eCommerce is a fast-growing sector of business. Many entrepreneurs around the world open online stores or marketplaces. Some of them start their businesses offline and then transfer them into the online environment, while others build their businesses in the digital space straight from the beginning. There are many types of marketplaces, and the one that attracts a lot of attention nowadays is a peer to peer marketplace platform.
You have probably heard about such marketplaces before - Uber, AirBnB and many others. These platforms help people to sell their services or goods, find services and goods, yet at the same time they try to eliminate the third party from the transaction between the sellers and the buyers. Such a marketplace becomes a marketplace in the most traditional sense of this world: just a place where sellers and buyers meet.
In this article we are going to look at what is a peer-to-peer marketplace platform, the specifics of such a platform and the ways to build it.
What is a peer to peer marketplace?
As the business develops, new concepts replace the old ones and sometimes it is hard to define those that just appear or put them into a new category. If we look at the history of the term “peer-to-peer”, it was originally not about platform, but network. It was meant to be a type of network without centralized management.
This term has gained a lot of new meanings over the last few years. Peer to peer marketplace definition may be explained as a marketplace with no third party between the participants, so buyers and sellers can communicate and transact directly to each other.
Peer to peer marketplace VS common marketplace
The difference between the usual and peer-to-peer marketplace can be seen in the following examples.
There is a B2C type marketplace that sells physical goods. Let’s look at the mechanics of this process on a B2C marketplace. A seller places his product into the marketplace warehouse, a buyer places an order, and then the product is delivered to the customer using the marketplace's internal services. The marketplace makes a direct contribution to the transaction between the buyer and the seller: it delivers the product. The marketplace is liable for the defaults or disputes between the buyer and the seller.
On the other hand, there is a P2P type marketplace. A very common one is P2P marketplace that provides reservation services. A buyer can contact a seller directly through the platform and the commission is charged to the seller automatically, immediately or at the end of the month after calculating that commission. In this case, the marketplace has minimal involvement in the transaction. Although marketplaces sometimes attempt to secure the relationship between the participants, they are the ones who are responsible for the fulfillment of the obligations within the transaction.
Peer to peer marketplace examples
- AirBnb—a rental marketplace for finding apartments. People ‘airBnB their property’ meaning they provide an apartment or a house for travelers. The fee is usually lower than the average market rate for a hotel.
- Uber—a platform for ordering a car. Drivers pick up and drop customers wherever they want.
- Etsy—a platform for finding handmade products. Creative people display their work on this platform, art lovers buy the art works.
- Poshmark—a marketplace where people can display and buy used stuff. This type of platform is always a nice example of a P2P marketplace.
Peer-to-peer marketplace for funding
Peer-to-peer platforms are often associated with monetary transactions, such as inversions. An ideal example of this type is platforms associated with monetary transfers. In this case, the money is not in one centralized place, not owned by just one participant, like a bank. It is distributed among the users of the platform. Investors decide for themselves to whom to lend their money. Those who need money find the best offer. Since investing is impossible without risk and even the most reliable company can fail, the platform tries to protect the investors in such cases. Some of the ways to do that:
- Help to prepare documents for the court
- Buyout debt
- Insure the investment
- Pledge property
- Arrange a co-signer for surety
Peer to peer marketplace for funding examples
The biggest investment P2P platforms by loans in the United Kingdom and the United States of America.
- Lending Club (USA) – issued $1.6 billion in loans in 1Q 2015
- Prosper (USA) – disbursed $600 mln in loans in 1Q 2015
- SoFi (USA) - plans to issue over $2 billion in loans in 2015
- Funding Circle (UK) – plans to issue more than $1 billion in loans in 2015
- Zopa (UK) – plans to issue about $1 billion in loans in 2015
- RateSetter (Great Britain) - comparable to Zopa in terms of the volume of loans issued, according to some data it surpasses Zopa
What are the features of a peer-to-peer marketplace?
These features are not bad or good, they all have pros and cons.
- Relationships are not regulated by state structures. On the one hand this provides some freedom for users, but on the other hand it imposes risks on participants
- Possible disagreements or conflicts. For such platforms, a system for conflict resolution and an advanced user agreement should be decided
- As any P2P platform, it has no third party and centralized management or platform’s influence is minimal
How to build a peer to peer marketplace website
To build your marketplace, there are several ways:
- You can use pure code—this is an obsolete way of website creation. It takes a lot of time and is rather expensive. What are the features of this approach?
- Building on pure code may be an expensive deal. Developer’s work costs about $60 per hour
- It may take 1-2 months to create such a platform
- Big projects require more than one developer. You may have to hire a team and regulate their work yourself
- There is also a dependence on one certain person or a group of developers. It may be difficult to find someone who can replace one of these specialists
- You can use a ready-made solution of one of the peer to peer marketplace software. A software platform can be Cloud-based on-premise. We recommend you to look at the platform CS-Cart Multi-Vendor. This platform has over 2000 addons available to expand the capabilities of a marketplace, for Enterprise platforms the expansion via API is available, also a few integrated applications are built-in. The integrated automation systems like QuickBook, PayPal, StripeConnect and some others.
Statistics on peer-to-peer marketplace for loans and funding
P2P lending marketplaces are very popular for this type of platform. In European countries, where lending is becoming more and more stringent, new methods of investing have become an excellent way to find promising projects and reliable investors.
The P2P market is expected to reach a record $558.91 billion by 2027
There is a lot of demand for loans without banks, which is why the P2P market is growing at incredible speed. In Europe, the P2P market has doubled even though the idea originated in the UK.
Peer to peer marketplace platforms related to money are based on the territory of the Baltic countries. With the fact that these countries demanded more friendly conditions for this business model. There are 6 such platforms in Estonia and two in Litva. The largest market in terms of the number of loans is located in Latvia, the amount of loans is about £3.2 billion in 2019, the market in Italy is strong enough, too, it is about £1.07 billion.
The pandemic has strongly emerged on such platforms in all countries of the world. old such platforms went bankrupt. Yet, today it is a stable market.
FAQ
What is a P2P marketplace platform?
A platform without a mediator and centralized power. Users can connect with each other directly. They are often related with money, sharing and any types of services.
How long does it take to create a P2P marketplace?
Any marketplace can be launched within 1 week. Our platform provides such an opportunity. You can try a free demo version of CS-Cart Multi-Vendor.
What are the examples of P2P marketplace?
All marketplaces which do not have a mediator or its function is minimal. For example, AirBnb, Etsy, Uber, Lending Club, Funding Circle.
Is peer to peer marketplace a profitable business?
It is a stable business especially in USA and Europe countries such as Litva, Latvia, Italia, and UK. The platform based there confirmed that this sector is a lucrative business even in pandemic conditions.
Summary
All in all, peer to peer marketplace platform is a lucrative business model. Apart from loans there are a lot of business models which can be profitable, too, such as peer to peer rental marketplaces. This business requires a very careful approach to meet the needs of both parties. Most importantly ensure the right customer policy to provide sellers and buyers, investors and borrowers with a win-win solution. As for the future of the platform for loans it looks as a prospective sector for the next few years.
