Mindless consumption has become an anti-trend - and an increasing number of people want to share the things that they already have with those who need them temporarily or permanently. This led to the development of a sharing economy, the main postulate of which is the idea that sharing any material value is a much more profitable and environmentally friendly alternative.
And in this case, both companies and individuals can act as parties to the transaction on an equal footing - the only subtlety is that this should be a place that helps them find each other. This idea formed the basis of the p2p marketplaces business model, and in this article, we will tell you how to create a successful solution according to this model, and moreover, how to make sure that it really will be successful.
It All Starts With an Idea
You can come up with a brilliant idea and fail. Unfortunately, the reality is that 42 percent of startups fail because the market does not need them. The only way to make sure your idea works is to validate it in every way possible. Next, we talk about how to do it.
Solve the Problem
The online marketplace is not about trading in a classic way. This is about solving a real problem. For example, one of the first startups in the sharing economy Airbnb solved the problem of tourists who needed cheap housing, as well as the problem of owners of real estate objects that could potentially be rented out. Therefore, as you see, you will have to solve two problems at once - and find an idea that will help you do this.
Define Target Audience
After you are convinced that your idea solves the problem, in the case of the online marketplace, you will have to draw not one but two portraits of your target audience - conditionally, this is a seller and a buyer. In the most generalized form and by the example of Airbnb, the seller is the owner of real estate in a certain location, which has an empty room or even a bed for renting. The buyer is a young and active tourist who wants to get more for less. See how needs matched? This means that a specific problem is solvable, and the target audience has been identified correctly.
Determine Market Entry Threshold
By all accounts, it’s quite simple to create an online marketplace - you don’t need any material resources except money for development. You just act as an intermediary. However, market size also matters in this case. For example, the car- and the bike-sharing market is already quite full - especially in the most popular tourist destinations.
In addition, the specifics of the market also have their own characteristics - for example, in Muslim countries, women got the right to drive a car not so long ago. Car sharing is not developed here, and it is difficult to predict whether this idea will be successful in the eastern market.
Get to Know Competitors in Person
Today, almost every person who came up with an idea begins to consider himself the initiator of a startup - and this means that what you came up with could be invented by someone else for a long time. But even this is not a reason to abandon your idea. This is an occasion to get to know your competitors better, to understand what they offer to solve a specific problem and to do it better.
Decide on a Monetization Method
How do you plan to recoup the money invested in the development of an online marketplace? This is called Return on Investment and there are several possible models.
Advertising. This is an ideal option since in this version the use of the service is free for both parties to the transaction, however, you will have to work hard on building the brand so that advertisers themselves ask you to place their announcements on [your marketplace.
Commission. This is the most reasonable option, and in this case, you will receive a certain amount for each completed transaction.
Subscription. In this case, users make a payment for the right to use the service without limits.
Listing Fee. This is a situation where the seller must pay the opportunity to publish his offer on your site.
Freemium. In this case, the basic functions are free, and the additional ones are paid, respectively.
MVP Creation
MVP is one of the key concepts in the LEAN startup methodology. Its essence is that the sooner you realize that your idea is working or not working, the less money, effort and time you will spend on creating an application that realizes its goal. In simple words, MVP is the most simplified, but at the same time functional version of your product, which is created as a test solution - in order to check how the market is ready to accept your idea, whether it works as you conceived it, and what users expect from your platform.
Feedback from users is the most valuable return from MVP - and this can become your lantern on a dark road.
Evaluation of Time, Cost and Technology
Once you have gone through all these stages, it becomes possible to start a conversation about directly creating an online marketplace. Moreover, in order to do it right, you need to get in touch with those who already have a lot of experience in marketplaces development. In their article on how to build an online marketplace, the Clockwise technical team consolidated all their knowledge and recommendations based on the live practice of solving their customers' problems. Each problem, and the idea that it gives rise to, is individual, so we recommend that you get a free preliminary consultation before starting active actions.
Top comments (3)
It's great that you mentioned LEAN startup methodology. The thing I love the most about LEAN approach is that you can check if your business hypothesis is valid before you start the main development process of your future marketplace
Really worthwhile article, Ivan! Thanks. I would like to add that the problem of thoughtless consumption is indeed catastrophically serious. One way to avoid this is peer to peer marketplace creation.
So nice article Ivan. You guide all the journey if anyone want to create online marketplace for his online marketplace business.