How To Start A Marketplace

how to start marketplace

Are you thinking about how to start a marketplace online?

Consumers are now spending close to 6 trillion dollars a year on marketplaces. Globally, this represents approximately half of all online sales. That’s a lot of money! There’s a good chance you bought, booked, or sold something on a marketplace platform without giving it much thought on how to start a marketplace.

The reason the marketplace industry is skyrocketing is that they cover a wide range of online sectors:

  • Large traditional online malls like Amazon and AliExpress
  • Booking and rental platforms like Airbnb or Eventbrite
  • Service marketplaces like Upwork and Taskrabbit
  • Digital software and asset marketplaces, gaming and music platforms, and more


Why Start A Marketplace?

The main reason is called the network effect, which is built into the marketplace concept and connects the two sides of a transaction (which is also why they’re called two-sided marketplaces). The network effect allows you to build a scalable firm with various revenue sources without the hassle of managing your inventory and transportation.

As a result, marketplaces are fundamentally different from online stores. To grow a typical e-commerce business sustainably, you need to be in the “Goldilocks zone,” where your free cash flow, operating expenses, and inventory are in harmony. You may lose your business if you don’t.

Marketplace owners face unique challenges, but excessive growth is unlikely to be your primary concern. If you run an e-commerce company that sells guitars online, you may be able to grow more quickly by adopting a marketplace model and allowing others to sell guitar accessories on your platform. Adding a few more staff members or acquiring many new items has resulted in a significant increase in business for your company.

An advantage of a marketplace business over traditional e-commerce is the sense of community built into the platform due to the underlying network effects. Think of the hundreds of unofficial Amazon seller forums, Uber driver clubs, and Aliexpress buyer forums as examples of how the community can self-organize and establish its own ecosystem around your marketplace.

Launching a marketplace is a great way to capitalize on network effects and establish a vibrant e-commerce ecosystem or expand your business without adding a great deal of funding, staff, or inventory.


1. Most Important Parts Of A New Marketplace

To begin with, the easiest way to waste time, money, and effort when developing an online marketplace is to include features that your visitors do not need. I’ve seen a lot of marketplace projects that spend vast amounts of time in development just never to launch or to discover that the users want a whole new set of features a week after launch.

Also, I’ve seen marketplace platforms launch in a matter of weeks with only the basics in place – and then evolve as they grow. This has usually worked much better in the long run. The best advice I can give marketplace entrepreneurs is to start with the basics and launch an MVP as soon as possible, and then improve the platform as the business grows and the requirements become clearer.

Here’s a quote from one of our implementation partners who agrees:

“The best way is to start with a small feature set and only build the essential functions that your platform needs. Launch the platform once you’ve collected enough funds to make it functional. If it achieves popularity among consumers, you will begin to notice early benefits and will have more time and freedom to build additional products and improve your platform.”


What Are The “Must Have” Features

Depending on your industry, I divide functionality into three broad categories: features for vendors, features for customers, and features for the platform itself:


Characteristics Of An Effective Seller

Your sellers want to sell their things and get paid for them. It involves listing, selling, and shipping items efficiently. The seems simple on the face but lets break it down:

  • Optimize your onboarding process to make it easier for your sellers to get started. The easier it is to onboard new sellers, the more likely they are to join your company.
  • A good onboarding process includes clear terms and informative landing pages, a simple signup process, and an easy way to import and manage the product catalog.
  • In your marketplace, what kinds of products will be available? Don’t ask your sellers to do more work than is strictly necessary to publish the product – optimize product management features for this product type.
  • Your marketplace should make it as simple as possible for your vendors to receive and process orders. Notifications are necessary to ensure that orders do not go undetected.
  • Provide your vendors with the most basic sales and marketing capabilities, such as discount code administration and product promotions, to make selling and marketing easier.
  • Last but not least, ensure that your merchants can communicate freely with you and your buyers. Start with a private message system and public product questions.


The Buyer Personas

When you shop on Amazon, what is your goal? You can quickly and conveniently locate, purchase, and receive the things you need. Make it as easy as possible for your buyers to find products and browse categories. How is it simple? It is wise to start with a functional search bar (with a low bar), faceted product filters, and information-rich product pages.

The easier it is for a buyer to place an order on your platform, the higher the likelihood the customer will complete the transaction. The checkout process should be ideally modern, one that allows you to make a single payment for products from several suppliers.

Payment options should be convenient for your customers. Stripe is excellent, but if your customers want to pay cash on delivery, it’s pointless. You should have answered this question during your market research since your region and sector usually determine it. In most cases, a split payment gateway and/or a manual processor, such as cash on delivery, are required.

Today, order management is just as critical for the buyer as it is for the supplier. Customers can easily check and track their orders, as well as receive notifications when the status changes.

It cannot be overstated the importance of communication. Your consumers should be able to ask your sellers pre-sales questions, contact them with order-related questions, and provide comments. In this way, you ensure a positive buyer experience and boost retention.


The Purpose Of Your Platform

The purpose of your platform is to connect buyers and sellers – and earn cash to keep your business running. You will need the appropriate technologies to support your marketplace operations and business model. In addition to what I’ve said so far, you’ll need a way to monitor, manage, and moderate everything that happens on your platform.

Among your duties as a marketplace operator are helping sellers set up and maintain their stores, approving and updating individual products, and searching for and monitoring orders. Additionally, you’ll want to change the look and feel of the marketplace without touching any code. With this, you can launch new items and categories, run marketplace-wide specials, and highlight your best sellers.

I mentioned payment processing earlier. Depending on your business model, you may need to manage buyer-to-seller payments and seller fees, manual vendor payouts, and other types of payments. “When it comes to payment gateways and payment providers, you must ensure that your platform offers a variety of possibilities. It is critical not to become fixated on a single strategy because you never know what you will require as you scale. So, while selecting a platform, make sure options are available.”

The same is true for shipping and logistics. The platform should allow sellers to manage shipping options and make it clear to purchasers where they ship to and how much it will cost. A direct link with third-party shipping providers and APIs is not required; automation can be added later. At the very least, your vendors should be able to enter their delivery prices manually.

Don’t Rule Out A Mobile App

The benefits of a mobile app are numerous:

  • Easy and fast notifications
  • Direct communication and engagement
  • Reporting tools on-the-go
  • Complex selling and marketing options
  • Increase brand awareness
  • Take your business to the next level and stay ahead of competitors

While it’s achievable to create your own mobile app, it’s not essential to get started.


2. Know Your Audience

Whether you’re building a marketplace website from scratch or switching from traditional ecommerce to marketplace commerce, knowing your audience is critical. According to CBInsights, the number one reason startups fail is “lack of market need” (42 percent of all cases examined). Starting an online marketplace without a strong grasp of your target market and your consumers’ demands is a fantastic way to learn a bitter lesson, but not a great way to start a business. Here’s when market research comes in handy. To establish a viable marketplace business, you must first understand the market, your users, their needs, and the answer they seek.


Research The Market

If you’re going into anything, you should know what you’re getting into. What does the industry look like? Based on the size and volume of the market, determine if the company plan you are considering is viable. If you want to charge selling fees but there aren’t enough transactions, you’ll have to find a different business strategy. Are there distinct niches within your target market? Knowing the market segments will make it easier for you to choose the most appealing specialization. Niche businesses have grown into today’s large marketplace businesses:

  • Amazon began as a modest internet bookstore.
  • Etsy began as a makers’ community forum.
  • Eventbrite initially targeted the IT community.

No matter what business you are in, you will face competition – either direct or indirect. Find out who your competitors are and how long they have been in business. Studying the competition can help you better understand the marketing methods and business models used in your target market, as well as the strengths and weaknesses you may exploit. Observe the market’s patterns – is it rising or falling, expanding or contracting? You can take advantage of large shifts or trends, such as technological advances, regulations, or changes in customer behaviors if you recognize them.


Decide On A Target Market

You do not create your marketplace for yourself; rather, you do it for the people. You can’t solve their problems if you don’t know who they are. It’s crucial to identify your target clients (including developing personas and researching the market opportunity), then conduct a competitive study and compile a list of potential users (both supply and demand). Finally, poll or interview these prospective clients to identify the ‘Blue Ocean’ opportunity.

Start with the basics: who are your target users, and what are their primary goals and challenges? Who do they shop with, where do they shop, and why do they shop? What motivates them? What drives them?

Now you can create a few easy buyer personas to understand your target audience better. Since you’re making a two-sided marketplace, you’ll have at least two unique user groups:

Your customers and sellers have their own goals, obstacles, and incentives. Make sure you understand both perspectives.


Figure Out Their Problems & Solutions

You now know what the market and the consumers want, so it’s time to research the solutions that can help them solve their problems. Determine what the most common pain points are for your target consumers and how you might alleviate them. Are purchases made online by your prospective clients? If so, where, how, and why are they doing it? How satisfied are they with their purchase? Is there anything better?

What about your vendors? By now, you should have a good idea of who will sell their products on your marketplace, so contact them right away! Ask them how they now sell their items, what other platforms they use, and what makes them happy and unhappy. What can you do to improve their experience?

You will better understand your users’ needs as well as the strengths and weaknesses of your competitors when you ask these questions – and as a result, you will be able to design a better solution. A solid understanding of your target market and the people you want to serve should come out of your market research. It will help you select a market niche for your marketplace platform, develop a solution that addresses your users’ concerns, create a viable business model, and plan a marketing campaign that will set your platform apart from the competition.


3. Select A Way To Make Money With Your Marketplace

The third step in how to start a marketplace is choosing a business model.

Previously, we learned that most startups fail because they produce things no one wants. What is the second failure reason? Money ran out.

It’s exactly right – simply creating a product people need isn’t enough. You must find a way to make it profitable – and keep it profitable for the long haul.

Here are some interesting facts. Amazon reported its first quarterly profit in the fourth quarter of 2001, more than six years after it was founded. It took Etsy five years to generate a profit in 2010, while eBay has (supposedly) been profitable since its inception, thanks to listing and selling fees. It’s a good idea to create a solid business strategy BEFORE launching your online marketplace, rather than afterward, regardless of your industry or history. It depends on a variety of factors how your market will make money. Here are a few marketplace business models to consider.

Joining Fees

You charge your sellers a signup fee when they sign up (duh!) on your marketplace platform. You can charge signup fees even before you have a booming marketplace, as long as you can sell your vision to new merchants. Signup fees are easy to collect since you can use any conventional payment method or request payments manually (e.g., via PayPal, bank transfer, or in-person). The most significant disadvantage is those signup fees don’t scale, so once the seller is on your platform, you’ll need to find other ways to monetize.

To grow a marketplace, you have to be in the middle of the transaction. With your audience, inventory, and volume, your business will grow. If you don’t do this, you won’t have a sustainable marketplace – and your platform won’t flourish. In order to charge merchants an upfront signup fee, you will need convincing proof that your platform is worthwhile.

Due to scalability concerns, signup fees are rarely used for monetization by the major marketplace operators. You can, however, impose a signup fee to weed out less serious dealers. Vendors on Google Play, for example, pay $25 to sign up – yet Google does not profit from these fees.


Subscriptions (Annual or Monthly)

You don’t need me to tell you that subscriptions are king. The global sharing economy is supported by subscription-based businesses. Gartner predicts that by 2020, all new software industry entrants and 80% of existing vendors will offer subscription-based revenue models. Establishing a monthly fee for your vendors is one of the best ways to earn recurring income and keep your marketplace running.

The first rule of subscriptions is to ensure that your sellers receive more value from your platform than it costs them to remain subscribers. When they make $199.99 per month, they don’t mind spending $19.99 per month.

Technically, subscriptions are more difficult to implement. You’ll also need a payment gateway that accepts subscription payments, such as Stripe (you can handle manual invoices while you’re an MVP, but good luck scaling this approach). The effort is worthwhile, however. If you combine the concept with multiple tiers that allow sellers to unlock more features (such as advanced selling tools) or reduce their selling fees, you get a continuous recurring stream of revenue.

Amazon, for example, offers two plans: an Individual plan with an additional $0.99 per item selling cost and a Professional plan for larger sellers at $39.99/month.


Listing Fees

You can charge sellers a listing fee when they list their items on your platform. The listing fee can be flat or variable depending on the price of the product, the category into which it is inserted, and other factors.

As long as they make a profit, sellers will typically accept a minor insertion charge to list their items. Listing fees are relatively easy to collect – but they are much more scalable than signup fees. Avoid friction by delaying the charge until after the product has been sold rather than doing it at the time of publication.

Etsy, for example, charges a $0.20 insertion fee but only receives the listing fee if the item is sold in multiple quantities.


Selling Commissions

Commissions are everywhere – and for a good reason. This is an excellent method of monetization. As soon as a seller receives and processes a new order on your platform, you charge them a selling fee. The more orders your marketplace receives, the more revenue you make from sales fees.

That sounds amazing, doesn’t it?

Selling fees, on the other hand, are much harder to establish than other costs. You’ll need a payment gateway that allows you to divide buyer payments so you can collect your sales commission at the time of sale (unless you want to manually collect sales commissions, which you probably don’t – for a variety of reasons, including legal reasons).

For you to make enough revenue from minor sales fees, you need a steady flow of new orders. When you’re just starting out, it can be difficult. However, it scales extremely well. If your platform gains enough popularity and you can automatically collect selling fees, you have a nice business going.

You can find examples of selling fees on today’s most popular markets, including:

  • Amazon charges a fee based on the category of the product.
  • Etsy charges a 5% “transaction fee.”
  • Envato chargers charge vendors 12.5 percent to 55 percent of their revenues.
  • Airbnb charges hosts a “service fee” of 3% plus taxes.


More Examples of Business Models & Monetization

These are only the most common types of marketplace businesses, but you can do more, for example:

  • Payment processing fees are collected
  • Promote the use of featured retailers and sponsored products
  • Manage your own advertising campaign

I discussed these and other monetization strategies in my earlier blog post: 10 Revenue-Generating Marketplace Business Models.


4. Plan Out Your Operations

Creating an online marketplace website is one thing. Successfully managing a marketplace business is quite another matter. Even a simple e-commerce firm can be complicated at times due to the amount of information that you must handle on a daily basis. The nature of mtwo-sided platforms makes marketplace operations more challenging. As a marketplace owner, you will face the following challenges every day:


Seller Management

Your new marketplace, in this case, will be based on sellers, so you will interact with them frequently. This includes everything from assisting new merchants in getting started to keeping existing merchants satisfied and profitable. You must first convince your vendors to join your platform. Your unique value proposition should have been developed during your market research and planning.

You now need to build a series of landing pages that explain how your marketplace works and why merchants should join. After that, you will need to complete a shortened signup process. Build your registration flow by determining who is eligible to apply and what information you need from them.

Would anyone be able to sign up, or will you only accept vetted sellers? You should have a mechanism for assessing applications if you want to keep freeloaders out. You need to either build payment processing into the registration flow or have a mechanism to collect payments manually by connecting directly with the vendors if you are collecting signup fees or subscriptions. Decide how much control your sellers will have over their stores, how their stores should look, and how customers can find them.

As soon as a new seller signs up, you’ll want to make it as easy as possible for them to import their product catalog into your platform.



As you figure out how to start a product marketplace, you’ll be pleasantly surprised to hear you don’t usually have an inventory of your own. To manage the products sold by your merchants, you will need mechanisms in place.

You can organize your product catalog in two ways:

On markets such as Etsy or eBay, each product belongs to one seller; on platforms such as Amazon, each product belongs to multiple sellers. Different individuals can sell the same product.

The way you structure your catalog will affect your choice of software, the appearance of your marketplace sites, and how your sellers publish and manage their products. Now you want to make it as simple as possible for new vendors to sign up for your marketplace. This can be achieved either by providing a bulk import feature or by providing an onboarding service where you handle it for them. If most of your sellers are established ecommerce business owners, it is a good idea to let them import their catalogs from other platforms where they sell, such as Amazon or Shopify. Optimize your product listing forms by removing extraneous elements to make it easier for vendors to list products. Keep in mind that different products may require different sets of data if you plan to carry a variety of product categories.

To maintain the quality of listings and keep scammers at bay, a product moderation system or a collection of the content may be necessary as your platform expands.


Payment Processing

It is always more difficult to process payments in a marketplace than in a typical online store. You’ll need payment gateways that allow users to buy from multiple merchants at once and divide payments during checkout.

Today, more payment platforms accept marketplace payments, although installation may be challenging. In addition, you will be handling various types of payments. Customer payments to sellers for orders Seller subscription and fee payments to your platform Payments from your platform to sellers. Various payment flows have different implementation requirements.

So be sure to know which payment gateways you’ll be using and how you’ll be using them. If you can’t find and get an appropriate gateway to work with your marketplace software, you are in big trouble. Additionally, as the owner of a marketplace platform, you may be responsible for payment taxation, invoicing, and reporting. Depending on your location and industry, these criteria will vary. We will examine payment processing in more detail in the next chapter.


Logistics and Shipping

Even though you don’t have to deal with inventory in your new marketplace – your sellers do, so your platform must allow it.

First of all, you need to decide whether you want your vendors to ship your items for you or if you want to handle it yourself (like Amazon FBA). If you ship yourself, logistics will be more difficult since you will have to collect merchandise from your sellers, store it, and then ship it to the buyer. Estimating shipping prices and times, as well as tracking the item at each stage, will be more challenging in this case.

Sellers will need a simple way to manage delivery policies and communicate them to customers if you make them responsible for shipping. Flat-rate, price- or weight-based shipping rules, or bespoke per-product shipping rules can be used, but make sure your sellers can simply specify different shipping rules to different regions via multiple carriers.

Regardless of the shipping method you choose, there are a few more questions to consider: how will you handle tracking information? Do you need third-party technologies such as shipping APIs? What will you do to establish and enforce SLAs across the marketplace?

The shipping cost and speed have an impact on marketplace conversions, so getting them right is crucial.



The first step is to get clients to buy from your platform. The next step is to ensure that your sellers deliver. When the vendor receives a new order, the sooner they can ship it and keep the consumer satisfied and willing to buy again. Therefore, your platform must notify sellers of new orders and make it easy for them to access, manage, and process the orders.

In addition, if you allow clients to purchase from several merchants at the same time, you need to tell them how different products within the same transaction are shipped. In order to ensure that the customer is always aware of the status of the order, you can offer your sellers a method of communicating the tracking number with the client.

You cannot avoid delays and problems; have a plan in place to deal with them. It is important to open a line of communication between the client and the vendor so that they can work together on a solution. Eventually, you may wish to develop your own consumer and seller protection programs, similar to eBay’s Money Back Guarantee or Airbnb’s Host Protection Insurance. If you don’t do this, you may encounter disagreements, refund claims, and lawsuits.


Marketing & Content Creation

As a result of network effects, your platform will gain traction, but you must actively market it – particularly in the beginning. How do you begin? When you’re just starting out, the first question on your mind is how you will attract and keep new merchants and customers. This topic will be covered later in this guide. After you’re up and running, you’ll need to figure out how to keep your marketplace growing. Search engine optimization, organic and paid marketing campaigns, and other business growth initiatives can help you achieve this.


Customer & Seller Relationships

New customers are no longer enough; you must also keep them satisfied, loyal, and coming back to your marketplace on a regular basis. Maintain a plan for communicating with your users and assisting them in answering inquiries and resolving problems on a daily basis.

You’ll face the following challenges:

  • New merchant onboarding and responding to their inquiries
  • Responding to order-related inquiries and providing technical assistance
  • Resolving disputes between the seller and the customer

To limit your own involvement, allow customers to ask vendors questions and engage with them before and after placing an order. The more communication options you provide, the more likely it is that the issues will be resolved without your involvement. Some of our clients want a mechanism to filter customer-seller communications so that they don’t try to off-load the transaction. The best approach is to focus on giving both parties the best possible experience on your platform, so going around isn’t worthwhile.

The importance of mass communication cannot be overstated. Your sellers will want to know about new features and policy changes, and your customers will want to know about a marketplace-wide discount campaign you’re running this month. Not to mention the post-transaction communication. Allow and encourage it to ensure repeat purchases, collect reviews, and establish confidence among your platform’s users and sellers. You will be able to convert your marketplace from a simple transactional platform to a business that clients enjoy interacting within the long run.


5. Starting A Marketplace With The Right Payment Solution

A marketplace platform that cannot process payments safely, securely, and reliably is not viable. According to McKinsey, the global digital commerce volume surpassed $3 trillion in 2017 and is expected to double by 2022. The global payment ecosystem includes your marketplace, but when it comes to payment processing, marketplace firms face a few challenges that ecommerce businesses do not.

As a marketplace platform owner, you are already aware of the numerous payment types that will be accepted:

  • Payments made by consumers (customers purchasing products)
  • Payments to sellers (signups, listings, subscription fees, marketing)
  • Payments to sellers (payouts)
  • Other payments (third-party advertisers)

For marketplace owners, customer payment processing is the most challenging task because it involves three parties: the customer, the seller, and the platform.

Order payments from customers to merchants can be received in three ways:

Direct Payments

With direct buyer-vendor payments, your platform is not involved in the transaction at all. The direct payment model requires the least platform engagement, but there are some limitations. Your platform does not own the transaction, so your options for collecting transaction fees and processing returns and refunds are limited. Direct payments also prevent your customers from purchasing products from multiple merchants at the same time, since they need to go through the checkout process for each individual vendor. Additionally, they are less secure for all parties involved, which makes it easier for dishonest buyers and dealers to take advantage of your platform.

Accumulated Payments

In aggregated payments, your platform collects cash from buyers and distributes it to sellers. Aggregated payments enable single checkout and give you ownership of the transaction, but they require more work in maintaining your vendors’ finances and making frequent payments.

The payment aggregation process will only become more complex as the payment industry becomes more regulated. The payments can be split or made in parallel. This leads to parallel (or marketplace) payment processing, whereby the payment processor splits the customer’s cash at checkout and distributes it among all vendors and your platform. Payment processing solves all of the problems associated with direct and aggregated payments while also transferring liability and compliance burdens from your firm to the payment processing company.

Implementation complexity and a shortage of marketplace processors remain the major concerns with parallel payment processing. However, things are improving. A decade ago, PayPal Adaptive was the only marketplace payment option that supported split payments. Marketplace payments are accepted by hundreds of payment processors around the world, with the most popular being Stripe Connect, PayPal for Marketplaces, Adyen Marketpay, and Mangopay.

Marketplace Payment Options

Choosing the right payment method for your marketplace is crucial. It is important to consider the features you require, the payment provider’s availability in your region, and, of course, the costs.

The following are a few tips from Paybase, another well-known marketplace payment solution:

“When deciding on a payment provider, it’s critical to consider your company’s specific requirements and interests. What each provider has to provide varies. Some provide a plug-in solution that is simple to integrate but will struggle to handle anything that requires a degree of customization. Others may provide wider scope, but you as a business may be required to further develop your product/service.

What’s most important is that you don’t underestimate the amount of flexibility you’ll require. Consider what you’ll need in the future and whether each payment source will allow you to do so.

Furthermore, it is critical to assess the provider’s quality of financial crime prevention, since the last thing your company needs is high levels of financial crime on your platform owing to an ineffective alerting system.”

You should ask yourself the following questions before you begin building your marketplace:

  • As the owner of a marketplace, what types of payments will I have to accept?
  • What payment options are available to me in my area?
  • What would payment processing cost me, and how should I account for it in my business model?

The third and last question is equally important to the first two.

Having no payment processing at all isn’t a good idea, nor is using a business strategy that charges your sellers a 5% selling fee only to discover that you have to pay the same amount for payment processing.


6. Select The Best Marketplace Software

Now you have a viable company concept and an operational plan, as well as an idea of which payment gateway to use and what features your marketplace platform will require, it’s time to choose the best software. Marketplace platform software can be categorized into three categories: cloud or hosted platforms, standalone solutions, and multi-vendor CMS extensions. Throughout this article, I do not discuss the creation of a marketplace website from scratch. Although possible, it’s usually not a realistic option for small and medium-sized businesses due to the complexity involved.


Cloud-Based Marketplace Solutions

A popular marketplace SaaS is usually the first thing a new marketplace entrepreneur considers. Cloud marketplace solutions are simple to implement and require little technical expertise. Many of them also offer free trials so you can spend some time experimenting with the platform to ensure it’s right for you. The biggest disadvantage of cloud marketplace platforms is their limited customization options. You can’t change it if it doesn’t fit you right out of the box since you don’t have access to the code. Separate marketplace software is a better choice if you want something more personalized.

Self-Hosted Marketplace Software

As opposed to standard e-commerce, these systems are designed specifically for marketplace commerce. Standalone marketplace software allows for greater customization and change because you have complete access to the source code. Most times, you will also host the platform yourself and have complete control over the marketplace experience.

Here are some of the most popular standalone marketplace solutions:

  • Multivendor
  • CS-Cart
  • X-Cart
  • Multivendor
  • Yo-Kart
  • MultiMerch
  • Standalone

What are the disadvantages of a standalone solution? Self-hosted software can be used to build a marketplace platform, but you will need some technical expertise. No matter how user-friendly it is, software must be hosted, maintained, and updated regularly. In order to make your life easier when working with self-hosted software, we always recommend having a developer on your team or partnering with an agency.


Multiple Vendors

In addition, you can use a standard CMS such as WordPress, Magento, or OpenCart and add a multi-vendor extension on top. That sounds like a good plan, doesn’t it? As a result, you will be able to take advantage of all the benefits of free and open-source CMS while also powering your marketplace. Things rarely go as planned in reality. Content management systems are designed to be used on regular websites or for e-commerce. It is hard, time-consuming, and error-prone to convert a traditional CMS into a marketplace platform.

Consider these software combinations if you decide to give it a shot:

  • A few options include WordPress + WooCommerce + Dokan, WC Marketplace, WCFM, WC Vendors, and YITH.
  • OpenCart + MultiMerch, PurpleTree, or Waabay PrestaShop + KnowBand or Advanced Marketplace
  • Using Magento with NextBits, CreativeMinds, Webkul, or Apptha

You must have a developer on your team who is familiar with the underlying system and two-sided marketplaces. You’ll need to put in a lot more technical effort than you would with SaaS or standalone marketplace software. The MultiMerch multi vendor extension for OpenCart has been available for years. Overcoming the CMS’s limitations and compatibility concerns with third-party themes and plugins has been an ongoing struggle. Any CMS will have the same issues.


What Is The Best Marketplace Software

Isn’t it true that the options are endless? You should first decide which type of marketplace software you want – cloud, standalone, or CMS.

The following are my general guidelines for selecting one of the three solution groups:

  • If you want to create your marketplace as quickly as possible but lack technical knowledge, you should consider using a cloud/SaaS platform.
  • If you want to get the most bang for your buck and own your platform completely, consider standalone marketplace software.
  • Consider multi-vendor CMS extensions if you’re already using the underlying system (for example, if you run a Magento store) or are prepared to invest heavily in custom development and have the necessary resources.

When selecting a software solution, consider the following factors:

  • Start with the type of marketplace you’re creating. Do you sell goods, services, or reservations? Software designed for a product marketplace will not work well in a service marketplace, and vice versa.
  • Make sure your platform has the features you need. Ensure that the solution meets your requirements – not just in terms of essentials, but also payment processing, logistics, and other critical elements. Can your team modify it if it does not offer the feature you require?
  • Consider the user experience and reliability. This is sometimes forgotten by novice marketplace owners, yet it’s as crucial as everything else. Make sure the solution not only provides the capabilities you need but also gives a fantastic user experience. If your marketplace is hard to use, the rest doesn’t matter — your users will jump ship as soon as there’s a better alternative.


7. Start A Marketplace With The Right Team

Developing software would seem to be all that is needed to launch a marketplace platform. Unfortunately, no. If you’re going to pull it off, you’ll (usually) need a superb team.

You will need the following skills to run an online marketplace:


Design & Development

Regardless of which software you choose, you will need some technical knowledge to set up, install, customize, and maintain your marketplace platform.

The following list illustrates how much technical expertise you’ll need to work with various types of marketplace software:

  • Developers will have little to no experience with cloud systems.
  • Self-hosted marketplace platforms will require at least some technical know-how.
  • Many vendors’ CMS expansions will require A LOT OF CUSTOM DEVELOPMENT.

To create a marketplace website, do you need to be a developer? No, however, having a developer on your side will make your life much easier. When it comes to design, things aren’t as challenging. Fortunately, most marketplace solutions will provide you with ready-made templates instead of having to develop everything from scratch in 2019. Nevertheless, you’ll need some design skills and tools to customize your platform and create engaging marketing materials. Investing in a UX designer will help your marketplace stand out in terms of user experience, assisting with acquisition, retention, and conversion.


Sales & Marketing

Your new marketplace won’t attract customers and vendors on its own. You’ll need to actively promote your new marketplace platform to get it off the ground. Sales and marketing play a key role here.

To get your marketplace going, you will need to find your first sellers and customers and convince them to join you. To gain traction and expand your new platform, you will need to increase brand awareness. It is crucial to understand the fundamentals of user acquisition and growth, such as organic and paid acquisition, building a strong social media presence, community management, email marketing partnerships, and promotions.

Additionally, copywriting is an excellent marketing skill. If you want people to join you, you must be persuasive on your website and in your advertising. You may also need copywriting skills to help your vendors create product descriptions that sell. All of this involves learning whatever it takes to keep your business alive and thriving.


Run Your Marketplace Daily

By now, you’ve seen what it takes to run a marketplace daily – we discussed this in earlier sections:

  • Maintaining vendors and keeping them happy, as well as tracking users, products, and orders
  • Providing customer service and technical support
  • Managing payments, documentation, and your workforce

As the founder of a marketplace, you will be in charge of the operations from the start. While much of the design and development and some marketing can be delegated, you are ultimately responsible for managing your marketplace. Therefore, the operation is entirely up to you.



The use of a freelancer is a great way to supplement your own skillset without making a significant investment or committing to a long-term commitment. Freelancers come in a variety of shapes and sizes. There are experts, interns, teams, as well as people for long-term collaboration and one-time projects. If you need something done quickly without having to master the expertise yourself, you should hire a freelancer.

Additionally, they are scalable. How is your company doing? We should hire more freelancers. Do you feel down? You should reduce your workload. You can find freelancers on large freelance websites such as Upwork and Fiverr, smaller platforms such as CloudPeeps, and forums on Slack, Facebook, and LinkedIn. One disadvantage of using freelancers is that you must fully understand and specify your requirements – otherwise, you could lose a lot of time and money. The more precise the specification, the larger the project you will delegate.



Try partnering with software development and marketing firms to unload a large amount of work at once if you have a larger budget. By using an agency, you can focus on your marketplace operations instead of managing individual freelancers. A software agency can handle all of your technical needs, while a marketing agency can handle most of your marketing needs.

It is more expensive and more time-consuming to work with an agency. When it comes to switching agencies, it’s more complicated than switching freelancers if you’re not a good match or need to reduce your budget. It is difficult to find a reliable agency. For our clients, we offer a list of vetted MultiMerch implementation partners who can take on any bespoke marketplace project and complete it on time and within budget.


Full-Time Employees

It is challenging to hire. As your company grows, you will likely begin hiring full-time employees. The benefit of full-time workers is that they become part of your team and bring consistency, which is crucial for customer-facing jobs. You can expect them to devote 40+ hours per week and become immersed in the culture of your firm. The disadvantages of full-time workers include the cost, the effort required to manage your staff, and the loss of flexibility.

Especially for specialized professions, full-time employees are hard to find, and the recruitment process is time-consuming. Alternatively, you could hire generalists, such as a versatile marketer or a business developer, and then supplement the team with freelancers or agencies for specialized projects. Although generic hiring is less expensive, it typically performs worse than hiring people who specialize in a market. Lastly, you should also ensure that the people you work with believe in your idea and aren’t just there for the money.

So what should you look for when hiring new employees? Look for experience with two-sided platforms and marketplace commerce. Both freelancers and employees are affected by this, as well as agencies. The more experience they have working with firms and platforms like yours, the more valuable they will be to your project.


Build Your Marketplace Platform

You now have everything you need to start developing your marketplace website. How do you go from buying software to establishing your market? To build a marketplace, you have to have a lot of knowledge!

You have two main options:

  • It is possible for you to do it yourself. DIY will be the most obvious option – especially if you’re just getting started.
  • With fully hosted and managed marketplace solutions, this strategy is most effective. Running your marketplace in the cloud will allow you to focus on marketing and operations because you’ll have taken care of most of the technical and design aspects.

Be sure you have the time and tenacity to manage everything that comes with running a marketplace if you decide to DIY it. Take advantage of any assistance you can obtain, from tools and services to mentorship and advice.

According to my experience, building a marketplace platform can take anywhere from a day (for hosted SaaS systems) to many months or longer for custom builds.

You can make the process go more smoothly by doing the following:

Specify What You Want

Implementing a complicated project is more challenging. Platforms for marketplaces are the most complicated part of e-commerce. To avoid disaster (e.g., going broke too soon due to cost and time overruns), prepare a functional specification that specifies your project goals, requirements, and implementation timetable. Your specification should be more precise the more technical labor your project requires.

Having detailed specifications in place before working with freelancers or agencies can save you months of wasted time:

  • Hold yourself and everyone else accountable by breaking the project down into milestones and tracking progress regularly.
  • Include your MVP and launch requirements in the specification. It also provides an estimated deployment and launch date, as well as the features that are absolutely necessary for launch.
  • The more precise your schedule, the better. This is more helpful than “We want to launch our marketplace within the next 6 to 12 months.” “We need the initial MVP ready and deployed on staging by June 1, and do a soft launch with early users on July 1.
  • Ensure that everyone involved in the project understands the requirements and the timetable – and follows it.


Become Familiar With Project Management

Your marketplace will be successful if you have at least basic project management skills. Understanding the basic ideas will help you stay on top of things, but you do not have to be a project manager. A project manager keeps you updated if you work with an agency. If you work with freelancers, you will be your own project manager.

To make changes to a project, you should always examine your technical specifications and timeframe and consult with all parties. Changing one milestone affects the entire schedule in the long run. Plan for when things don’t go as planned – because they will. It is more likely that something will go wrong with a large project, from inattentive freelancers to complex features taking longer than expected to develop.


Follow Excellent Development Techniques

Your team will save time and ensure the successful completion of the project by following the appropriate development and operations procedures. If you don’t have to create the best development team, you should focus on the fundamentals. Use tests, version control, and issue tracking extensively throughout the development process. Use separate server instances for development, staging, and production, and don’t deploy new software upgrades on top of your live marketplace without first testing them. It’s easier to avoid breaking things than to fix them later.

Always maintain up-to-date, automatic backups – and a way to restore them if necessary. Whenever something goes wrong (which it will), you want to get operations up and running as soon as possible. It’s a fantastic idea to follow KISS when developing your platform. “Keep it simple, stupid” when designing, implementing, and deploying marketplace software.


When To Go Public

Lastly, keep in mind that marketplaces take time to perfect. Amazon, like Rome, was not built in a day. For your new marketplace to continue iterating and improving, you will need real users and genuine feedback. Among new marketplace owners, the two most common mistakes I find are launching too soon and not launching soon enough, the latter being the most serious. Test your marketplace with real consumers as soon as possible and use the feedback to iron out all of the kinks by the time it’s ready for the grand opening.



8. The Launch Gameplan

So, how do you launch your marketplace? It’s a brilliant idea to launch the new marketplace in two stages: soft and hard.


Plan Your Launch NOW

The earlier you begin preparing for your launch, the more time you’ll have to talk to people, collect feedback, and improve your marketing and product. Plan your launch by defining the launch timeline, marketing messaging, and major platforms. Various industries, geographies, and market types require different launch methods. Try to select the most appropriate one.

While your marketplace is still in development, start building anticipation among your target buyers and merchants. You already know who your users are if you have done your market research (which you should have done by now). Get in touch with them – directly, on social media, and through advertisements.

Begin building a mailing list well before the main launch – this will allow you to gauge interest and give you an early adopter base to reach out to. When your platform is ready for testing, you should have a group of people familiar with you and eager to participate.


Release A Beta Version

No matter how detailed your specification and how well-designed your solution is, you will encounter a number of roadblocks at first, ranging from software errors to usability issues to missing or lacking functionality.

  • Do a limited release before your grand opening to test things out and ensure everything works properly.
  • Introduce your platform to early beta users as soon as you have your MVP ready, if possible.
  • Make use of your mailing list and direct communication with users to identify a few of the most enthusiastic sellers, then assist them with setting up their stores on your platform and observe how well it works.
  • Try inviting a few early clients and seeing how they like it when your beta marketplace isn’t a deserted town.


Gather Feedback, Iterate, Improve

It’s helpful to gather as much feedback as possible – in any way you can.

  • Take note of everything your early buyers and sellers say about their experiences.
  • Arrange in-person meetings or record and transcribe interviews with your users.
  • Listen more than you speak. Listening will provide you with a wide range of enhancement ideas that you can implement to make your platform even better.
  • Iterate and improve – invest as much time as you need to develop your MVP based on the feedback from your soft launch.

Another thing: don’t just use your early adopters as test subjects; instead, aim to form genuine connections with them and gain their trust. This trust will assist you in marketing and growing your market in the early stages of your company.



Now it’s time to make it official. You should run a final round of tests before you begin to ensure that everything is working properly. Things tend to go wrong when you least expect them. Prepare your team for launch.

No matter what kind of marketplace you’re in, make your launch an event. Bring your launch to your target users’ locations through a webinar, a Q&A session, or an AmA.



9. After Launching: Grow Your Marketplace

Your new marketplace has hopefully been launched successfully, and users are beginning to use it. Now is the time to focus on user growth and retention. Even though they have many similarities, growing a marketplace is not the same as growing a traditional ecommerce firm. As online markets are two-sided, you must expand both your seller and customer bases. Growing the supply side of your new marketplace business will be your main focus in the early days, so you must set up a pipeline of new sellers and keep them.


Getting Your First Customer

Ever visited an online store with exactly 50 empty categories, four dusty products, and a blog post from months ago? This is not the way you want your marketplace to appear as new customers and vendors arrive. Due to this, acquiring new sellers will be your top priority in the early stages of your marketplace business, both before and after launch. You can bring on new sellers in two ways: by talking to them and inviting them directly and by growing awareness through paid advertising.

Now that you’ve done your market research and selected a niche, you know who your sellers are and where they are – it’s time to contact them! Here are some strategy methods for increasing your success rate:

  • Contact every single seller who might be interested in your marketplace because some may not be interested.
  • Consider creating a relationship instead of spamming.
  • Get them started on your platform with free onboarding and comments on their products, for example. You can also give your first sellers the option of selling their products for free, so they can get a feel for your platform and become passionate about it. Don’t worry about fees; you’ll use them later.
  • You can also advertise on Facebook, Instagram, or Google Ads to attract first-time sellers. If you haven’t launched your platform, you can advertise a landing page introducing your idea and inviting vendors to join.
  • Make sure your paid ads are hyper-targeted to your niche – for example, if you’re developing a local marketplace, target vendors in your area.
  • To improve your new seller acquisition system’s efficiency, mix regular ads with retargeting and personal outreach.


Brand Recognition

It’s time to recruit customers now that you have merchants and a respectable product lineup. As a market owner, you have a few additional options compared to developing a conventional ecommerce company:

  • Social media and paid advertisements will be your primary methods of acquiring new clients as with sellers.
  • Create a presence on Instagram or Facebook. Organic social media reach is declining, but it remains an essential channel for ecommerce firms.
  • Try a few different channels and set aside a small budget for paid advertising. Instagram is an excellent platform for highly visual advertisements. Show off your unique items if you run a handcrafted marketplace!
  • Also, keep search engine optimization in mind – SEO will be your long-term growth driver. You’re a wise marketplace owner, aren’t you? You have chosen a software platform that is SEO-friendly. In this case, your categories, product pages, and seller storefronts will begin ranking and bringing in new visitors soon after launch.
  • When introducing new sellers, items, and features, don’t forget to leverage your mailing list. Keep your list healthy and expanding by inviting new customers and vendors to subscribe.
  • Utilize a free service like Google Analytics or something more sophisticated like Ahrefs to determine the success of your marketing efforts.


Customer Satisfaction Is Key

Now that you’ve successfully launched your marketplace and implemented new user acquisition techniques, it’s time to focus on retention. What is the point of spending time and money acquiring new users only to have them leave the next day? You must ensure that your merchants and buyers are satisfied with the platform and willing to continue using it. Here are the best ways to get that accomplished:

  • Keep collecting comments and improving your marketplace. Organize personal interviews with the most active users in exchange for a discount coupon or other offer. Solve problems as soon as they arise.
  • To make your marketplace more user-friendly, create a knowledge base that answers the most frequently asked questions. You can also build a guide or a series of tutorials to assist your sellers in selling more successfully on your platform.
  • Feature and promote your best sellers with case studies and success stories. On Etsy’s blog, for example, their content team showcases the stories of their users. Keeping them satisfied and bringing them new clients will also assist your SEO efforts.
  • Learn more about advanced analytics and conversion rate optimization when you have time, so your improvement efforts are guided by accurate data.
  • Keep your marketplace software up to date to ensure that it is always secure and efficient.


Gain A Competitive Advantage

You’ll need more than just a consistent growth and marketing strategy to defeat your current competitors, especially if you’re new to the market:

  • Think wisely and provide your users with new, unexpected benefits that your competitors don’t consider. You can do this by constantly experimenting with and increasing your value proposition through new technologies, services, content, and strategic relationships.
  • When you launch a new marketplace for handmade goods, try working with a local photography studio to provide your sellers with professional photography services.
  • To spread the word about your marketplace, contact local and regional magazines as well as trade shows.
  • Integrate complementary businesses to offer value to your sellers and consumers and make it easy for them to join and stay with you.

Never stop learning, experimenting, and improving.


It’s Your Turn, Get Started!

Hopefully, this article has made the prospect of how to start a marketplace business less overwhelming.

We would like to hear your thoughts on everything:

What led you to run a thriving online marketplace today?

Are you just getting started? How are you feeling?

If you would like to talk to us more about how to start a marketplace, talk to a marketplace expert now.