Online marketplace traffic has soared in recent years, taking an ever greater share of ecommerce traffic
Whichever statistic you look at, it’s the perfect time to be running an online marketplace right now. Annual sales have crashed through the $1 trillion barrier, and marketplaces now account for 50% of all online retail traffic. Even better, the growth is spread across the whole industry; while eBay and Craigslist usage levels out, younger sites such as Uber and Airbnb are seeing 100% growth.
But if you want to get a slice of this hugely promising sector, be warned: it’s hard work. With new entrants flooding the market all the time, you’ve got be exceptional to stand out.
Sites like Marketplaces Inc. will take care of much of the work for you. We will plan, build and host your platform, giving you a quality marketplace with its own mini-storefront and avoiding the need to hire developers.
But there are plenty of things you’ll have to do on your own. You’ll have to create all the ingredients of a great site, one which works equally effectively across web and mobile platforms, if you want to stand out.
To help you along the way, we’ve compiled a list of our ‘top tips’ for building a great marketplace. If you follow all these tips, you’ve got a great chance of achieving your growth objectives.
1. Pick a name
The challenge of picking a great name is as old as commerce itself. Long before online marketplaces were even conceived, brands and retailers were trying to find the most dynamic name possible to get one up on their competition.
If you haven’t yet come up with a great name for your business, here are some tips:
Keep it short. The most successful marketplaces (Amazon, Airbnb, Uber) all have short names, and that’s no coincidence. The shorter your name, the easier it will be to remember - and it’ll show up better on your mobile site.
Keep it scalable. Make sure your name can grow with your business. So don’t use geographically limited terms and references if you want to go international.
Give it some x-factor fizz. If you want to make your name really pop, use plenty of dynamic sounds. Sharp letters like x and z can give your brand some really punch.
Make it relevant. This isn’t an essential - after all, the word ‘Gumtree’ has nothing to do with classified ads. But it could be a definite plus.
Avoid in-jokes. If you and your colleagues keep laughing about a specific aspect of your marketplace, that doesn’t mean everyone else will get the joke - or even understand it. So make sure there are no niche references.
2. Design a great logo
Logos are, if anything, even more important than a name, as they will anchor your entire marketing strategy as you scale. If you need any persuading about how powerful a logo can be, just think of McDonald’s’ golden arches.
Again, we recommend you keep it simple. Like the name, the logo should be sharp and memorable, a visual representation of what makes your marketplace great. Also, the simpler your design, the easier it will be to incorporate into your marketing strategy. And, on mobile devices, a simple visual motif is likely to be more successful than an elaborate one.
Also, think about what your brand represents. If you’re building a brand that’s light and breezy, it might be best to use light, airy colours. However if you want something that’s earthy and natural, greens and browns might be better. Whatever you want from your brand, your colour scheme should reflect that.
Finally, if you can make it a kind of visual pun, alluding to what your marketplace sells, that’d be great. So, if you’re selling shoes, it might be an idea to design the logo in the shape of a sneaker. But if this seems too convoluted, don’t worry - it’s not essential.
McDonald’s’ golden arches provide the perfect example of a logo
3. Pick the right remuneration model
It’s the fundamental question for all marketplace owners: How do I get paid?
The answer will vary according to the specific type of marketplace you want to build. We’ll explore this in more detail in a future blog, but essentially there are four key models to choose from:
- Commission. This is the most common model, used by Uber, Airbnb and loads of others. If you want to go for something that’s tried and tested, and you deal with physical goods (as opposed to services), this is a great choice - and it means you’ll earn money whenever your vendors do.
- Subscription. This works if your marketplace deals in skill-based services (such as, for example, a freelance employment exchange) or your vendors don’t typically exchange money (such as a dating site). You’re guaranteed to earn from every user, but on the downside you won’t earn every time they do.
- Listing fee. If your vendors are conducting one-off transactions rather than multiple ones, you’ll want to charge a listing fee. Again, it’s great if you want money up-front - but again, it limits your earning potential during the seller’s lifecycle.
- ‘Freemium’. Craigslist is one of the most famous examples of this model. Users start off advertising for free before graduating to a subscription or listing fee later on. It’s great for attracting people to your site - but, for quality control purposes, it might pose problems.
In addition to these four key variants, several marketplaces, notably Amazon, use a mixed model which combines two or more of the examples listed above. But, if you’re just starting out, it’s best to keep things simple.
4. Work out how much you should charge
After working out how you want to get paid, you need to think about how much. This is probably a more difficult question, as price ranges vary between different sites.
Consider the disparity in commission fees. Etsy, for example, charges 3.5%, while some sites charge as much as 70%.
To work out how much you should charge, it’s best to do some research. Take a look at your vertical and find out how much your competitors are charging. Then pick a figure somewhere in the middle of the range.
As a general rule, many marketplaces, such as Uber, charge 20%, so this might be a decent benchmark.
Uber is one of many sites whose commission hovers around the 20% mark
5. Give your sellers clear instructions
Marketplaces often oblige their vendors to handle all image and product content (this is certainly a requirement on Marketplaces Inc.). But to protect your brand image and deliver a great user experience, it’s good practice to give your sellers clear instructions on what to send. The clearer the instructions, the better.
Here’s some great advice you can pass on:
- Descriptive titles. Make sure the title correctly and clearly describes what the item is. It helps to think of what others may search for when trying to find your item.
- Hi-res images. Marketplaces Inc. requires images to be a minimum of 600 x 400 pixels, and this is fairly typical of marketplaces generally. So encourage your sellers to take images of their products on a proper camera, rather than a mobile phone. If they can capture the product on a clear background, that’s even better.
- Product descriptions. There’s plenty of space for product descriptions, so if sellers want to go into detail about their product, they can. But when it comes to these descriptions, less is often more. If the sellers can keep their descriptions short and sharp, so much the better.
- Product videos. More and more shoppers are looking for videos of items before buying. These help a shopper gauge what the item is really like before committing. It could be an unboxing, official promotional video, or usage guide. Creating compelling and exciting video content really boosts sales.
6. Authenticate your stock
One of the ways to make your marketplace stand out is by ensuring all your stock is 100% authentic. A number of established players, such as eBay, don’t actually do this, so it’ll give you an instant advantage.
Authenticating all the products you have on sale can be a laborious process - marketplaces like StockX go through their products one by one, but this sort of detail is really tough when you’re just starting out and don’t have much spare resource. For the reputation of your marketplace, though, it can be a great time investment.
Try and get direct access to as much of your stock as possible. Online thrift store thredUP, for example, asks sellers to send their merchandise for assessment before it is sent on to the buyer. Depending on the size and location of your seller base, this might not be possible - but it would be really advantageous.
7. Remember: It doesn’t have to be perfect first-time
Don’t worry: a lot of marketplaces have started small and worked their way up. So when you’re confident you’ve ticked all the boxes above, get the site launched. The sooner your site is out there, the sooner you can prove your concept and attract investment.
The most important thing is that the site is scalable. This means a minimum number of features to function effectively, but with plenty of space for more.
As time goes on, you can add cool little extras to consolidate your customer base and expand your repertoire, but at first, it’s better to get your core offering right. You can always expand it later.