Previously we wrote about Different Types of Digital Marketplaces and 24 Tactics Used to Solve Chicken and Egg problems. This time, we would like to dig deeper into details about developing a marketplace startup. You probably know that a marketplace business model is one where buyers can connect with sellers (and vice versa), with the marketplace charging a fee for helping to make the connection. But did you hear about the vertical marketplaces and the horizontal marketplaces startup?
Table of contents
- 1. What problems will your marketplace startup solve?
- 2. Will you choose vertical marketplaces or a horizontal marketplaces startup?
- 3. Building Customer Relationships in Your Marketplace
- 4. Building Trust in Your Marketplace Startup: Connecting Buyers and Sellers
- In summary: Are you ready to develop a marketplace startup?
- Frequently Asked Questions (FAQ)
If you want to develop a successful marketplace platform, there are a couple of questions that you need to consider.
In this article, we will take you through the questions you need to ask to validate your idea and get started with developing a marketplace startup.
1. What problems will your marketplace startup solve?
Before developing a marketplace startup, you need to make sure that your marketplace solves a problem that your target audience has. For example, Uber was created because the founders were fed up with finding taxis in their hometown of San Francisco.
When determining what services and products your marketplace platform will solve, you need to ask the following questions:
- Who is my target audience?
- How large is my target audience?
- How will my marketplace solve their problem?
- What pain points does my target audience have?
- How will I promote my marketplace to these people?
- How will I encourage sellers to join my marketplace?
- Who will my competitors be?
Carrying out a SWOT analysis will help you identify your marketplace’s strengths and weaknesses, as well as those of your competitors.
2. Will you choose vertical marketplaces or a horizontal marketplaces startup?
As you embark on the journey of crafting a marketplace startup, a pivotal decision awaits: Will you opt for the specificity of a vertical marketplace, catering to a particular niche, or cast a wider net through a horizontal approach, accommodating a diverse range of products and needs? This crossroads presents a strategic choice that will fundamentally shape the trajectory of your venture.
Vertical marketplaces startup
Vertical marketplaces focus on one particular niche.
Marketplaces like Uber, Just Eat and Etsy are good examples of vertical marketplaces as they focus on one key demographic or product/service.
The advantages of developing vertical marketplace startups are that it is easier to focus your marketing strategy, and you can provide a higher-quality product or service.
The disadvantages are that there are fewer customers and potentially less money to be made. You will also have to have superior knowledge of the niche for it to prosper. For example, Etsy was created by a group of friends who wanted to sell the handmade goods they made online. If you want to know how to create a custom marketplace app like Walmart check it out here.
Horizontal marketplaces startup
Developing a horizontal marketplace startup that sells a wide range of goods and services for a variety of different audiences. These are marketplaces where you can buy a pair of jeans, a soldering iron, hot sauce, and a new set of car tires in the same transaction!
Horizontal marketplace samples could be Amazon, eBay, Alibaba, and Taobao.
The advantages of horizontal marketplaces are that you have bigger audiences to sell to and can make a larger profit. Of the world’s top 50 marketplaces, 74% of them are horizontal ones.
The disadvantages are that there is a lot more competition, and it is harder to appeal to a specific target audience. You may also find that your customers are less loyal.
You will need to determine which type of marketplace is the right one for you. Generally, we recommend starting as a vertical marketplace. You can then scale up and begin selling a more comprehensive range of goods as you grow.
Amazon started this way. The marketplace startup originally sold books and then diversified into other products and services.
3. Building Customer Relationships in Your Marketplace
In the journey of crafting a new marketplace, especially in the context of a broad horizontal venture, the cultivation of customer relationships emerges as a cornerstone for success. Amidst this landscape, the delicate art of fostering loyalty takes center stage, wielding the potential to determine your marketplace’s trajectory.
Initiating your marketplace on a foundation of resilience requires a strategic approach, and here are key methods to embark on this path:
- Cultivating Early Adopter Alliances: Early adopters hold the potential to become your brand’s most fervent advocates. By ensuring their satisfaction, you lay the groundwork for organic referrals. Nurturing these relationships amplifies the resonance of your marketplace’s voice in the digital realm.
- Treating Sellers as Valued Partners: Recognizing the pivotal role that sellers play in catalyzing income for your marketplace, it becomes imperative to treat them not just as participants but as essential partners. By prioritizing their needs and experiences, you foster allegiance that transcends competition.
- Crafting a Distinct Brand Persona: Establishing your marketplace as an authority within your industry demands the cultivation of a robust brand identity. As a voice of knowledge and expertise, you earn the trust of customers and set the stage for long-term engagement.
The journey of customer relationship development is a tapestry woven with empathy, strategy, and an acute understanding of human dynamics. Every engagement, every interaction becomes a thread, knitting together a mosaic of trust and commitment. As your marketplace matures, the nurturing of these relationships emerges as not just a strategy but the heart and soul of your growth story.
4. Building Trust in Your Marketplace Startup: Connecting Buyers and Sellers
The dawn of a new marketplace startup, be it a broad horizontal platform or a specialized vertical, often casts a veil of uncertainty among potential users, and trust becomes the cornerstone of assuaging their reservations.
The challenge lies twofold: on one hand, buyers might grapple with doubts about the reliability and caliber of the products or services offered. On the other hand, sellers may harbor concerns regarding payment assurance and the impartiality of the marketplace during disputes.
The imperative is clear: the onus rests not solely on establishing trust in your platform but on fostering an atmosphere of unwavering confidence between buyers and sellers. The journey toward this synergy of trust is multifaceted and holds the potential to shape the very essence of your marketplace startup.
Understanding the buyer’s psyche is paramount. Meticulous curation of product or service offerings, coupled with transparent quality control measures, instills a sense of reliability. Providing comprehensive information and user-generated reviews can serve as a bridge to overcome skepticism.
Equally critical is engendering trust on the sellers’ front. Implementing secure and prompt payment mechanisms allays fears of payment non-compliance. A judicious dispute resolution process, impartially mediated, strikes a balance between buyer protection and seller reassurance.
The journey to building a trust-laden marketplace entails transparency at its core. Open communication channels that foster real-time interaction between buyers and sellers humanize the experience. Robust customer support not only resolves issues swiftly but underscores your commitment to user satisfaction.
In a landscape where digital connections are paramount, the power of authenticating identities cannot be underestimated. Implementing verification processes for both buyers and sellers cultivates accountability and reduces anonymity-induced apprehensions.
The art of trust cultivation in a marketplace is a delicate symphony of strategy, technology, and user-centricity. Transparency, user empowerment, robust safeguards, and tangible outcomes intertwine to fortify the bedrock of trust. As the nexus between buyers and sellers gains strength, so does the resilience of your marketplace startup, poised to ascend the echelons of credibility and prosperity.
A good point to increase trust is to have all the required compliances for your location and industry. Here are some articles we are suggesting for this point:
– HIPAA Compliance Checklist for Scalable MVP Apps;
– GDPR compliance checklist to follow in a developed MVP app.
Here are some of the ways you can do this:
- Bring in ID verification and background checks for sellers. This will help prove that they are who they say they are and are qualified and competent to carry out a service. For example, Uber carries out a background check and asks to see a valid driving license. Fiverr makes copywriters pass a spelling and grammar test before they can start selling their services
- Introduce reviews and ratings. This lets buyers see what others think of the products or services that sellers provide
- Set out your rules right at the start. Explain what is expected of buyers and sellers and what will happen if they do not adhere to your terms of service. If you implement changes, communicate this to both parties so they are aware
- Offer customer support and make sure you respond to any questions quickly, fairly, and with empathy
- Introduce a secure payment system that both buyers and sellers can trust. You may want to consider an escrow feature. This is when you hold payment and only release it when the buyer has confirmed they have received the product or service
In summary: Are you ready to develop a marketplace startup?
This means that you not only have to distinguish your marketplace from your competitors but nurture long-term relationships with buyers and sellers alike. This is a hard challenge, but ultimately a gratifying one.
Don’t forget about integrating analytics into your app, as it would be your ears and eyes in the app. We also recommend using as many 3d party service integrations as possible in order to downgrade the price of development services.
Also, keep in mind that your startup would need to go through 5 stages of the life cycle and it requires a lot of patience, will, and a huge workload. But if you are not sure where you need to start, check our startup library.
If you need help and support to develop your brand new marketplace, You are launched is here to offer assistance. We’ve been working with a range of lean startups since 2014, helping them to grow, develop and generate high levels of profit.
Contact us today to find out more about how we can start your marketplace off on the right path
Frequently Asked Questions (FAQ)
Identify your target audience, assess the size of the market, understand their pain points, and strategize on how your marketplace will solve those problems.
Develop a compelling value proposition, promote your marketplace effectively, and consider the strengths and weaknesses of your competitors through a SWOT analysis.
Vertical marketplaces focus on a specific niche, catering to a particular demographic or product/service. Horizontal marketplaces offer a wide range of goods and services for diverse audiences.
Generally, it’s recommended to start as a vertical marketplace to focus your marketing strategy and provide a higher-quality product or service. You can scale up to a horizontal marketplace as you grow.
Early adopters can become strong advocates for your brand. Nurturing relationships with them lays the foundation for organic referrals and long-term success.
Sellers should be treated as valued partners, prioritizing their needs and experiences to foster loyalty that goes beyond competition.
Implement secure payment mechanisms, introduce reviews and ratings, set clear rules for both buyers and sellers, offer robust customer support, and consider identity verification processes.
Implement ID verification and background checks, introduce reviews and ratings for products/services, and communicate rules and changes transparently.
The average failed marketplace lasts five years. To ensure success, distinguish your marketplace from competitors, nurture relationships with both buyers and sellers, integrate analytics, and consider third-party service integrations.
If you need help and support to develop your brand new marketplace, “You are launched” is here to offer assistance. They have been working with lean startups since 2014, helping them to grow, develop, and generate high levels of profit.