How to build an online marketplace website

Global e-commerce sales are predicted to reach $6.5 trillion in 2023. Given this astounding number, it is no surprise that many entrepreneurs are excited to launch their marketplace solutions. 

So, if you want to follow their lead but do not know where to start, we are here to help. We have a detailed guide on building a marketplace based on our domain expertise and long years of practice. Today we are eager to share it with you.

In a nutshell, the steps below define how to create a marketplace that will become a flourishing business.

1. Determine the type of marketplace you want to build.
2. Choose the revenue model.
3. Validate your business idea.
4. Choose the required functionality.
5. Build a marketplace wisely.
6. Grow and promote your marketplace business.

Why you should build a marketplace in 2023?

Online marketplaces benefit all parties involved. Buyers find e-commerce platforms convenient and secure places to purchase the required goods immediately. Sellers are lured to marketplaces by a diverse range of potential customers.  

But what about business owners? Why should they invest their time and money in building a marketplace? Let’s find out!

Scalability

The rapid growth of a marketplace is an excellent justification for creating one.  Your traffic will grow fast if everything is done right from the start. Soon, you will need to add new sellers to meet the demand. The most important thing here is to find the right balance between supply and demand. The more reliable and high-quality the vendor is, the more customers it attracts. At the same time, a growing customer base encourages more sellers to join your platform.

Complex analysis

As soon as you start a marketplace website, you will need to track the sales process. Intuitive dashboards with accurate data can become a silver bullet for you. They show accurate data about the most desirable products and the most popular sellers. Armed with this information, you can promote products and services that bring actual value to your customers. As a result, you get great chances to increase your revenue. So add analytics tools to the list of must-have features if you wonder how to build a marketplace that will thrive. 

Reduced financial risks

The good news about owning an e-commerce platform is that you do not have any inventory. It means you are free from any issues and expenses that come with inventory management. But there is more. You do not have to deal with warehousing, logistics, or delivery. All these burdens lie with the sellers. Being a marketplace owner, you have other tasks. Thus, you are responsible for providing a platform that links buyers and sellers together.

Vendor’s loyalty

As a marketplace owner, you have business goals that largely overlap with the aims of your sellers. To be more specific, both of you want to gain as many customers as possible. For this purpose, provide sellers with all tools they may need to do business on your platform. It could be onboarding manuals or a simple order management system. By offering sellers the required assistance, you can reduce marketing expenses significantly.

To prove that building a marketplace is a good idea, let’s look at the growth of e-commerce sales over the past ten years.

How to build an online marketplace website from scratch

Step 1. Choose the marketplace type

If you wonder how to build a marketplace that will differ from Amazon or Rakuten, you need to do some background work. In particular, you have to define your target audience. Also, you should know the primary types of online marketplaces to choose the right one for your business.

All this valuable data will allow you to create a marketplace that will pay off and bring you stable cash flow.

Classification of online marketplaces

There are several classifications of online marketplaces. Each of them views e-commerce platforms from a different perspective. Generally, marketplaces are classified by participants, focus, and offerings. Let’s take a closer look at each classification:

By participants:

• Business-to-consumer (or B2C for short). We use this term to talk about marketplaces where sellers are other companies. Hence the term business. As for buyers, they are regular end-users.
• Consumer-to-business (or C2B). On such platforms, individuals, e.g., developers or designers, offer businesses their services. The most popular marketplace of this type is Upwork. It links employers and individual contractors.
• Business-to-business (or B2B). Businesses sell their product or services to other companies. The first B2B marketplace that comes to mind is Alibaba.
• Customer-to-customer (or C2C). Both parties, buyers and sellers, are regular users. So if you have ever bought something on eBay or Etsy, you have made a C2C purchase.

By focus:

• Horizontal marketplaces. Such platforms offer a great range of products to a broad audience. Toys, books, clothes, electronics—you can buy all these items there.
• Vertical marketplaces. These marketplaces offer specific products to a limited audience. Over the last few years, this approach has gained momentum. The success of Airbnb, Etsy, Upwork, and other narrow-focused platforms proves this.

By products available:

• Product marketplaces. These marketplaces sell physical goods that you can touch and feel. They include clothes, books, beauty care products, etc.
• Service marketplaces. They are designed to help buyers find a skillful professional for almost any activity. Whether you need to design your logo or launch a Facebook ad campaign, you will find a specialist there.
• Project marketplaces. Such platforms allow entrepreneurs to raise money for their startup projects through crowdfunding. The most famous project marketplace is Kickstarter. 

To sum it up, below you can see the table displaying the main types of online marketplaces:

	Classification of online marketplaces	Examples
By participants	– B2C (business-to-consumer) – C2B (consumer-to-business) – B2B (business-to-business)  – C2C (consumer-to-consumer)	– Amazon – Upwork – Alibaba – Etsy, eBay
By focus	– Horizontal – Vertical	– Amazon – Etsy, Airbnb
By products	– Products – Services – Project marketplaces	– Walmart, Rakuten – Upwork, Fiverr, TaskRabbit – Kickstarter

Step 2. Define the revenue model

You cannot underestimate the importance of a proper revenue model since it will define how your platform will be bringing you a stable cash flow.

Below you can see the most popular monetization strategies:

• Commission. This business model is one of the most popular and transparent ones. You charge buyers, sellers, or both parties a certain percentage of each transaction that takes place on your platform. This way, you allow both parties to use your platform for free and charge them when they get some value from it. TaskRabbit, for example, takes 15% of the price paid for a particular task.
• Subscription. Users pay a certain monthly fee to access your marketplace platform. A typical value proposition that comes with this model is that the marketplace helps goods or service providers find new customers. For example, LinkedIn charges organizations a monthly fee to give them access to their talent pool.
• Freemium. With this model, you offer users basic marketplace functionality for free. However, some advanced features come at an extra price. The main challenge with this model is that you need to provide additional value to convert free users into paid ones.
• Advertisement. You can allow third-party companies to promote their offerings on your platform for a specific fee.
• Listing fee. Etsy is an excellent example of a marketplace that combines commissions with listing fees to get revenue from both popular and non-popular items. The platform charges sellers $0,2 for posting their products on the website.

Step 3. Validate the marketplace website idea

Before defining how to build a marketplace, make sure there is an actual demand for your platform. In other words, you need to validate your business idea. 

There are several steps to take to ensure that it is worth the cost.

Conduct market research 

To start with, take a look at the industry overview to determine the market size and define the latest industry trends. Thus, the latest innovations associated with this domain include a shift toward vertical marketplaces, the rise of chatbots, omnichannel selling, and the growth of mobile commerce.

Armed with this information, you will figure out how to build a marketplace that will stand out from the crowd.

Your next step is to analyze your competitors and their solution. What features do they have? What functionality should be added? What about their revenue modes? 

Finally, explore your target market. Think about your potential users. Define their age, location, interests, occupation, and income. You will need this data to promote your online marketplace accordingly. 

Choose your niche

There are dozens of marketplaces on the internet. Your task is to find an unexplored market area, a so-called “blue ocean.” Alternatively, you can create an exclusive solution to a common problem.

Create a unique value proposition

You don’t want to build a marketplace that will be another Amazon clone, do you? In this case, you should provide users with an exceptional value. Today, when customers are more demanding than ever before, you need to show extra creativity to satisfy their needs.

The best way to achieve this goal is to develop a unique value proposition. To make your offerings appealing to your target audience, try one of the following drivers:

• Price focus – provide customers with a significantly better price 
• Convenience focus – for example, allow buyers to reduce time searching and purchasing for a required item.
• Market access focus – give consumers access to more suppliers or products.

Step 4. Choose the required functionality

Now is the time to talk about the functionality of your marketplace platform. The following is a list of features you should implement first:

• Simplified sign-up process for both buyers and sellers. Avoid asking users to take multiple steps to register on your marketplace platform. Instead, offer them an opportunity to sign up via Facebook, Twitter, or Google.
• A separate dashboard for each seller. Enable vendors to manage their online stores, upload and edit new products, track their inventories, and take care of the shipping process easily and efficiently. 
• An advanced search and filtering system. Add multiple categories and subcategories, allow users to use keywords when they type their search query and don’t forget to implement the autocomplete search feature.
• Product page. Provide shoppers with a detailed description of each item available on your platform. Add high-quality photos and videos of the products.
• Multiple payment gateways. Allow shoppers to choose the most suitable payment option.
• Rating and reviews. They ensure the reliability of your marketplace platform and help customers make the right choice. 

Killing features to create a competitive marketplace

How to build a marketplace that is different from dozens of similar platforms? The answer is to introduce killer features that cannot be found on other websites. 

Based on our experience, we recommend implementing the following advanced functionality:

• Augmented reality. With this feature, customers get a chance to evaluate products visually before making a purchase. For example, the mobile application IKEA Place allows customers to place their true-to-scale 3D models to help them find the best location for the item they want to buy.
• Voice search. Voice commerce, or the ability to order goods using voice commerce, is becoming increasingly popular these days. So why don’t you offer customers a great alternative to a keyboard and a mouse and enable them to place an order using Siri, Alexa, or Google?
• Photoshopping. You can allow shoppers to search for the item they like by using its image. This feature becomes very helpful when a customer does not know the desired product’s brand or exact model.
• Friendly chats. This functionality helps sellers improve their interaction with buyers and, as a result, grow their profitability. Ideally, a chat should have fast response templates and the ability to send media files or create group chats.
• Enhanced help and support section. Provide users with an opportunity to ask you a question or make a complaint with the help of chatbots. You can also offer self-service by creating the Frequently Asked Questions section. 

Step 5. Build a marketplace website wisely

Finally, we have arrived at the key topic of this article. From now on, we will be discussing the actual marketplace development process. How to build a marketplace that is user-friendly? What functionality should you implement? and How do you find a reliable software development partner? 

If you want to know the answers to these tricky questions, we are happy to help.

Discovery session

The discovery phase is equally important for both customers and software development companies. It will help you validate your business idea when you turn to a software development team that will create an online marketplace for you from scratch.

Vendors, in turn, collect all the data they need to define how to build a marketplace that will meet your target audience’s demand.

At Syndicode, we have an online meeting with a new customer to discuss the general subject idea. We need to know your business model and the desired functionality when creating a marketplace website. 

With that data in hand, we create a presentation to demonstrate how we will build a marketplace app. You will learn how we work and what project management methodology we apply (Scrum, Agile). 

Also, we explain how we approach the task evaluation and what development team we will need to create a marketplace website.

Finally, we will provide you with ballpark estimates based on specified requirements. The primary purpose here is to prepare the ground for the business analysis phase.

Business analysis 

At this stage, we will create the architecture of the marketplace website. With its help, we define the website’s future design, infrastructure, user experience, and software modules. Here we focus on the scalability of the future e-commerce platform.

We follow the basic principles of scalable web architecture design. This approach will allow us to define how to build a marketplace for you that will support the higher loads without fundamental changes and additional expenses.

After that, we form technical specifications based on user stories. We define a user story as a brief description of the main tasks the software product should perform. They are written in plain language and consider the users’ points of view.

Below you can see the user stories list created by our team for a custom web product:

At Syndicode, we have been helping customers define how to build marketplaces that will blossom since 2014. Over these years, we have learned to hold discovery sessions 40% faster. We have also defined how to create marketplaces that will cost 30% less than before. In addition, we can determine the functionality that your marketplace website actually needs.

Based on user stories, we will give you estimates for the back-end and front-end development and the UX/UI design. Then the same goes for the testing and management parts of the web development process. 

An example of Syndicode’s projected team expenses is as follows:

At Syndicode, the completed information infrastructure or the so-called Mind Map looks the following w

Relying on the document with time estimates, we create a project timeline. It defines what specialists we need and when they will join the project. Also, it determines the project milestones and demos we will present to you.

A bespoke software development project timetable at Syndicode looks like this:

We divide the whole project into months and form a budget accordingly. It means that we will charge you monthly fees for the team that will build a marketplace app for you.

In the end, you will get an infrastructural diagram and technical specifications. Apart from that, we will provide you with the project timeline and cost estimates. We will start prioritizing features if the desired functionality exceeds the budget or timeline. We will define the core features that should be included in the first version of your marketplace.

If the software development team expenses are the issue, we can create smaller teams. For instance, a tandem of a senior developer and a junior developer can work on your project with almost the same efficiency as a standard team. 

That way, you will be able to save money and product quality. However, the timeline will be exceeded.

Product design process

1. Strategize phase

At Syndicode, the design stage comes after the discovery session. Designers will start the strategizing phase as soon as the project documentation is completed and aligned with your requirements and needs.

They will conduct market research and communicate with the stakeholders. Based on the data received, they will create a feature list or job stories list.

The complete list of the deliverables looks the following way:

• Competitive analysis
• Stakeholder interviews
• User interviews
• Analytics Insights
• Creative brief answers

2. Execute phase

The following stage will be the execution phase. The main goal at this stage is to create and test optimized designs to reduce risks and improve usability.

At this stage, we analyze our results to develop a proper information infrastructure. The aim is to get a clear picture of the system our team has to develop.

At Syndicode, the completed information infrastructure or the so-called Mind Map looks like this:

Below is an example of UI desi

The next part is wireframing. Wireframes are black-and-white layouts that show the structure of your future marketplace website, the arrangement of UI elements on the screen, and their size. They will not have logos, images, or colors to keep you focused on usability rather than visuals.

Apart from wireframes, the execution stage will provide visual concerts and the final list of Job Stories.

3. Design and produce

At the next stage, our design team will develop a UI design and show it to you for review. UI design is created based on Wireframes and Job Stories. Also, designers test the flow of your future e-commerce platform on real users.

Below is an example of a UI design created by our team:

S

The deliverables for this stage are:

• Visual designs in Figma
• Interactive prototypes
• Design Library.

4. Assess phase

Here, our designers will measure the product performance. This process implies collecting and processing feedback from real users as soon as your marketplace is launched.

This stage will end up with new feature proposals.

Software development 

The software development stage will start with putting up a team of specialists to build a marketplace website for you.

At Syndicode, our development team traditionally consists of the following specialists:

• 2 back-end developers (1 Senior Ruby on Rails Developer and 1 Middle/Junior Ruby on Rails Developer
• 2 front-end developers (1 Senior React Developer and 1 Middle/Junior React Developer
• Project Manager who will be managing the whole project.

At Syndicode, we focus on the high quality of our written code. We firmly believe that a high-quality code has the following attributes:

• Simple
• Well-tested
• Refactored
• Documented
• Compliant with the standards of the specific industry.

Technology stack

Regarding our tech stack, we use Ruby on Rails for the server side of our web products. We have been using this framework for a long time and know it inside out.

Ruby on Rails has a simple syntax. Besides, it is noted for many ready-made solutions. They speed up the development process and reduce the web application development cost.

Initially, we have been using Ruby on Rails to create minimum viable products. However, over the years of practice and after dozens of projects delivered, we have learned how to build marketplaces and other large complex solutions with the help of this framework, too.

The client side of the web applications we deliver is written in React. This open-source library is used for building user interfaces. The following benefits have increased its popularity over the recent years:

• Many reusable components make code more accurate and save developers time.
• Usage of the virtual DOM (Document Object Model) helps build better user interfaces.
• Simple programming style speeds up the development process.

Kick-off session

The development stage will start with a kick-off session. We will hold team member onboarding by introducing them to you and informing them about the marketplace they need to build.

Usually, this phase takes up to one week. During this time, developers read user stories and technical specifications. Thus making it easier for them to offer the most suitable solutions.

At this stage, we assess how much time the team will need to complete a particular task and define the priority of the tasks.

Sprints

We will divide your project into short sprints lasting for two weeks. Each sprint will start with planning. In the following weeks, the team will perform the tasks. Daily meetings will be held to make sure all goes according to plan. 

The sprint will end with a retrospective to help our team analyze what has been done during those two weeks. In addition, we will consider possible ways to improve current processes.

Schematically, sprints can be presented in the following way:

Here are our development team’s main roles and responsibilities that will create a marketplace website f

If we identify a bug during the sprint, we will create a new task and plan to fix it during the next sprint.

You can join our team for a demo session at the end of each sprint. Also, you can ask for a demo at a specific stage of product development.

The product development stage will end with the project answers stage. We will discuss with you the finish of the development process. Usually, it is a product release or a soft launch.  

Testing and Release

Before delivering the solution, we will ensure every product feature works as it should.

To ensure that we create online marketplaces that are secure, reliable, and bug-free, our quality assurance engineers perform manual and automated tests. Also, they make sure the code is clean and business requirements are met.

At Syndicode, the developers write automation tests during the product development stage. They include unit tests, integration tests, and behavioral tests. Once the task is completed, the code is deployed to the staging server. There it is tested by a manual tester. 

If everything is okay, the code can be merged to the master. After that, it is tested once again on production.

Occasionally, testers should perform reverse tests.

Maintenance

When it comes to maintenance, we can offer you several options. 

First, we can provide you with a certain amount of hours. To some extent, it is similar to a subscription model when users pay a specific monthly fee for a particular service. 

Suppose you have sporadic requests for product improvements. In this case, we will recommend gathering all tasks in the backlog. As soon as there are enough tasks to take 80+ working hours, our development team will start working on them.

The team needed to build a marketplace website

Here are our development team’s main roles and responsibilities in creating a marketplace website for you.

• Business Analyst. This specialist will evaluate your business idea and your input data. This information includes a business model, basic functionality, and requirements. All this data will help a business analyst to form correct technical specifications for the development team.
• Software Development Team Lead. This professional will create user stories and offer the most suitable technical solutions. The team lead will communicate with project managers and business analytics so that developers can focus on the tasks at hand.
• Designers. They will create mockups, wireframes, and prototypes. These tools will help both customers, and the development team understands how the web application looks and feels. 
• Back-end Developers. They will build the server side of a web application. It implies business analytics, architecture, and third-party integration. Also, back-end developers will deal with cloud computing and are responsible for the overall system stability.
• Front-end Developers. Their task is to convey visually appealing designs in code to provide end-users with the best experience. They will create buttons, search bars, navigation, and other web page elements.
• Quality Assurance Engineers. They will verify that the software product meets the required technical specification. Also, they will make sure that each feature works properly and that there are no bugs.

Step 6. Grow and promote your marketplace business

Ensure the ongoing website and application development

At Syndicode, if you want to update your current website, we will provide you with the same team that has been building your online marketplace platform.

The whole process looks the following way: you tell us about the desired improvements. We discuss these ideas with the business analytics, project managers, and the development team. We assess the scope and give our estimates. 

As soon as the customer agrees, we start working on the second project phase.

Choose the right promotional channels

Creating a marketplace is only half the battle. You need to turn it into a profitable business. That’s when you will need the proper promotional channels.

To make things easier, we identified the most efficient marketing strategies you can use to gain traction. Check them below if you wonder how to build a marketplace that will bring you stable cash flow.

Search Engine Optimization (SEO)

It is a process aimed at increasing a website’s visibility in search engines. With the right action plan, you can gain new customers who come to your marketplace from Google. The SEO process can be divided into four parts. Technical SEO improves the technical aspects of a marketplace website. On-page optimization deals with keyword density, page title, and image alt optimization. Off-page SEO means building a reputation for your e-commerce platform. Finally, content optimization refers to the optimization of all content on your website. It can be blog posts, product descriptions, videos, etc.

Content marketing

You have a good chance of attracting new platform users by producing high-quality content. First, if users find your content engaging, they would want to share it on their social media. Thus, you will get the desired visibility. Second, the optimized content improves your ranking in search engine results. When browsing your niche, people will likely come across your marketplace. Finally, you can create educational content to help vendors grow their sales.

Paid traffic

If you have spare money that you are ready to spend on promoting your marketplace, you may try this strategy. There are several popular traffic sources. First, consider search engine marketing. You can display ads with your main keywords on Google or other search engines. Second, you can launch an ad campaign on Facebook or Twitter. Finally, you can publish banner ads on other websites. However, this promotion option is not flawless. You must be sure that the return on the investment will be positive.

Influencer marketing

Collaboration with famous influencers in your industry is a proven way to increase your marketplace visibility on social media. It works like this. You hire an influencer, i.e., a person who has a large following, to promote your marketplace. This way, you can attract new users much faster. Airbnb often uses this strategy. The brand offers celebrities accommodations in return for a promotional post on Instagram.

Thus, Airbnb offered Lady Gaga a $20 million estate in Houston for Super Bowl LI. The singer then thanked the company for the gift in her sponsored Instagram post.

Email marketing

There are several ways to drive more traffic to your marketplace platform with e-mail marketing. For example, you can offer vendors helpful and valuable tips on how to make money on your e-commerce website. They may get interested in your marketplace if they see it as a place where they can sell their products successfully. Your task is just to provide them with solid knowledge on how to make this thing happen. In addition, you can promote some special offers. Free shipping or discounts will attract your audience’s attention and encourage them to visit your marketplace and check your offerings.

Social media

To make the most out of this sales channel, ensure that your business page is all set. You should specify your contact details, products or services available on your marketplace platform, and other crucial company information. Besides, interacting with your target audience by joining relevant groups or communities would be a good idea. Finally, if you are an owner of a multi-vendor marketplace, try to reach your potential sellers via LinkedIn and ask them to sign up.

How much does it cost to create an online marketplace

Apart from how to build a marketplace website from scratch, you must be interested in the cost of a marketplace project. So let’s take a look at specific figures.

A marketplace MVP cost starts at $50,000, whereas to build a fully-featured e-commerce platform, you will need $100,000 or even more.

As for the timelines, the software development team will require four to five months to build a minimum viable product for a marketplace website. Meanwhile, they will need nine to twelve months to create a marketplace website with extensive functionality. Or even more.

Be aware that we provide you with rough estimates. Each project is unique, and so is the cost.

Factors that define marketplace website development cost

The marketplace development cost is determined by two equally important factors:

• Marketplace functionality. If you want to create a marketplace with some complex and unique functionality, be ready to pay a higher price for a completed solution.
• Location of the vendor. In Western Europe or North America, hourly rates for software development services are higher than those in Eastern Europe.

The correlation between the location of software developers and their rates:

Country	Average hourly rates
The USA	$80
Western Europe	$60
Eastern Europe	$30
India	$10

Marketplace MVP development cost

At Syndicode, the cost of building an MVP version of an online marketplace starts with $50.000. As for the timeline, our team will need 4-5 months to create an online marketplace with limited functionality.

During this time, the following primary marketplace features will be developed:

• Personal profiles
• Search system
• Administration panel
• Messaging system
• Product page
• Payment gateways
• Shopping cart.

Building a full product marketplace cost

The timeline and the cost of a full marketplace depends on the number of extra features you want to implement. If you need specific figures, the cost of a full-featured marketplace website built by the Syndicode team starts at $100,000.

Our team will need 9-12 months to create an online marketplace with diverse functionality. It will include the features discussed above, plus some functionality you may find desirable. 

If you want to know how to build a marketplace that will stand out from the competitors, you need to focus on building exceptional features to attract more users. They may be as follows:

• Wish lists
• Notification system
• Social media sharing
• Localization
• Product comparison
• Rating and review system.

Bottom line

We hope that this comprehensive guide answers your question about how to build a marketplace.

Apparently, building a marketplace may seem like a challenging task. However, things start looking very promising if you have a reliable software development company to take up your project. 

The experienced specialists will build a unique and powerful solution to help your marketplace business thrive.