Learn the top 5 success factors to create an eCommerce marketplace business model in this article.
Despite ongoing trade tensions and a slowing global economy, eCommerce remains booming. Global online marketplaces are leading the way, with Alibaba Singles’ Day hitting a record $74.1 billion in sales this year and Amazon’s YTD revenue up 20% on last year.
The performance of big players has taken part in marketplace growth, which has been tracking over 20% for a few years. However, the important question is, why do just some ecommerce marketplace business model for startups reach considerable time while numerous struggle and disappear?
For one, the old ‘it’s the economy’ excuse doesn’t hold water; the ecommerce marketplace business model is exceptionally compatible with challenging business environments. Their phenomenal economies of scale reduce costs, while their network effects create exponential growth and defensive moats in a manner that has not seen its equal in the other eCommerce business models.
They also promote better logistics, more innovative use of knowledge, more comprehensive product ranges, greater transparency, easier cross-border expansion, and more personalized customer satisfaction.
Ecommerce Marketplace Business Model Trend In 2023
Entirely 60% of all online business ($3.5 trillion in 2019) is already happening on marketplace business model platforms like Amazon, eBay, Airbnb, and Uber. Forty-seven percent of shoppers now like better to make their repeat purchases via online marketplaces. Prospects also are wealthy for the United Kingdom – it’s tipped to stay the world’s third-largest e-commerce market with $124 billion in sales.
New trends and segments are constantly creating further opportunities for the eCommerce marketplace business model. The Fourth Wave of E-commerce will be driven by new marketplace business model trends like service platforms, niche B2C verticals, B2B procurement, and e-commerce malls.
But sadly, despite all those outstanding macro advantages, most high-growth platform startups fail (a 70% failure rate seems to be the overall consensus). The truth is that marketplaces are complex systems; developing a successful one isn’t an easy paint-by-numbers game. The great news is that there’s a proven set of ingredients that will hugely improve your marketplace’s opportunities for fulfillment.
Ecommerce Marketplace Business Model: What Are The Factors to Succeed?
We have written about many of them previously, but now for the primary time, we’ve condensed all the early-stage marketplace success factors into one blog post for straightforward reference. The collective experience of high-performing marketplaces like Airbnb, Etsy, Fanpass, and Mobypark (some of which we helped to develop) here are five key elements for a successful multi-vendor marketplace launch.
“Product-market fit is the essential factor to create an online multi-vendor marketplace and the primary goal of each startup. It’s one business term that denotes successful product delivery, a working go-to-market strategy, and customer satisfaction.
Some startups declare they need to achieve product-market fit prematurely, while others don’t recognize they need it until much too late. Getting it wrong may result in a waste of resources and loss of precious time.”
Product-market fit is arguably the foremost important thing about marketplace business model success. If the market doesn’t want what you’re selling, you’re dead in the water. Or ready for a pivot.
Rapid iteration of a minimum viable product (MVP) offers an empirical thanks to developing product-market fit. These advanced prototypes allow marketplace entrepreneurs to gather user feedback at speed while minimizing the financial risk accompanying a fledged platform. Each iteration cycle builds on new insights to refine your marketplace value proposition until sufficient traction is achieved.
Go-to-market Online Business Model
A go-to-market or market activation strategy is that the game plan outlines how you’re getting to use the resources at your disposal (team, budget, tools, skills). To sell your unique value proposition to a selected audience and, within the process, gain competitive advantages or create network effects that will grow your marketplace.
Critical components of a go-to-market strategy include:
- Defining your target market and ideal customer personas.
- Doing an in-depth competitor analysis.
- Clarifying your value proposition.
- Mapping out the customer journey.
- Choosing a business model and tech stack.
- Identifying marketing and sales channels.
- Outlining your customer success process.
You will get to identify clear milestones supported by a hierarchy of goals, objectives, and KPIs. Dreams and goals should be specific, measurable, attainable, realistic, and available within time frames.
Marketplace Business Revenue streams
It’s important to differentiate between business models and revenue streams. Business models describe the valuable flow in your business, i.e. the advantages for the users and which products or services will be served to a selected target market. Revenue streams determine how marketplace owners can monetize the flow of that value between users (buyers & sellers).
Marketplace business model includes B2C, B2B, P2P, and On Demand. Your business model should be supported by the relationships between all the stakeholders (buyers, sellers, owners) on your platform.
Most marketplace platforms have revenue streams like commission, subscription fees, listing fees, freemium, and advertising. Finding the right option for your marketplace is often supported by benchmarking with an identical sort of platform.
However, using an MVP to clarify your value proposition to users and to work out if they’re willing to buy that value will provide a more accurate indication.
Features & Online Marketplace functionality
Just like your value proposition, your marketplace features and functionality got to be tested. Adding too many bells and whistles at the MVP stage is often a waste of resources and confuses users.
Ideally, you would like to start with features that support your core value proposition. Chief among them may be a suitable payment system. Managing the flow of funds between buyers and sellers is one of the vital functions of a web marketplace.
Look out for some seamless attributes that make the marketplace easy to use kinds of platforms like easy onboarding, flexible payment options, escrow functionality, split payments, and compliance adherence.
Besides the payment systems, the marketplace has several other features lucrative admin interfaces, rating and review systems, order processes and shipping frameworks, user dashboards, and custom search. Take into consideration that integrating some features would require advanced technical skills.
Focus on the user experience of your marketplace business model
How users experience your marketplace may reflect the technical expertise applied, the go-to-market strategy implemented, and therefore the level of product-market fit that has been achieved. Your marketplace should be well-organized, trustworthy, and straightforward to navigate, with as little friction as possible between what users want and, therefore, the fulfillment of their needs.
- 88% of online consumers are less likely to return to a site after a nasty experience
- 76% of internet buyers abandon their shopping carts
- Online users take 50 milliseconds to make an opinion about your site’s visual appeal
- User experience has the potential to spice up conversion rates by the maximum amount of 400%
UX design may be a multidisciplinary field that mixes technical skills, creativity, and analytical thinking in iterative cycles of designing, prototyping, and testing. Thanks to its broad scope and profound impact, its implementation isn’t a trivial matter. UX issues like unresponsive rendering and slow load speeds can have serious consequences.
Unfortunately, only a few marketplace entrepreneurs have combined experience in psychology, human-computer interaction, computing, information architecture, product design, graphic design, front-end development, and QA testing. Investing in professional UX design will be your best bet to enhance conversion rates and customer retention.
Entrepreneurs need self-belief and confidence by the bucket load. That doesn’t mean becoming a victim of your hubris, though. Great entrepreneurs know when to invite guidance and believe experts urge certain aspects of the work done.
At the top of the day, you and your investors want to ascertain an honest return on investment. Building a multi-vendor marketplace that does that’s tough, but following these tried and tested guidelines can significantly enhance your chances to urge there.
If it all seems a touch overwhelming, but you’re confident that you have a simple marketplace idea, get some input from those with a successful diary of building high-growth marketplaces.
Webnexs has helped several startup entrepreneurs and established companies develop and position their marketplace platforms for fulfillment. We will do an equivalent for you.