04.06.21

How To Create A Marketplace

Four components of a successful e-commerce project
Marketplace as a business model has enormous potential. You've probably already seen this forecast: by 2022, 67% of all online purchases in the world will be made through marketplaces. In such a situation, creating a marketplace seems like a profitable investment. However, we at Scallium never tire of repeating it's not that simple. The marketplace gives impetus to an already existing successful project. It increases the number of new customers, removes the traffic ceiling, and, in principle, scales Internet marketing processes. Building a marketplace from scratch is significantly more difficult. But it is possible.

Regardless of the marketplace business model, it has 4 components: analytical, technical, operational, and marketing. If there is a gap in one of the parts, everyone else will suffer. No one marketing budget won't make the project popular if the IT solution does not allow the platform to work speedily and be user-friendly. Vice versa, no matter how functional the system is, people should know about it, and they should choose this marketplace among a dozen well-known and established e-commerce players.
First Component: Analytical
Независимо от бизнес-модели маркетплейса, у него есть 4 составляющие: аналитическая, техническая, операционная и маркетинговая. Если есть пробел в одной из частей, пострадают все остальные и проект в целом. Даже самые внушительные маркетинговые бюджеты не вытянут проект, если IТ-решение не позволяет платформе работать быстро и быть удобной для всех участников процесса продажи. И наоборот, какой бы функциональной ни была система, о ней должны узнать, и ее должны выбрать среди десятка уже известных крупных игроков e-commerce.
How to prepare for marketplace development? First of all, research the market: its volume, the number of companies, their target audience, and market share, competitors' methods of promoting. Then you should choose a business model based on the key objectives of your project. Marketplaces are different. You don't have to come up with a new Amazon, create your own unique format, use a hybrid model. There are many options.

Take note of the basic marketplace models with examples:
By trade participants:
С2С — trade between ordinary people, non-entrepreneurs (for example, Etsy, Preply, Skillshare, DogVacay);
B2C — the business sells to the client (AliExpress, Booking.com, Amazon, Zocdoc, GoldenLine);
B2B — business sells to business (AliBaba.com, Indiamart, Capterra, Tradeindia.com).
By topic:
Goods — Amazon, eBay, Etsy, Google Play, App Store;
Services— Uber, Airbnb, Booking.com, DogVacay, Couchsurfing;
Hybrid platforms with goods and services — Houzz, OLX, Oodle;
Media — Twitch, YouTube, Yelp, Spotify, Soundcloud, TravMedia IMM;
Crowdfunding — CircleUp, Kickstarter, IndieGoGo.
By offline-online balance:
О2О — Online-to-offline: users are attracted to the network, and the service is provided offline;
Online commerce — except for the delivery of goods all processes are online.
By type of monetization
Sale of goods and services, advertising, payment for listings, a commission from each closed deal, subscription or Freemium (sale of premium features) model, etc.
Read more about marketplace models
TOP 10 Ideas For Niche Marketplaces
The more accurately you think over the business model, the more detailed you define the business processes, the faster and clearly successful the next stages will be completed. This is the job of business analysts.
Second component: Technical
Irrespective of which marketplace format you choose, it must be based on a reliable and flexible IT system. Thanks to a functional e-commerce platform, you can quickly respond to any market changes: include products from new suppliers in the assortment, test new categories, promptly serve customers, track orders in real-time, and enter foreign markets.

The secret of the smooth functioning of the marketplace is in a well-established back office. By this, we mean a set of tools and technologies for solving any problems related to the efficiency of the platform and the learnable convenience of its participants.
The main systems of the marketplace are:
MMS (Marketplace Management System) is the system for platform administration. Opportunities: full customization of marketplace parameters, including individual work models (for example, differentiation of access rights for employees, creation of commission conditions for partners, etc.).

MAS (Merchant Administration System) is a system for interacting with third-party marketplace sellers. Opportunities: automation of the suppliers' onboarding to the marketplace (invitation, registration in a personal account, moderation), establishing communication between merchants and the platform, ensuring quality control of order processing.

PIM (Product Information Management) is a content management system. The goal is to automate up to 80% of routine content-related tasks. Opportunities: creating and editing product cards, setting product categories and characteristics, export/import of data, integration with other sales channels.

OMS (Order Management System) automates all business processes connected with orders. Opportunities: working with orders coming from different channels (receiving, processing, transferring for execution, creating invoices, tracking with receipt of delivery notifications), centralized storage of information about stock balances, requests, and order statuses, and transferring this information to the merchants' accounts.

Billing is a system for managing financial relationships with suppliers. Opportunities: development of conditions for the merchants' commissions, due-bills, sending notifications about the status of the balance, exporting reports on transactions.
Functionality and flexibility are must-haves for any technical solution. You must be certain you can scale your activities, adapt to market conditions and requirements when entering new markets.
Third Component: Operating
We are considering the team that will ensure the operation of the marketplace. Here is an example of a minimal operational team sufficient to get started and test a marketplace concept. Further in the process of scaling it can also be expanded.
Minimal operating team:
The Executive Manager
This is the leader of the entire platform. He or she plans, develops, and executes strategic plans for the development of the marketplace, organizes operational activities. And he or she is responsible for the implementation of plans together with the leadership team.
The Category Manager
She or he is responsible for the entire cycle of product sales. This person participates in assortment management, procurement planning, pricing, analysis of sales efficiency, and profitability of product groups.
The Content Manager
This person is responsible for managing the product information. He creates, distributes, and curates content, working with different types of information (text, graphic, video, audio).
The Assistant Analyst
This person is responsible for data processing and analysis. She or he collects analytical data from various channels and determines the development paths of the marketplace associated with expanding the range and maximizing profits. This person works in tandem with the Category Manager
The Account Manager
He or she is responsible for project support. He maintains good relations with existing clients and searches a new ones, conducts presentations and business negotiations, develops loyalty programs, and maintains document circulation.
Fourth Component: Marketing
The final and no less important stage in the marketplace creation is the development of a successful marketing strategy. The peculiarity of the marketplace is that marketing in this business model should ideally target two audiences:

  1. suppliers interested in promoting their goods and services on favorable terms;
  2. end customers making purchases in the marketplace.
As a guideline, in 2020, a local marketplace in CIS Ozon spent about $136 000 on marketing, and it is almost 39% more than in 2019! Over 50% of its promotion costs were in the digital sphere.
    Marketplace promotion should solve the following tasks:

    • customer base expansion,
    • increasing brand awareness and customer loyalty,
    • maximizing user traffic,
    • increasing the number of orders.
      These tasks can be solved by different tools. Below are the 3 most popular and must-haves for the marketplace:
        Эти задачи могут решаться разными инструментами. Ниже перечислим 3 самые популярные и обязательные для маркетплейса:
          Search Engine Optimization
          The key goal is to bring the marketplace to the top positions in search engines.

          Methods:
          • collecting the semantic core,
          • clustering keys into groups for competent distribution across the site,
          • creating separate pages for each group,
          • optimization for users (title, description, H1, H2, useful content),
          • backlinks from thematic sites.
          Complete product data including headings, bulleted lists with features and benefits, clear sizing images, up-to-date pricing information are important for e-commerce.
            Performance Marketing
            The key goal is to increase the awareness of the platform on the network at the initial stage and improve site traffic.

            Methods: assessing the potential of each of the possible traffic sources and distributing the budget among several sources, depending on the urgent tasks.

            If the task is Client Acquisition, then use these tools:
            • organic search,
            • Targeted advertising,
            • PPC advertising,
            • media advertising,
            • influence marketing (collaborating with bloggers)
            If the task is Keeping the audience interested:
            • social networks,
            • email newsletters,
            • YouTube,
            • instant messengers.
            If the task is to increase sales:
            • PPC advertising,
            • Targeted advertising,
            • selling links (e-mail),
            • selling messages (messengers).
              Referral marketing
              The key goal is to build trust with marketplace clients and target audience.

              Methods:

              • the development of a rating system about sellers and customer reviews of products and services;
              • adding "share link" buttons to the site on third-party channels (for example, in social networks, messengers) with calls to action (buy now, get an offer);
              • creating a referral program where the customer receives a reward for referring his friends.

              Thus any marketplace has 4 components: analytical, technical, operational, and marketing. All components are closely related! Keep in mind that choosing an IT platform is 50% of a project's success. This is the foundation for building e-commerce business and its further scaling and promotion. If you are unsure how to start, contact the Scallium team. Our people and our platform contain everything you need to create a marketplace from scratch.