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February 2, 2022

How to Develop a Marketplace Website: The Comprehensive Guide for 2022

Online marketplaces aren’t new for people anymore, but there’s room for growth. Read the article to learn how to create a marketplace website.

Dasha Rizoy

Head of Business Development

No one is surprised with buying all kinds of things online anymore. Food, makeup products, furniture, electronics, books, toys, and practically all conceivable services, everything is available with just a few clicks. Given the global pandemic raging outside, the demand for e-commerce has significantly increased.

Marketplaces played a huge role in boosting online shopping. You definitely use or at least know about services such as Amazon, eBay, and AliExpress. Their success is tempting and inspirational, so there’s no wonder some businesses wonder about developing a marketplace website. For example, the net revenue of Amazon for 2020 was $386.06 billion, and eBay’s market capitalization approaches $48 billion. It's remarkable.

In this article, we are going to describe the process of creating a web marketplace, costs, and the arising trends of e-commerce in 2022.

What is a marketplace?

If we take a look at offline marketplaces, we can say that a marketplace is a location where a lot of vendors can come and sell their goods. Such locations are known from the time of ancient Greece and Babylonia so there’s no wonder they became a part of our lives.

Online marketplaces are the same thing but on the Internet. Sellers register on a platform (or multiple platforms) and sell their products to clients with the help of services provided by the platform itself. Depending on the type and size of a given platform, these services can differ and so will the target audience and marketing strategies.

Online marketplaces are, in other words, mediators between vendors and customers. Those in the first group don’t have to spend extra money on promotion and organizing a shop, and those in the second group have everything they need.

Are online marketplaces profitable?

The short answer is yes, for sure. However, it’s obvious that our words aren’t enough to eliminate all your doubts. That’s why we prepared some figures that will explain everything.

  • In 2020, people around the world spent $2.67 trillion on top 100 marketplaces. (Digital Commerce 360)

  • Black Friday 2020 made $9 billion in online sales. (Forbes)

  • Every national business has experienced double-digit growth in e-commerce, from 19.8% in the Middle East and Africa to %36.7 in Latin America. (eMarketer)

  • 37% of small businesses don’t have a website. (Visual Objects)

  • 81% of people do online research before buying something online. (Chain Store Age)

  • B2C marketplace sales are about to reach more than $3 trillion by 2024. (Forbes)

  • The fastest-growing marketplaces in the world are Takeaway, DoorDash, and Delivery Hero. (Statista)

Source: Digital Commerce 360

Taking these numbers into account, we can see that building a marketplace is an idea that is worth trying.

Popular Marketplace Websites

It’s impossible to launch a new marketplace without analyzing what your competitors already offer. Their weaknesses can become your competitive advantages and their success can inspire you. Here are the most prominent marketplaces you should take a look at.

Amazon

Amazon is one of the first associations that comes to mind when someone mentions “online purchases.” This marketplace is a global leader with 7.7% of the market share. This service has 2.45 billion monthly visits in the U.S. only. Customers are satisfied with the service mentioning fast and free shipping as the main reason they shop on Amazon. Also, Amazon has a lot of perks for its Prime members and as a result, they spend more than twice as much as regular users.

Retailers also find Amazon convenient to work with, especially because of Fulfillment by Amazon (FBA). For the individual plan, the platform charges $0.99 per sale and various commissions depending on the product’s category. If you register as a professional vendor, the monthly charge will be $39.99 plus other types of fees. 

eBay

Founded in 1995, eBay is now the second large e-market in the world. It functions as a B2B, B2C, and P2P market, so most people can find what they’re looking for on this platform. It fits vendors who want to sell both used and new goods because it requires only a simple registration. When the profile is ready, you can create your first listing and start selling.

Now, eBay has 1.7 billion monthly visits around the world and 159 million active buyers, so we can definitely call eBay a successful online marketplace website.

Walmart

Walmart started its online journey in 2000. More than 20 years have passed and now Walmart is one of the most popular marketplaces with almost 120 million monthly visitors and $60 billion of online sales worldwide. Because Walmart has been around for a long time, people trust this brand and easily recognize it.

This platform is suitable for medium- and large-scale vendors that plan to reach a wider audience. The registration is simple: A seller needs to fill in an application form and wait for the approval. Once everything is done, they can create a listing and start selling on Walmart.

Etsy

This marketplace stands out from the list because of its main focus. This platform helps vendors sell unique, handmade, and vintage goods. Etsy isn’t just an e-commerce website, it’s a community of creative and talented people that can support and help each other. The buyers will find a lot of one-of-a-kind items from custom pins and T-shirts to wedding dresses and jewelry.

Etsy charges its vendors almost nothing: There’s a fixed price of $0.20 for each element of listing and 3.5% or price per sale. Because vendors set the prices themselves, they can regulate how much money they earn. It makes Etsy very appealing to artists who want their works to be recognized.

Alibaba

Alibaba is a China-based group of online marketplaces that include Alibaba, AliExpress, Taobao, and Tmall. Together, these websites cover an enormous amount of the Asia-Pacific region. They generate approximately 1 billion active consumers annually. So, if a seller wants to enter the Asian market, Alibaba Group will be the one to consider.

The main difference between all these marketplaces is their type. Alibaba operates in the B2B sector, AliExpress works with B2C sellers, and Taobao is a C2C platform. Tmall provides buyers with direct-to-consumer goods. 

What Are the Advantages of Marketplace Development?

Both buyers and sellers can find online marketplaces useful. Customers visit these platforms because they know they’ll have an extreme range of options that they can compare and find what they’re looking for. Vendors will reduce costs on organizing an online shop and get access to a wide audience.

However, such a platform should be beneficial to owners themselves. Why is marketplace website development a good idea? There are several advantages we can mention.

  • Financial profit

If you own an online marketplace, you reduce several items of expenditure at once. For example, you don’t have to worry about setting up the production line and organizing full-scale offline stores. Additionally, owning an online marketplace provides you with several ways of monetization (we will talk about them later). You can choose the one you find the most suitable for you or implement two or three at once.

  • Flexibility and scalability

If everything is set up correctly, your marketplace solution will quickly gain a lot of visitors. It will definitely make you scale up and look for new vendors. You can expand your range of product categories and add new features to your platform. It’s important to keep supply and demand balanced: Top-notch vendors attract more solvent customers and these customers attract even more sellers.

  • Retailer loyalty

Technically, your business needs to match, as much as possible, those of your vendors: attracting and receiving more customers. To complete this goal yourself and help your sellers complete it, you can provide them with tools such as order management and delivery service. It will improve the relationship between you and retailers and cut the marketing costs.

  • Customer variety

Because you become a platform where multiple vendors function, you will attract a huge range of customer segments. With the help of discounts, special offers, and loyalty programs, you will be able to retain them and make more revenue.

Types of Online Marketplaces

The marketplace category is defined by various factors. For example, it includes the types of participants, business model, and offered products. In a nutshell, we can organize a table with an approximate classification.

FactorTypes
ParticipantsB2B, B2C, C2B, P2P
Business modelVertical, horizontal
ProductsGoods, services, crowdfunding, content

Let’s look closely at each of these categories.

Participants

  • Business-to-business (B2B): On B2B marketplaces, companies sell their goods and services to other companies. Alibaba is a great example of this type.

  • Business-to-consumer (B2C): It means that vendors sell their products directly to customers. The most popular marketplaces such as Amazon and Walmart belong to this category.

  • Consumer-to-business (C2B) or consumer-to-manufacturer (C2M): Sometimes businesses need help from individual specialists such as designers or photographers. In this case, companies go to C2B platforms such as Yelp or Shutterstock and buy what they need.

  • Peer-to-peer (P2P): These marketplaces are occasionally called consumer-to-consumer (C2C). Both sellers and buyers here are regular people. The most popular P2P platform is eBay.

Business model

  • Vertical: These marketplaces sell a specific category of goods and services to a niche audience. You can think of Uber and Airbnb as vertical marketplaces.

  • Horizontal: The list of products horizontal marketplaces sell isn’t limited by any category or audience segment. They can sell everything to everyone, including Amazon.

Products

  • Goods: Marketplaces sell physical products that you can see and touch, including toys, books, electronics, makeup products, furniture, etc.

  • Services: Platforms such as Upwork let specialists look for and communicate with clients who need particular services.

  • Crowdfunding: If you want to launch a new project and want to accumulate the necessary budget, you can go to a crowdfunding platform and raise money to complete it (Kickstarter, GoFundMe).

  • Content: Netflix and Steam can be considered content marketplaces. You don’t buy a physical product or a service. Instead, it involves content such as videos, games, audiobooks, and podcasts.

Marketplace Website Features

Despite the fact that all marketplaces belong to different categories, they share features that make them function properly. It’s important to include the necessary online marketplace features in your solution so that the audience will feel comfortable.

Must-have features

Here is the core functionality that your future marketplace needs to have.

  • Sign up/Sign in

This process will be a bit different for vendors and buyers. When a retailer registers, they should provide you with the necessary information to prove that they’re allowed to sell their products. The easiest way to organize it will be a simple fill-in form with the relevant fields.

For buyers, the registration is even easier: You can implement sign-up via emails, social media such as Facebook and Google, or phone numbers. It’s better not to stick to one way but to choose two or three options so that users can choose the methods that are most convenient for them.

  • Buyer profile

Buyers should have a simple but functional profile. It should definitely include name, birth date, delivery address, and payment information. This data should be well-protected. Other important elements for a buyer are the shopping cart, the wish list, and the history of orders. It will help you create more personalized recommendations.

  • Vendor profile

The merchants should always feel comfortable while using your platform. The main parts of a retailer’s profile are the list of products with the ability to edit it and the indication of payment and shipping methods. You can also add the ability to respond to reviews so they can communicate with customers in an atmosphere of mutual trust.

  • Product catalog

The product catalog will combine all the listings from the registered retailers and categorize them accordingly. In addition to products, the catalog should include search, filters, and product details. With that information available, customers can readily find what they want.

Source: Amazon
  • Payment gateway

A marketplace can’t be called a marketplace unless there's a payment gateway. Shoppers should be able to pay for goods and services from their cart. The crucial criteria for any payment gateway are security and transparency. You should also consider implementing several payment options such as PayPal, bank transfers, etc.

  • Ratings and reviews

It's hard to overestimate the power of reviews. In fact, the Power of Reviews report states that approximately 95% of customers study reviews before making their purchase decisions. That’s why your marketplace should have a simple, transparent review system. It will encourage buyers to share their experiences with the items they've purchased. 

Advanced features

The creation of a next-level marketplace means the inclusion of top-notch features.

  • Extensive support

Because you’re going to function as a mediator between vendors and buyers, you should always be ready to help both parties. To make a functional support system, you can implement chats with chatbots that will cover simple, repetitive issues. If there’s something they can’t solve, they’ll redirect a user to your staff so they’ll process the requests.

  • AI

Even if AR isn’t widespread in the commercial realm, AI is used by many businesses. With the help of machine learning and artificial intelligence, you can create personalized recommendations and special offers for customers to stay engaged with your site and service. It can also help in your effort to provide advanced search capabilities. For example, a user can create an image of the item they have, but the algorithms will find similar ones.

Source: AliExpress
  • Augmented Reality

The technology of Augmented Reality—known as AR—has an extensive history, but little of that history has involved application in e-commerce. That’s why it can become your killer feature. You can follow the examples set by Ikea, MAC Cosmetics, and Gucci: Create a virtual try-on for some of your product categories.

Custom Marketplace Development Step by Step

We now know what to include in your marketplace solution, so, we can move to the process of development. It includes several important steps that will help you understand how to develop a marketplace.

1. Define the type of marketplace. We already mentioned the possible types you can choose from. It’s important to choose the one that matches your interests and goals.

2. Analyze the market. The two most important parts here are your target audience (both customers and retailers) and competitors. Analyze the audience’s needs and what your competitors have to offer to create your competitive advantage.

3. Hire online marketplace software developers. It’s important to be on the same page and have the same vision as your future partner. To ensure that the team is good and the work will be done, you can check the reviews on dedicated platforms. The team of specialists at Yellow is ready to help you with your online marketplace platform.

4. Develop. This stage will include several steps that you need to complete:

  • Discovery and business analysis: so that the team can understand your business

  • Prototyping: to perceive the core functionality and prevent future errors

  • Product design: to create the user journey with an application that's easy to use

  • Development: with the use of trusted solutions and tools

  • Testing: to ensure that the marketplace won’t crash under a load of users

5. Launch and update. When your marketplace is running, the work doesn’t stop. You also have to listen to user feedback and update your platform according to the needs of shoppers and merchants alike.

Make sure that you always know the stage of your project and all the issues are covered quickly.

The Ideal Tech Stack for a Marketplace Website

To create a marketplace, you may choose two ways: out-of-the-box solution and custom development. Both methods have their own pros and cons and can be used in various cases. A ready-to-use platform will be suitable if you don’t have technical skills but instead feel that an average feature set is sufficient. However, such a solution could have many extra parts that you'll have to pay for even if you never use them.

If your plan is to make a unique solution that will be tailored to your business needs, custom development will be a better choice. Depending on the type of marketplace and the available budget, your tech stack may vary. However, there’s a list of tools that are commonly used in most marketplaces because they’re shown to be efficient and secure.

  • Back end: Ruby on Rails, Node.js, Laravel

  • Front end: JavaScript, React, Angular, Vue.js

  • Hosting: AWS

  • Data storage: PostgreSQL, MySQL, MongoDB

  • Mobile: React Native, Flutter

Ultimately, your tech stack will be defined by the project's specifications. If you want to discuss the list of tools for your project, simply schedule a quick call with our team.

Оnline marketplace development cost 

The cost of developing a marketplace is difficult to specify because it depends on many factors:

  • The project’s specifications

  • The tech stack

  • The team’s location and hourly rate

  • The feature set

  • The expected deadline

The different configurations of these factors will influence the final costs. To ensure a clear picture of the project, we can provide a time estimate for the marketplace development:

StepWhat it includesHours
Research and business analysisThe research of the target audience and demand, competitive analysis50 to 100
PrototypingMaking wireframes and a clickable prototype to help visualize key functionality50 to 100
UI/UX designCreative an easy-to-understand UX and eye-catching UI150 to 350
DevelopmentFront-end and back-end development, code review500 to 1500
TestingManual and automated testing and debugging200 to 300

The team's hourly rate will range from $15 to $150 per hour, depending on the location. If we consider the average rate of $40 per hour, the approximate cost of marketplace website development will be approximately $50,000. For a more detailed estimation, feel free to contact our team of experts.

Dream Team: Specialists Needed

A smooth, efficient development process requires teamwork. Let's list the players who'll be involved:

  • Business analyst: They’ll analyze your business and provide you and your team with valuable insights.

  • Project manager: They’ll lead the team, coordinate all the processes and be responsible for communication.

  • Designers: Their responsibility is all design elements of your marketplace.

  • Web engineers: Back-end engineers will build the server side of your app and frontend engineers will create the client side for your customers to interact with.

  • QA engineers: To ensure that your app functions properly, you must include quality assurance in your team.

The above list is basic. You can include more team members such as DevOps engineers and marketing specialists.

Monetization Models for Marketplace Websites

One of the advantageous features of a marketplace website is the variety of monetization options. You can make money from vendors and customers, depending on the type and features of your platform. Here are the types of monetization we can use:

Charging vendors

  • Sign-up fee/Subscription

It’s the easiest, most obvious way to make revenue out of a marketplace: In order to be listed on your platform, the vendor should pay a fixed sum of money. It can be useful at the beginning, but in the long run, this model is better to evolve into a monthly or yearly subscription. This way, your flow of revenue will become constant.

  • Listing fee

You can make the registration on the platform free, but charge a fee for each item a vendor places. You can establish a fixed amount or make it a certain percentage of the item’s price. It can be especially useful for marketplaces with unique goods such as handicrafts or arts.

  • Sponsorship and promotion

When a vendor wants to boost their sales or get noticed by a new audience, they can pay you for placing their profiles or products on the main page. You can also put them into banners and place their products higher in search results. You have a lot of freedom here to test different plans and packages.

  • Advertising

This model will give you the ability to work with third-party agencies. It works the same as sponsorship, but you place an external ad instead of placing a vendor on a banner.

Charging customers

  • Bidding fee

It works only on auction marketplaces and trading platforms. The users should pay a small amount of money to participate in the auction and bid on the product.

  • Freemium

You can make a certain part of your marketplace free, but to get the rest of it, the customer should pay. For example, Unsplash implemented this model to charge users for access to the whole stock.

What’s Next: Post-Launch Activities

When your marketplace becomes available for vendors and customers, the work continues. If you want to be successful and keep your solution afloat, there are several actions of which you should be aware.

  • Promotion

You should promote your website for both sellers and the general public. It’s an interdependent process: Without solvent customers, vendors won’t register on your marketplace and without vendors, customers will have no use of your platform. You can use multiple channels such as SEO, paid ads, social media, content marketing, and influencers.

  • Support

The experienced QA team will find and fix most bugs and errors prior to the release, but customers could find more. Additionally, there could be issues with delivery or payments that you also have to deal with. So, listen carefully to user feedback and provide concise, relevant answers.

  • Scaling up

When more vendors register on your marketplace and more items are sold, you will have to scale up. To make it happen, you need to focus on a certain niche (even if your marketplace is horizontal) and try to form a community around your services.

  • Mobile e-commerce

You might not plan to build a mobile app for your marketplace right now, but having the website optimized for mobile devices is essential. Mobile e-commerce is on the rise, so if you ignore mobile devices, it can negatively affect sales. To make your website usable for mobile users, you can use responsive web design or make a separate mobile version.

Final Words 

It's definitely worth the effort to develop a marketplace website in 2022. E-commerce is on the rise, and its evolution will continue for the foreseeable future. Despite the inevitable presence of various major players, the market is still rich with opportunities.

If you’re ready to transform your idea into a reality, we at Yellow are ready to help. We worked on projects such as Beautonomy and Fernwayer, which have marketplace functionality. Feel free to contact our team so that we can discuss your marketplace website.

🛒 Why are marketplaces so popular?

Marketplaces let customers quickly find what they want and compare it with other items, and vendors reduce their costs on setting up the individual shop.

🛒 Is it worthwhile to create a marketplace website?

Yes! Online marketplaces are gaining more and more popularity, so your solution has a high chance to hit the target.

🛒 How much does it cost to develop a marketplace website?

If we consider the average rate of $40/hour, the approximate cost of marketplace website development will be around $50,000.

🛒 How can I make money out of my marketplace?

You can set listing fees for vendors, offer promotion programs and paid ads. Another way is to apply a "freemium" model or implement the use of bidding fees.

Tags
How-to
Marketplace
Web development

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