150,000

With this budget, any marketplace website development is possible. You can hire a team of top professional developers and code your own marketplace platform from scratch—with the features and integrations your business needs. But again: custom marketplace development is a great option unless you’re limited in time. Building marketplace from scratch requires months of development and weeks of testing.

Why should you develop a marketplace on CS-Cart Multi-Vendor?

As you can see, the most balanced option of a marketplace portal development is to build it on a ready-made marketplace platform tailored to marketplace needs. With this kind of a platform, you can be sure that your marketplace will work like a charm right off, have all the necessary features, and basic design.

CS-Cart Multi-Vendor is a specialized platform designed for building both niche and large scale online marketplaces. The platform ships with over 500 eCommerce features, tons of vendor administration tools, marketing tools, and integrations with over 70 payment and shipping services.

CS-Cart Multi-Vendor admin dashboard

The platform is aimed for fast start and continuous further growth. So, if your marketplace idea works, you will be able to grow the marketplace easily—CS-Cart handles high loads, supports an unlimited number of products and sellers, and has open source code and API, which give you fantastic scalability and customizability.

Over 1,600 marketplaces have been created on CS-Cart worldwide—no other marketplace solution has this number of projects.

You can try the CS-Cart Multi-Vendor demo for free—sign up for it on our website and see how Multi-Vendor can help you reach your business goals.

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