How To Build A Successful Marketplace Startup

How To Build A Successful Marketplace Startup

Last Updated on May 3, 2021 by Editor Futurescope

When we think about successful marketplace startups, the first names that come to our minds are: Amazon, eBay, Etsy, Airbnb. They are the so-called giants of online retail. Marketplace businesses have completely changed the industry and taken it to the whole new level. But what is an online marketplace exactly? And what does it take to build a successful one? In this post we are going to answer these questions and most importantly share the keys to building your successful marketplace startup.

What is an online marketplace startup?

Before we go into the ways of building a marketplace startup, let’s find out what it is. An online marketplace is a digital platform (website or/and mobile app) that connects buyers with sellers. The owner does not own any of the inventory on the platform but helps sellers to promote and sell their products through the marketplace. It was made to facilitate searching needed products and internationalize buying. And the numbers of marketplace startups are growing every year. In the Marketplace100 list you can see a detailed ranking of the largest and fastest-growing marketplace startups and private companies.

Nowadays people can buy and sell everything online. All marketplaces are different but they are divided into 4 main types:


1. Product marketplaces (only physical products)
2. Service marketplaces (selling and buying services)

3. Hybrid marketplaces (physical products + services)

4. Project marketplaces (fundraising platforms)

How do I start a Marketplace?

So we figured out what an online marketplace is and got acquainted with the most popular types. You realised how great they are, how spread it is that people gladly buy something from one another. And now you are probably thinking about starting your own marketplace. And we’ll tell you how to do that exactly, even though it may seem as there are too many details and information and thousands of things to worry about. So don’t worry, we created a step by step information on how to build a successful marketplace startup and make it work.

Step 1: Analysis

Define your niche and choose a marketplace model

As the number of marketplaces grows, the competition increases as well. So it is crucial to distinguish yourself from others. Even if there are thousands of different startups on the market, you still can create something new and unique. Think about your main goal that you want to achieve with your marketplace, research and ask yourself questions like “What do I want to achieve with it?”, ”What problems does it solve?”,  “How will it help others?” etc. 

After defining your niche choose a marketplace model. There are six different monetization models that marketplace businesses use:

  • Commision
  • Listing fee
  • Membership/subscription fee
  • Lead fee
  • Freemium
  • Featured listings and ads

To choose a perfect marketplace model you have to think about both: your marketplace model needs to be easy to scale and also meet customer needs, demands. An important rule to remember is to balance. You have to think about keeping the balance between monetization from your business and what user needs and expectations are and maintain it. If one will be prioritised more than it will fail.

Look at your competitors

Never underestimate the success of others and the mistakes they have made. Analyzing other businesses can help you prevent mistakes and understand more in which direction you need to go. Look at their website/app, target audience, statistics. See what they did good or wrong and learn from it. There are plenty of ways to gather such informations:

  • Meetups and industry conferences
  • Interviews
  • Documentation review
  • And most important – your own research and observation

Focus on solving customer’s problems and organic growth

Trust is the key to not only in personal life but also in all marketplace businesses. Customers need to know that they can trust you and that it’s secure to sell or buy on your platform. The lack of trust is the exact problem that can lead to failure so that is why it is the first thing that needs to be worked out. This can be achieved by different ways, the most important one is transparency of the selling/buying process and direct communication. You have to assure people that they can trust your services and your platform. So create a platform that users will love and be able to trust.
Keep in mind the quote: “What is quality content? Ultimately, the consumer decides.” – Joe Chernov, CMO at InsightSquared. So build trust in your platform and products, find out what your target audience needs and do the best you can to give that to them and meet their needs.

Step 2: Building an online marketplace

Choose between vertical, horizontal or global marketplace

The first thing you want to do before starting developing your marketplace is to choose a vertical, horizontal or global marketplace business to approach. You have to understand their pros and cons to decide which one is ideal for you.

Vertical marketplaces are platforms that sell products from many sources but are focused on specific niche, specific category of products to targeted audience. A vertical marketplace is good because you have just one category to focus on, which helps to present them better and easier to find targeted audiences. Netflix, Uber are good examples of a vertical marketplace.

Horizontal marketplaces are broader than vertical, they offer a good variety of products and services but they all share specific characteristics. They let users buy different products or services using only one platform. Etsy is the best example for a horizontal marketplace, where there are a lot of different products like furniture, clothes or pottery but all of them are handmade. It gives the opportunity to reach a more general audience and have different categories of offers on your platform.

Global marketplaces sell everything regardless of their specifics, characteristics or niche. This marketplace is considered to be the most complex one. It is developed for offering a wide range of products in one place. It is one of the most popular marketplaces because it does not oblige you to choose only one specific item, service. There is no better example than well known Amazon. Even though it started out as an online book selling platform, there is nothing that you cannot find there. Just think about it: is there anything you cannot find on Amazon?

Of course there is no such thing as the one perfect marketplace for you because it all depends on the requirements, your goals and services you want to offer. The best strategy is to start with a narrow niche and then when you’ve achieved success, you can expand your assortment and enter the horizontal marketplace and then go up to the global one.

Seed round

At this stage you already have an idea of the first steps to start a marketplace, what your goals are and why it is important for people. But another influential subject that you need to know about is investors and seed round. Consider investors your friends who are there to help you in starting, developing and expanding your business from the earliest stages to complete success.

Depending on the goal, industry etc. you might need some amount of money in order to implement the idea. This is where the seed round comes. Seed round is a small amount of financing that allows you to hire some people, write a complete business plan or have a little bit of income while working on starting your marketplace. There are a lot of different ways to find investors and it may seem as something difficult to achieve. But we got your back here as well. Finding investors is not an easy task but when you know 7 ways to raise funds for a marketplace startup, it gets easier to choose the right one for you.

Create Minimum Viable Product (MVP)

Minimum Viable Product (MVP) is a version of your product that you present to targeted audiences to get feedback. It simply saves excess work, money and time. MVP can help you see the product’s flaws, find out which features work and which don’t and also prevent problems. You can test out what users really need and want and also add additional features later. Planning and building your MVP is vital because you will realize if your idea is worth investing in the first place and the actions to take to make the best of your startup.

Step 3: Launching your marketplace

The sooner you start working on your marketplaces and launch it, the better. But the main thing to remember is – don’t put your expectations too high. A lot of people get discouraged after the first launch because most of the time expectations are too high. You can’t expect your business to become successful overnight. In addition, when you expect too much from your product you might put off for later the launching itself, which can result in not launching at all. Developing a marketplace can bring up a lot of thoughts and details, so start by thinking in small aspects and steps. The launching day doesn’t define your whole business and it doesn’t mean it cannot be successful.

“If you launch and no one notices, launch again. We launched 3 times.”

Brian Chesky, founder of Airbnb.

Step 4: Growth

After finally launching your marketplace you have to start thinking about ways of growing it. You’ll want to have detailed information about your users, where they come from, what they need to make your marketplace better for them. The easiest way is using Google Analytics and making some calculations.

Attracting more new customers is one of the keys to growing a marketplace. You can use viral marketing which is about encouraging your users to bring in new users to the platform. This method is effective and doesn’t require more work from you.

Another way is using SEO (Search engine optimization) and Content Marketing which will help other people find your platform easier. You make yourself more visible which helps users find desirable products quicker and easier which results in better experience for them. Also if you have capital at your disposal, you can make growth quicker by buying ads on Google for example or banner ads which are also popular ways of growing your marketplace.

Step 5: Always improve and learn

Always developing your products and services is another important aspect to remember. Yes, your product has to be good from the start but if it stays always the same it loses its relevance. The more people use it the more it has to get better. It is important to connect and communicate with your users, conduct surveys and get responses. In this way you’ll know what they expect, which features are significant and which aren’t. This will help you move in the right direction. Knowing how to build and develop your marketplace is good but maintaining it is what is the most difficult part. Technologies and trends improve and change every year and to stay relevant in your niche you have to always adapt to them. It’s the time for thinking about all those advanced features, ideas and improvements your marketplace needs.

And to the conclusion, never underestimate the work you’ve done regardless of whether it was successful. It is better to try and fail than not to try at all. And remember that the commitment to improve, learn from mistakes and try again is what counts in the long run.

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