Unlike an Ecommerce Website where you have two stakeholders, a buyer, and a seller, a Marketplace operates with at least three stakeholders.

There will be a buyer who wants to buy, a seller who wants to sell, and a Marketplace Platform that facilitates the whole transaction. The role of Marketplace Platform is to:

Enable sellers to get more sales for their products or services.
Enable buyers with a large variety of products and ensure timely delivery of products ordered.

Are ecommerce marketplace platforms profitable?

OH! yes, they are unless you leave things to chances.

It is easy to launch an eCommerce marketplace platform, and in this article, we have outlined essential steps you need to consider before launching one for your business.

Do you want to create a Marketplace Platform? Checklist below...

Choose your Niche.
Create a Persona.
Plan for Profits.
Write a Business Plan.
Protect your Marketplace.

Choose your Niche

When you decide to start a marketplace platform, you need to determine if you want to create a Horizontal Marketplace or a Vertical Marketplace.

Now, if you wonder what the difference between the two is, then.

A Horizon Marketplace is a massive collection of products that you cater to in different categories. An example of this is Target or Amazon. You can find any product you are looking for.

While a Vertical Marketplace is focused on a Niche and caters to a specific audience. An example of this will be FirstCry, which focuses on maternity & newborn products. You can find any product related to the niche on that platform.

Now, why do we recommend Choosing a Niche for your Marketplace Platform?

Because it is simple to market to a specific audience, and your chances of success are higher than a horizontal marketplace. If you were the owner of FirstCry, you would only focus on the newborn category, not on machine tools and mobile phones.

Create a Persona

Now since you have your niche figured out, I recommend that you focus on the Buyer persona.
How does your buyer look like, what do they likes, where do they meet?

Learn as much as you can about your target audience, which includes but not limited to their:

Age
Gender
Location
Qualification
Profession
Hobbies
Interests

And most Importantly... Where can you find them in Groups?

Plan for Profits

Now, this is the most common mistake businesses make. They will get an idea; they will jump onto it and will leave the profit to chances.

Though there might be times for you to Pivot your business, what is the point of starting an online business without thinking of a revenue channel and not planning on how you will make profits on each sale?

Never limit yourself to just One revenue channel on your marketplace platform. You can plan to gain revenue from the following channels:

Success fee / Commissions charged from a seller on every successful sale of a product.
Listing Fee charged from a Seller for listing their products or services on the platform.
Monthly Subscription Fee charged from the sellers for processing their orders.
Sponsored Listing Fee charged from the Sellers to give priority placements.
Advertising Fee you can charge your sellers to provide them with premium banner spots like on the homepage or category pages.
Lead fees that you can set your sellers in case your platform operates on RFQ's.
Premium membership to your buyers to provide privileged content or services.

Opting for good revenue models has always been critical to making a profit on the multivendor marketplace platform.

Write a Business Plan

A business plan is a document that helps you define your path to success. It enables you to outline your objectives and acts as a guiding light in your times of need.

There are multiple benefits of making this document.

It will help you decide your goal and path to success.
It will help you carve out your marketing message.
It will work as your investor pitch if you are on the lookout to seek funding from an external source.
It will help you decide the kind of vendors or products you want to be listed on your marketplace platform.
Financial Projections from zero to scale.

I strongly recommend that you make this document early, putting your thoughts together and deciding where you want to reach.

Protect your Marketplace

When I say this, you should have a process to ensure your business's compliance in legal terms and methods to safeguard your idea.

Legal Compliance: Ensure you are on the right side of the law. Get your business registered, ensure you adhere to all rules of your trade.
Safeguard your Idea: A patent is useful if you believe your idea is unique. Besides that, you should also plan to secure your marketplace platform against any exploits or hack issues.

Often, we have seen owners trying to start an online marketplace platform using open source software and getting hassled as they tend to be more vulnerable to hacks than a closed source solution.

Conclusion

You may observe that starting an online marketplace platform is like starting any other brick and mortar business. It needs preparation and decisions on choosing the right partners in your journey to success.

I know for sure that if done correctly, a marketplace is profitable and scalable.

Find the right ecommerce marketplace platform

If you are struggling to find the right marketplace platform to start your online business, then we are here to help you. You can contact us for a discussion on your business model and get a free quote.

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