Published: May 23, 2014 Last updated: Dec 27, 2021 Yan Kulakov

eCommerce is a permanently growing field. The most profitable branch of it is marketplaces. The more it develops, the more people are eager to launch an online business marketplace. Entrepreneurs are looking for a reliable e commerce marketplace business model.

When a person decides to start their own online business marketplace, they face a huge number of questions. All startupers have to figure out how to choose a niche, find a client, and promote a product. We will tell you what a young entrepreneur needs to know, where to start and how not to repeat the typical mistakes.


What is the marketplace of an online business?

Marketplace is an internet platform where sellers and buyers find each other and make a deal. The main difference between a common website and a marketplace is the number of sellers. An online business marketplace has several vendors, they are business owners, and an administrator—a marketplace owner. There are some prime examples of marketplaces: Amazon, eBay, Alibaba, Etsy, Airbnb, Uber, etc. Such platforms have various specializations and are divided according to different criteria.

Classifications of marketplaces

eCommerce marketplace business model is based on various choices from business niche and type of a marketplace to a marketplace software.

Marketplaces are being created for a large number of suppliers and consumers. Participants can interact with each other on an equal basis (when both parties are individuals or business representatives) or build an "entrepreneur-client" hierarchy. There are 3 basic models:

  1. С2С—customer-to-customer—ordinary people, not entrepreneurs, look for or offer services or products on a marketplace. Example: Airbnb, Uber.
  2. B2C—business-to-customer—a business sells to people. Example: Alibaba, Amazon.
  3. B2B—business-to-business—online business to business marketplace is a model when a business buys from a business. Example: Alibaba, Amazon and some other marketplaces have an opportunity to make bulk orders so these marketplaces can be considered as B2B marketplaces as well.

Another significant criteria is what people can buy in the marketplace. There are two main types and several subtypes:

  1. Products—all physical goods from clothes to medical supply. The list of popular goods for online marketplace business will be examined in the next block.
  2. Services—different services which can be divided into subtypes:
    - Certain skills—professional, creative, educational, helping services
    - Subscription related—services for reading books, listening music, watching film
    - Booking services—car sharing, ticket booking, apartments booking
    - Money related—loans and other transactions

Apart from it, division according to the covered territory is crucially important for a startup.

  1. Local—this means that you prefer to work on a certain territory. It may be limited by one city, region or country. Local marketplaces are limited by territory but not by the opportunities. It allows you to set a certain strategy of development, filter successful and unsuccessful categories, and find reliable vendors before you introduce your marketplace to a global world. Moreover, a lot of marketplaces do not prefer to go to a global market at all since you cannot be equally good in all trades and some services can deteriorate after globalization.
  2. Global—a marketplace works around the world, the shipment or subscription are available in most countries. All today’s global players were local marketplaces for the first time. Globalization often is the last step of development of a marketplace.


What are popular products for online marketplace business?

When starting a marketplace one of the keys to success is choosing the right product so as not to waste time and money. Therefore, it is important to analyze consumer demand in advance and introduce something that can be popular and demanded from the start. There are statistics on the popular online shopping categories.

Statista, source

The top product categories are those which are related to fashion (clothes and shoes), electronic devices, entertainment sphere (books, movies, and games) and cosmetics.

When choosing what type of products you will focus on, make sure that they are not included in the forbidden list of products of your country. For some regions and countries there are the restrictions which apply to alcohol, medicines, drugs, tobacco products, poisons, psychotropics, weapons without a license, and occult items.


How to start an online marketplace business?

There is a description of a process of creation in general:

  1. You should start by generating the idea and drawing up a general strategy for your business.
  2. If the idea is worthwhile, you need to write a detailed business plan. It will become your reference for the first six months. Then you may need to adjust it.
  3. Find sources of funding. As it is an often problem of young entrepreneurs we prepare some interesting ideas on how to find money for your project in the blocks below.
  4. Decide on a convenient form of doing business and search for information about the tax system.
  5. Pay attention to detail. Take into account the subtleties in order not to pay fines later.

If you can't figure out the nuances of your future business, seek advice from an experienced entrepreneur who works in the same field. Or contact a business consultant to help resolve difficult issues. Consultants can offer both partial and full support for your business.


How to prepare an online marketplace business model?

The scheme of launching an online business marketplace is simple but the success depends on how detailed the plan is and how good you can perform it.

  1. Form an idea—this is a part when you should define several prospective concepts. Find whether there are other similar online marketplace businesses. Examine their pros and cons, look through the history of their development, are there any chances to be competitive?
  2. Discuss it—Try to be objective and honest. Guess your audience, examine it, decide what kind of marketing is appropriate in your case. Discuss details with your friends, people from your target audience, business specialists to decide whether your idea is relevant.
  3. Start MVP testing—it is important to test your idea. Try to find a contractor who can create a marketplace with minimum spendings for you but can provide all the minimum features to function well.
  4. Test marketing strategy—you already have an approximate strategy. But still you need to define “golden" vortexes of selling and boost them.
  5. Launch—do not let your hair down! It is only the start of a long way. You should maintain work, improve services, and enlarge products.

How to find money for my project?

At least once all entrepreneurs have faced the problem of lack of money for a start. Think about how to attract money to your business in advance. This can be done in different ways:

  • Competitions and grants—private companies, universities, and the government provide grants for startups. Look for information, prepare a project, and take part in a contest to win a needed sum of money. This way also has a positive influence on brand, marketing, and acquaintances formation.
  • Crowdfunding—Crowdfunding allows you to collect the necessary funds by attracting investors who want to get access to the project. They voluntarily pool money or other resources to support the authors of an idea of interest. If you are sure that your project will be interesting and useful to a large number of people, you can try to reach them directly through special Internet sites.
  • Attract an investor—Private investors sometimes invest in prospective startups. You can find an investor from your circle of friends and relatives or there are also special Internet platforms for finding venture capitalists.
  • Search for government support—If your business is important for people from your region or even the whole country, the government can help you with guarantees, inexpensive loans or loans, preferential leasing and rent.

Source


Web marketplace business simulation answers

There are some frequently asked questions about how to start an online marketplace business:

How much does it cost to launch an online business marketplace?

The prices are variable. There are two types of payment: subscription and one-time payment. Subscription may vary from 10$ to 400$ per month, while one-time payment starts from about 1500$. The CS-Cart Multi-Vendor starts from 1450$ one-time payment, look for the advantages of launching on our platform.

What type of payment, subscription or one-time payment, is better?

It depends on how long lasting your project is going to be. For businesses which are planning to exist and develop for more than 3 years it is better to choose a one-time method. The number of opportunities is not enough for big projects on basic tariffs, so you will need to choose a premium one. There are still a lot of limitations because of code-base adding absence. In about 3 years the one-time payment will pay off. For MVP testing and small businesses there are enough features on a low-tariff subscription of no-code platforms.

How long does it take to start a business model online marketplace?

Timing depends on purposes, finances, and marketplace software. For MVP testing you can launch a no-code cloud marketplace in one day; you can start complex projects in 1 week; starting a marketplace from scratch on a pure code may take about 2-3 months.

The most reliable way is to choose a certain low-code software which allows for mixing no-code and code-based development to make this process cheap and fast. Try a free demo version of a marketplace made on CS-Cart Multi-Vendor.

It looks as if there are too many competitors in the market. Should I try to launch an online business marketplace anyways?

If there are no competitors, the sphere is most likely not in demand. A great number of competitors signals that the sphere is prospective. To stand out from other marketplaces you can create a specific marketplace: choose a certain niche, a certain area for servicing, and marketplace type. Read about creating a specific marketplace.


Summary

In the eCommerce business model online marketplaces have become a game-changer. This sphere has opened up new possibilities for businesses. There are a lot of marketplace types and categories for each interest.Trading platforms are the future. If you want to enter the market, then perhaps you should start from an online marketplace business, because it is otherwise difficult to compete with the leaders in eCommerce.

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