How to Build a Marketplace Website: The Comprehensive Guide for 2023

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. The pandemic has also contributed to the fact that the number of marketplaces’ websites rises and more people acknowledge the advantages of marketplace business models.

Online marketplaces played a huge role in boosting online shopping. You definitely use or at least know about platforms such as Amazon, eBay, and AliExpress. Their success and annual revenue are tempting and inspirational, so there’s no wonder some businesses wonder about developing their own marketplace. 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 your own marketplace, costs, and the arising trends of e-commerce in 2023.

What is an online 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 marketplace is 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 marketplace 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?

Is developing an online marketplace worth doing in 2023? 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.

• The global e-commerce market is expected to total $5.55 trillion in 2022. (eMarketer)

• Black Friday 2021 made $886.7 billion in online sales. (The Balance money)

• 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 Cazoo (UK), Opendoor (USA), and Delivery Hero (Germany). (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

Having a marketplace idea is great, but 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 successful online marketplace businesses you should consider at the very beginning of marketplace platform development.

Amazon

Source: Amazon

This is perhaps the most successful marketplace in the world. 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

Source: 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

Source: 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

Source: 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

Source: 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.

Flipkart

Flipkart is an Indian e-commerce company that operates a marketplace platform where sellers can offer their products to a wide range of customers. The company was founded in 2007 by Sachin Bansal and Binny Bansal (no relation), and it has since become one of the largest online retailers in India. Flipkart offers a wide range of products, including electronics, fashion, home and kitchen appliances, books, and more.

One of the key features of Flipkart is its Cash on Delivery (COD) payment option, which allows customers to pay for their orders in cash when they receive their products. This has helped Flipkart to gain a significant share of the Indian e-commerce market, especially in rural areas where access to online payment methods may be limited.

In 2018, Flipkart was acquired by Walmart, the American retail giant, for a reported $16 billion. This has helped Flipkart to further expand its reach and offerings, and it has also allowed the company to leverage Walmart's global resources and expertise in retail and e-commerce.

If you’re interested in how to build a Flipkart-like website, we’ve got all questions covered in our comprehensive guide.

Yellow’s experience in developing marketplace platforms

At Yellow, we had a chance to develop and are proud to present a marketplace website and app. 

Beautonomy

Beautonomy is a platform where Instagram and YouTube beauty bloggers can share their makeup looks and earn some money on it. 

Within the platform, bloggers can create their profiles and share make-up tutorials and products they used in make-up. Another part of Beautonomy is an online marketplace where users can buy everything creators used in those products or choose offered alternatives with a set of filters.

To develop a marketplace, we used PHP, WordPress, WooCommerce, and HTML/CSS. Take a closer look at the tech stack, team compositions, and challenges we successfully resolved while developing Beautonomy.

Fernwayer

Fernwayer is a marketplace made like a social app for experience makers and travelers who want to buy a unique experience. 

Experience makers can create profiles with the detailed description of services they are ready to provide and indicate whether the experiences are private (for lone travelers), for groups (like excursions and tours), or private groups (if a traveler wants to go on a date or spend time with friends and family).

Travelers, in their turn, can use the booking system to book those events. The system can synchronize with the client's digital calendar. 

The chatting system facilitates communication between travelers and experience makers. Both groups can initiate the chat and discuss details about upcoming or part events. Also, both of them can talk to a support agent of the app itself if any issues occur. 

You can find more about Fernwayer’s tech stack, team compositions, and features in the case study.

Marketplace for clairvoyant services

It’s an online marketplace website for mediums, clairvoyants, and psychics. They all have a profile with a description of the services they provide, prices, specialization, and reviews from clients. The easy-to-navigate interface lets clients find the perfect clairvoyant to get answers to their questions.

Find more about this project in the case study.

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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 of organizing an online shop and get access to a wide audience.

However, such a platform should be beneficial to the 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's 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 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.

Vertical Marketplace VS Horizontal Marketplace: Marketplace Business Model

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.

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: it is a type of online platform that focuses on a specific industry or product category. It is designed to connect buyers and sellers within a particular market segment, and it often offers specialized features and tools that are relevant to that industry. You can think of Uber and Airbnb as vertical marketplaces.

One of the key benefits of a vertical marketplace is that it provides a focused and targeted platform for buyers and sellers to connect. This can help businesses to reach a more specific and relevant audience, and it can also make it easier for buyers to find the products or services they are looking for. For example, a vertical marketplace for automotive parts and accessories would only feature products related to the automotive industry, making it easier for buyers who are looking for car parts to find what they need.

Vertical marketplaces can also offer a range of value-added services, such as market research, industry news and analysis, and educational resources, to help businesses stay informed and competitive in their industry.

• Horizontal (multi-vendor marketplace): it is a type of online platform that offers a wide range of products and services across multiple industries or categories. It is designed to connect buyers and sellers from a variety of different markets, and it often offers a broad range of features and tools to support these diverse product offerings.

One of the key benefits of a horizontal marketplace is that it provides a one-stop-shop for buyers to find a wide range of products and services in one place. This can save time and effort for buyers, as they don't have to visit multiple websites or physical stores to find what they need. For example, a horizontal marketplace might offer products from various categories, such as electronics, fashion, home and garden, and sports and outdoors.

Horizontal marketplaces can also offer a range of value-added services, such as payment and shipping options, customer service and support, and ratings and reviews to help buyers make informed purchasing decisions.

Products

• Goods: Marketplaces sell physical products that you can see and touch, including toys, books, electronics, makeup products, furniture, etc. If you want to create a food delivery website, it will also fall into this category.

• 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.

• Artificial Intelligence (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 (AR)

The technology of Augmented Reality—known as AR—has an extensive history, but little of that history has involved applications 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.

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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. This is the first step you need to take to build a marketplace website. We already mentioned the possible types you can choose from. It’s important to choose the one that matches your interests and goals, because it’ll influence the feature list, tech stack of future marketplace platform, as well as its marketing strategy on further stages. 

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. Market analysis will give you priceless insights into your clients’ purchasing behavior and how your online marketplace can help them solve their problems.

3. Hire online marketplace software developers. To build a marketplace website, it’s important to be on the same page and have the same vision as your future partner. Software development is a long process that involves a number of tech specialists. Choosing a good vendor for software development is important for a number of reasons:

• Quality: A good vendor will have the experience and expertise to deliver high-quality software that meets the requirements and expectations of the client. This can help to ensure that the software is reliable, functional, and user-friendly, which can lead to better adoption and satisfaction among users.

• Cost effectiveness: A good vendor will be able to deliver software at a reasonable cost, taking into account the complexity and scope of the project. This can help to control costs and ensure that the project is delivered on budget.

• Time to market: A good vendor will be able to deliver the software in a timely manner, helping to meet project deadlines and get the software to market faster. This can be especially important for businesses that are looking to launch new products or services in a competitive market.

• Communication and collaboration: A good vendor will have good communication and collaboration skills, and will be able to work effectively with the client to ensure that the project is delivered on time and to the desired quality.

• Ongoing support: A good vendor will also provide ongoing support to ensure that the software is properly maintained and updated, and to address any issues or concerns that may arise.

To ensure that the team is good and the work will be done in time, you can check the reviews on dedicated platforms. The team of specialists at Yellow is ready to help you with your online marketplace platform. And we’re interested in your project’s success just like you’re.

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

• Discovery and business analysis: The team can understand your business needs and come up with a detailed estimation and roadmap of online marketplace development.

• Prototyping: To perceive the core functionality and prevent future errors. At this stage, you’ll get the feel of the future platform.

• Product design: To create the user journey with an application that's easy to use. And this is not only about beautifully designed menus and buttons but about an effortless and intuitive sense of control.

• 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 build a marketplace website, 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.

• Backend: Ruby on Rails, Node.js, Java

• Frontend: React + TypeScript, Vue.js, Next.js

• Hosting: AWS, Heroku

• Data storage: PostgreSQL, MySQL, MongoDB

• Mobile: React Native, Flutter, Swift, Kotlin

Ultimately, your tech stack will be defined by the project's specifications. If you want to discuss the list of tools for your marketplace idea, 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

• Design complexity

• The number of third-party integrations

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

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 range from $80,000 to $117,000. For a more detailed estimation, feel free to contact our team of experts.

Dream Team: Specialists Needed to Develop a Marketplace Platform

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

• 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.

• UX/UI designers: Their responsibility is to ensure that your marketplace platform is intuitive, user-friendly, and visually appealing, as well as to create the visual design of the marketplace, including the layout, color scheme, and typography.

• Web engineers: Backend 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.

• DevOps engineers: They are responsible for managing the infrastructure and operations of the marketplace, including tasks such as deployment, monitoring, and scaling.

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 website 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 marketplace 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 website 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 2023. 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 an up and running marketplace website, we at Yellow are ready to help. We worked on projects such as Beautonomy, Fernwayer, and a clairvoyant services marketplace that have marketplace functionality. Feel free to contact our team so that we can discuss your marketplace website.