Wout Withagen
Your successful online marketplace: the best tips for each stage
Innovate & digitalize
Marketplaces
Jun 2, 2021
Time for a recap! Recently, I wrote several blogs about setting up a successful online marketplace. From the very first question — does an online marketplace fit what you want to achieve? — to launching a marketplace. All the steps were covered. In this wrap-up, I'll summarize them for you once more. And as the icing on the cake, I'll also take a moment to highlight one last, unmissably important point: your online marketplace is never finished.
1. Develop (no) online marketplace
Following our book 'Build a Successful Online Marketplace', journalists and writers from publications like Marketing Tribune, Sprout, and Quote have interviewed us extensively over the past six months. It's really great to notice. One question we weren't asked, however, is: should you actually want to develop an online marketplace?
Online marketplaces offer myriad opportunities. They provide exactly what 'regular' sales channels currently lack: convenience, speed, market-compliant prices, and trust for both buying and selling parties.
Making an online marketplace successful is quite a challenge in itself. You have to deal with supply and demand (and thus with the needs and whims of both buyers and sellers). You need to adapt your platform to these factors. You have to attract multiple parties and keep them satisfied. It's like the wheels of a gear that must fit precisely together. In every marketplace, those gears operate differently. The art is to discover the success formula for your own marketplace.
So: should you want a marketplace? No, not as a goal in itself. But it certainly should if it shows to offer enormous opportunities because you've discovered your perfect formula.
2. Nobody is waiting for your marketplace idea. Or are they..?
You have the best ever idea in your mind for an online marketplace — a plan you want to roll out NOW. This is the holy grail. You've been nurturing it for months. Off to the next step: building an online platform. Stop, take a breath, and think again. Spend your time and effort in thorough analysis and validation before you take a single step further. That's how you find out whether anyone is waiting for your idea at all. And that you're not unnecessarily investing time and money in a plan doomed to fail.
The following questions will help you in this step:
Does your idea fit on a beer coaster?
Is there a win-win-win situation and a perfect product-market fit?
Do your future users (on both demand and supply sides) see your plan as viable? (Meaning: will they actually use your online marketplace?)
To answer these questions well, you can't do without thorough analysis and validation.
To answer these questions well, you can't do without thorough analysis and validation. How did it go again? Read blog 2 again to refresh your memory.
3. The team, the tent, and the money
A perfect team, ideal prerequisites, and a strong budget. A successful online marketplace cannot do without these. You achieve this by:
1. Being flexible
Describe your validated idea in the most concise and concrete business case possible. Mention no more (and not less) than your idea (in one sentence), your revenue model, your schedule, and your budget. A good tool for this is the Business Model Canvas. It excellently portrays the desired win-win-win situation that every marketplace should strive for (for the provider, the purchaser, and the marketplace itself).
2. Assemble the ideal team
A useful formula here is the three H’s + L. The Hacker (critical developer), the Hipster (strategic thinker and visionary), and the Hustler (fixer and networker). I add a fourth type, especially focused on marketplaces within corporates: the Lobbyist. Build a team with the right people. Ensure that together you possess all the skills.
3. Work with a roadmap
Setting up an online marketplace takes time. Three to four years is very normal. Try to remain realistic and conservative with all your dreams, enthusiasm, and drive when formulating your next steps. A roadmap—which cuts your schedule into manageable portions—is ideal here.
4. The money: substantiated guesswork & scenarios
This special marketplace P&L, pre-filled by us for a fictional business case, helps you draft your budget. Do you need just a bit more grip on the matter? Then working with different scenarios for your budget is a good option. You can read more about this in our book.
Read blog 3 again? You can do so here.
4. From soapbox on wheels to SUV
Do you want nothing more than to get started with the first version of your super cool plan for an online marketplace? Work towards this step by step: from a minimum viable product to a full blast product.
Focus your attention on the absolute core of your online marketplace: creating a successful match between buyer and seller. Such a match only exists when two or more parties feel a ‘win’. What minimum viable features do you need for this? Use that to design your online marketplace. And it should be (read: must be) as simple as possible. That everything is held together with rubber bands and tape at the back end, we'll solve later.
Start with a relatively small target audience to test your marketplace. But not too small. The intention is that your test audience is precisely the right size to quickly gain valuable insights.
Determine your minimum viable location with a healthy dose of common sense. Are you rolling out your services region by region, like Uber and Picnic? Are you starting per province or going internationally right away? Think carefully about what suits your services.
5. Believe you can fly
The fact that online marketplaces like Uber, Bol.com, and YoungOnes are well found and used is all about the right marketing and activation. How do you kickstart the supply and demand dynamics for your online marketplace?
Focus your marketing strategy on the demand side of your platform. The right strategy for this depends on your specific situation. Paying for quick user recruitment works well at the start of your online platform, while using mass media works better for more mature online marketplaces.
Set good, SMART formulated growth indicators before you start. These form the guiding thread along which your marketplace can grow step by step. Exactly in the direction you envision. The next step is to experiment wildly with the right marketing mix. The growth indicators and experiments are also in line with each other.
A widely used model for gaining insight and bringing structure and focus is the AARRR Model, also known as the Pirate Funnel. Devise several experiments to validate the growth opportunities for your marketplace. Put them in an overview and assess each experiment on impact, complexity, and planning. How exactly you do this is explained in our book.
Need more context? Read blog 5 again.
6. Your online marketplace is never finished
If you have completed all the previous steps, you've reached the most exciting phase: your platform is running! Matches are being made, there is traction, you've learned what works, and much more often, what doesn't. You're generating revenue, although the costs are likely higher than the income at this point.
Time to sit back? Better not. Now it's time to grow: from start-up to scale-up. Growing your online marketplace means only one thing: creating even more matches between buyers and sellers. That means you need to further develop the platform, advance your marketing to the next phase, and require other skills in your team.
Growth can occur in many ways. Both lengthwise and breadthwise. You name it. Therefore, it's crucial to focus. Choose one growth strategy, one so-called mark on the horizon. Roughly, there are three possibilities:
Expand your reach by further optimizing the platform (think of new functionalities and technical scalability).
Broaden and deepen through internationalization, other verticals, or whitelabels.
Integrate by making the functionality of your platform accessible through APIs and fitting into other platforms.
It's important to realize that an online marketplace is never 'done'. You continuously learn and with those new insights, you get to work on further improving your marketplace. Further development is an integral part of growth and thus the success of the platform. Optimize, optimize, optimize. Continue to test and monitor whether both the demand and supply sides still sufficiently benefit from your platform. And whether it can or must be better, or different. Build, measure, learn. Start new ideas small, validate, implement, and test. This is how you make your successful marketplace even more successful!
Do you really want to accelerate in developing your own successful marketplace? Sign up for the newsletter (at the bottom of this page) and receive a fresh dose of tips and insights every month! Or order our book and have all the background information per step right at your disposal.