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<p>If you are building an online marketplace, you probably know that one of the most important goals is to achieve product-market fit. This means that your product meets the needs and expectations of your target market, and that you have a viable and scalable business model. But how do you get there?</p>



<p>In this blog post, we will explain what product-market fit is, why it is important, and how you can use a high-fidelity minimum viable product (MVP) to test and validate your assumptions and hypotheses. We will also share some examples of successful marketplaces that used high-fidelity MVPs to establish product-market fit.</p>



<h2>What is Product-Market Fit?</h2>



<p>Product-market fit is the degree to which a product satisfies a strong market demand. It is often considered as the first step towards building a successful and sustainable business. According to Marc Andreessen, the co-founder of Netscape and Andreessen Horowitz, product-market fit is "the only thing that matters" for startups.</p>



<p>Product-market fit can be measured by various indicators, such as customer satisfaction, retention, referrals, revenue, growth, and profitability. However, there is no one-size-fits-all formula or metric to determine product-market fit. It depends on your specific product, market, and goals.</p>



<h2><strong>At what stage of the business cycle should you start looking for product-market fit?&nbsp;</strong></h2>



<p>One common question that entrepreneurs face is when to start looking for product-market fit. Should they do it before launching the product, after launching the product, or somewhere in between? The answer depends on the stage of the business cycle that the startup is in.</p>



<p>During the<strong> discovery phase</strong> the entrepreneur identifies a problem that needs to be solved, and comes up with a hypothesis for a possible solution. The goal of this phase is to find the problem-solution fit, which means that the proposed solution actually solves the problem for a specific target market. We have explained how to do this in our article: <a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp//">Why marketplace startups should test problem-solution fit with a low-fidelity MVP</a></p>



<p>The <strong>validation phase</strong> is where the entrepreneur tests the hypothesis with real customers, and collects data on their behavior and feedback. The goal of this phase is to validate the product-market fit, which means that the product satisfies a strong market demand, and that customers are willing to pay for it.</p>



<p>Usually, at the beginning of the product-market validation phase, there is an existing platform with some user acquisition and engagement, but low conversion rates. This MVP may have started to generate some turnover, but does not yet have a viable business model.</p>



<p>Based on this framework, it is clear that looking for product-market fit should start in the validation phase, after finding the problem-solution fit in the discovery phase.</p>



<p>However, this does not mean that product-market fit is a one-time event that happens once and for all. Rather, it is an ongoing process that requires constant monitoring and adjustment, as customer needs and preferences may change over time, or as new competitors may enter the market.</p>



<h2><strong>Why is Product-Market Fit Important?</strong></h2>



<p>Product-market fit is important because it validates that you are solving a real problem for a large enough market, and that you have a competitive advantage over other solutions. It also helps you optimise your product development, marketing, and sales strategies, and allocate your resources more efficiently.</p>



<p>Without product-market fit, you will likely struggle to acquire and retain customers, generate revenue, and grow your business. You may end up wasting time and money on building features or functionality that nobody wants or needs, or chasing after the wrong market segment or channel.</p>



<h2><strong>Common product-market fit questions</strong></h2>



<p>To achieve product-market fit, online marketplace entrepreneurs and product managers need to ask and answer some common questions, such as:</p>



<ul><li>How much are users willing to pay?</li><li>Are there enough users willing to pay?</li><li>How do users find and engage with your platform?</li><li>How do users transact on your platform?</li><li>How do you retain users?</li></ul>



<p>These questions help to define the value proposition, the competitive advantage, the marketing strategy, and the product development process of a marketplace project.</p>



<h2>How to Achieve Product-Market Fit with a High-Fidelity MVP?</h2>



<p>A high-fidelity MVP is a version of your marketplace concept that has enough features and functionality to deliver value to your early adopters and test your core assumptions and hypotheses. It is not a fully-fledged product, but it is not a prototype or a mockup either. It is somewhere in between.</p>



<p>A high-fidelity MVP can help you achieve product-market fit by allowing you to:</p>



<h3><strong>Test usability</strong></h3>



<p>You can evaluate how your UX/UI design impacts your user flow and engagement, and how well your core functionality works. For example, how easy is it for users to search, find, select, compare, checkout, and fulfil their transactions on your platform? You can use metrics such as drop-off points, user feedback, sign-ups, ratings, and reviews to measure usability.</p>



<h3>Test and refine the business model</h3>



<p>You can experiment with different aspects of your business model, such as user segmentation, product segmentation, geographic focus, pricing strategy, etc. You can use metrics such as customer acquisition cost (CAC), customer lifetime value (LTV), gross margin, etc. to measure the viability and scalability of your business model.</p>



<h3>Test and refine the revenue model</h3>



<p>You can test different ways of generating revenue from your platform, such as commissions, fees, subscriptions, advertising, etc. Use the <a href="https://www.cobbleweb.co.uk/aarrr-pirate-metrics-improve-marketplace-performance/">AARRR framework</a> to define, track and analyse appropriate metrics. These include average order value (AOV), conversion rate, cart abandonment rate, retention rate, churn rate, etc. to measure the effectiveness and sustainability of your revenue model.</p>



<div class="wp-block-image"><figure class="aligncenter size-large is-resized"><a href="https://www.cobbleweb.co.uk/are-we-there-yet-how-to-measure-product-market-fit-in-marketplace-startups/" target="_blank" rel="noopener"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/11/image-1.png" alt="How to measure product-market fit in marketplace startups" class="wp-image-10225" width="462" height="415"/></a><figcaption>Click the image to learn more about selecting metrics to prove product-market fit for your marketplace startup.</figcaption></figure></div>



<h3>Iterate</h3>



<p>You can add, adjust, and test features and functionality in an incremental manner based on user feedback and data analysis. You can also identify which features or functionality contribute to product-market fit and which ones do not.</p>



<h2><strong>What is the best technology approach for high-fidelity MVPs?</strong></h2>



<p>Since product-market fit validation, especially for online marketplaces, puts a big emphasis on optimal user flows and the user experience, as well as a process of incremental iteration, <strong><a href="https://www.cobbleweb.co.uk/">custom marketplace development</a></strong>, which can accommodate unique user flows and features, will always deliver superior outcomes.</p>



<p>Unfortunately, taking shortcuts with an inflexible, unscalable one-size-fits-all turnkey solution will usually postpone, if not permanently block, your quest for product-market fit. We explain why in more detail in our article: <a href="https://www.cobbleweb.co.uk/6-ways-turnkey-software-solutions-can-kill-your-marketplace-startup/">6 ways turnkey software solutions can kill your marketplace startup</a></p>



<h2>Examples of Successful Marketplaces that Used High-Fidelity MVPs to Establish Product-Market Fit</h2>



<p><strong><a href="https://www.cobbleweb.co.uk/airbnb-case-study/">Airbnb</a> </strong>started as a simple website that allowed people to rent out their spare rooms or couches to travellers. They focused on testing their value proposition (affordable accommodation with local experiences) and their revenue model (charging a commission from both hosts and guests). They also iterated on their UX/UI design and functionality based on user feedback and data analysis. They eventually added features such as reviews, verification, insurance, etc. to increase trust and safety on their platform.</p>



<p><strong>Ube</strong>r launched as a mobile app that connected riders with drivers who had black cars or SUVs. They focused on testing their value proposition (convenient transportation with premium service) and their revenue model (charging a dynamic fare based on supply and demand). They only added additional features such as surge pricing and ratings after iterating on their UX/UI design and functionality based on user feedback and data analysis. </p>



<p><strong><a href="https://www.cobbleweb.co.uk/projects/fanpass-marketplace-case-study/">FanPass</a> </strong>- a fast-growing event-ticketing marketplace - used detailed analysis of user behaviour and traffic acquisition to create special features for specific buyer and seller segments. The improved product-market fit resulted in a threefold increase in conversion rates.</p>

How to establish product-market fit for your online marketplace with a high-fidelity MVP

7 growth strategies to scale your online marketplace post product-market fit

<p>We’ve previously written about the <a href="https://www.cobbleweb.co.uk/6-ways-turnkey-software-solutions-can-kill-your-marketplace-startup/">pitfalls of using off-the-shelf templates</a> to build complex platforms like online marketplaces. In particular, we highlighted how turkey solutions fail to adequately support multiple challenges of new marketplace concepts, in particular: user experience, user flows, scalability, shipping, APIs, and revenue streams. In fact, that post did such a good job of driving the point home that other <a href="https://www.platformos.com/blog/post/the-6-pitfalls-of-turnkey-marketplace-solutions-you-can-avoid-by-building-on-platformos">software development companies</a> have used it as a reference point.&nbsp;</p>



<p>In comparison, <a href="https://www.cobbleweb.co.uk/">custom marketplace development</a> offers, not only almost unlimited flexibility, functionality and scalability, but critical for success, a blueprint for <a href="https://www.cobbleweb.co.uk/marketplace-development-process/">mapping a path to product-market fit</a> and identifying growth opportunities.</p>



<p>That said,&nbsp;</p>



<h2>Off-the-shelf marketplace builders do have some advantages</h2>



<p><strong>Budget friendly</strong></p>



<p>If you have a limited budget for developing an online marketplace, off-the-shelf ecommerce software can be a cost-effective solution. These software solutions often come with a range of features and functionalities that can be customised to meet your business needs.</p>



<p><strong>Low skills threshold</strong></p>



<p>If you don't have a team of developers or technical experts to build and maintain a custom ecommerce solution, off-the-shelf software can be a good option. These solutions typically come with support and documentation that can help you get up and running quickly.</p>



<p><strong>Quick implementation</strong></p>



<p>If you need to launch your online marketplace quickly, off-the-shelf software can be a good choice. These solutions often have pre-built templates and integrations that can help you get started faster than building a custom solution from scratch.</p>



<h2>The most important use cases for turnkey marketplace solutions</h2>



<p>Speedy implementation and resource-friendliness by themselves are not necessarily enough reason to utilise a turnkey solution. As we’ve pointed out, such a hasty decision may eventually lead down a dead-end that could result in just the opposite: wasted time and money.</p>



<p>As an example, one of our clients, <a href="https://www.cobbleweb.co.uk/projects/affordable-art-fair-marketplace-case-study/">Affordable Art Fair</a>, built the initial go-to-market version of their online art marketplace with Magento.&nbsp; The resultant architecture was difficult to adapt, almost impossible to scale, and slow site speed hurt the UX, which necessitated a complete custom overhaul.&nbsp;</p>



<p>However, at the risk of contradicting ourselves, there are instances where custom development amounts to an overkill. This is especially true for novice marketplace entrepreneurs who haven’t built anything yet, or who have gained very little traction or user feedback from badly implemented or overcomplicated <a href="https://www.cobbleweb.co.uk/building-mvp-top-mistakes/">MVPs</a>.&nbsp;</p>



<h3>1. Test if there is a general need in the market</h3>



<p>The first priority of any aspiring marketplace entrepreneur should be to check&nbsp; if there is in fact a problem that needs solving in their chosen target market. <strong>Driving traffic to a landing page,</strong> which is populated with the basic premise of your marketplace and a sign-up form, could indicate if there is interest from either side (buyers or sellers) in the market.</p>



<p>Other strategies include:</p>



<p><strong>Keyword research</strong>: Using turnkey software, entrepreneurs can research the most commonly used keywords and search terms used on and off their site. This can help them understand if there is significant demand for their concept, and if there are already existing marketplaces targeting those keywords.</p>



<p><strong>Social listening:</strong> Turnkey software can be used to monitor social media channels for mentions of specific keywords or product categories related to the marketplace idea. This can help entrepreneurs understand what people are saying about existing marketplaces, identify potential gaps in the market, and gather feedback on what customers are looking for.</p>



<p><strong>Surveying:</strong> Turnkey software can be used to create and distribute surveys to a target audience, to gather data and feedback on their needs and preferences. Surveys can be used to test the demand for a specific marketplace idea and understand what features and functionalities would be most important to customers.</p>



<p>It is important though, not to confuse testing for a need in the market with validating assumptions about users in that market. The prior forms part of market research, while the latter works towards product-market fit, i.e. do users find your particular solution useful?</p>



<h3>2. Formulate and refine your value proposition</h3>



<p>Online marketplace startups can leverage turnkey software in several ways to gain a better understanding of various market elements. The information gathered can then be used to make data-driven decisions about the new marketplace’s value proposition.</p>



<ol><li><strong>Market analysis</strong>: Turnkey software can provide startups with access to data and analytics on their target market, including consumer behaviour, popular product categories, and regional trends. This information can be used to make informed decisions about which product categories and locations to focus on.</li></ol>



<ol start="2"><li><strong>A/B testing</strong>: Turnkey software can enable startups to run A/B tests to evaluate different product categories or locations to determine which ones are most successful. This can help identify areas of the market with the greatest potential for growth and profitability.</li></ol>



<ol start="3"><li><strong>User feedback</strong>: ecommerce software often includes tools for gathering user feedback, such as surveys or ratings and reviews. Entrepreneurs can use this feedback to identify areas where customers are experiencing problems or frustrations with existing solutions, and use this information to create a better solution.</li></ol>



<ol start="4"><li><strong>Testing and experimentation:</strong> plug-and-play marketplace software can enable entrepreneurs to quickly test and experiment with different marketplace concepts and features to see what resonates with their target audience. This can help identify potential problems and challenges that need to be solved before launching the go-to-market version.</li></ol>



<h3>3. Build user personas&nbsp;</h3>



<p>User feedback collected via turnkey software can also be used to create and segment user personas. Such an exercise will improve audience targeting and engagement once the actual MVP version of the marketplace is up and running.&nbsp;</p>



<p>Some of the main variables that can be used to build user personas for online marketplaces:</p>



<p><strong>Demographics</strong>: This includes variables such as age, gender, income, education, and location. Understanding the demographic characteristics of users can help entrepreneurs tailor their online marketplace to specific groups of people.</p>



<p><strong>Behaviour patterns:</strong> This includes variables such as the frequency of use, the types of products or services purchased, and the time of day that users are most active. Understanding these behaviour patterns can help entrepreneurs design a user experience that is tailored to the needs of their users.</p>



<p><strong>Goals and motivations:</strong> This includes variables such as the reasons why users use the online marketplace, their goals for using it, and the benefits they expect to receive. Understanding these motivations can help entrepreneurs design a marketplace that meets the needs and expectations of their users.</p>



<p><strong>Pain points and challenges</strong>: This includes variables such as the challenges users face when using the online marketplace, the pain points they experience, and the barriers they encounter. Understanding these pain points can help entrepreneurs design a marketplace that addresses these challenges and makes it easier for users to achieve their goals.</p>



<p><strong>Communication preferences</strong>: This includes variables such as the preferred methods of communication and the frequency of communication. Understanding these preferences can help entrepreneurs tailor their communication strategies to the needs of their users and ensure that they are receiving the information they need to use the marketplace effectively.</p>



<p>Our clients, <a href="https://www.cobbleweb.co.uk/projects/fanpass-marketplace-case-study/">FanPass</a>, a very successful event marketplace, tested their idea with a super smart and cost-effective strategy. They used competitor platforms such as Viagogo, Ticketbiz, and Gumtree to learn more about sellers and buyers of event tickets.This helped them target the right audience with their MVP version with rapid growth as a result.</p>



<h2>Which type of turnkey software is best for testing your marketplace idea?</h2>



<p>These days there are a bewildering array of platforms that offer off-the-shelf ecommerce templates for marketplace development, each with their own advantages and disadvantages. Your options include no-code platforms like Bubble or Webflow, low-code platforms like Shopify, general website builders with ecommerce plugins like WordPress with WooCommerce, and dedicated marketplace builders like Sharetribe and Mirakl.</p>



<p>The choice between them depends on the complexity of the online marketplace being developed, the customisation required, the available budget, and the technical skills of the development team.&nbsp;</p>



<p>Note that there can also be big differences between the options within each category. For example, Sharetribe is a good option for entrepreneurs who want to quickly build and launch a basic online marketplace without requiring extensive technical skills. However, entrepreneurs who need more advanced customisation options or more complex features may find Mirakl a better option.</p>



<p><strong>Here’s a basic breakdown of the pros and cons of each category:</strong></p>



<h3>No-Code Platforms:</h3>



<p>Pros:</p>



<ul><li>Easy to use, even for beginners</li><li>No coding skills required</li><li>Fast development and deployment</li><li>Affordable, as they often have low or no subscription fees</li></ul>



<p>Cons:</p>



<ul><li>Limited customisation options</li><li>May not be suitable for more complex marketplaces</li><li>Limited functionality compared to dedicated turnkey software</li><li>Limited support for custom integrations or extensions</li></ul>



<h3>Low-Code Platforms:</h3>



<p>Pros:</p>



<ul><li>More flexibility than no-code platforms</li><li>Faster development than traditional coding methods</li><li>Can integrate with custom code or third-party tools</li><li>More affordable than dedicated marketplace builders</li></ul>



<p>Cons:</p>



<ul><li>Steeper learning curve than no-code platforms</li><li>Limited customisation options compared to dedicated marketplace builders</li><li>Limited functionality compared to dedicated marketplace builders</li><li>May require some coding skills or technical expertise</li></ul>



<h3>General Website Builders with Ecommerce Plugins:</h3>



<p>Pros:</p>



<ul><li>Easy to use, even for beginners</li><li>No coding skills required</li><li>Affordable, with low or no subscription fees</li><li>Can create a basic online marketplace quickly</li></ul>



<p>Cons:</p>



<ul><li>Limited functionality compared to dedicated marketplace builders</li><li>Limited customisation options</li><li>May not be suitable for complex marketplaces</li><li>Limited support for custom integrations or extensions</li></ul>



<h3>Dedicated Marketplace Builders:</h3>



<p>Pros:</p>



<ul><li>Extensive functionality and customisation options</li><li>Supports custom integrations and extensions</li><li>Suitable for complex marketplaces</li><li>Often comes with dedicated customer support</li></ul>



<p>Cons:</p>



<ul><li>Higher cost than no-code or low-code platforms</li><li>Steeper learning curve than no-code or low-code platforms</li><li>May require more technical expertise</li><li>Longer development and deployment time</li></ul>



<h2>Next steps&nbsp;</h2>



<p>By using turnkey software to conduct market research, test the market, gather user feedback, and monitor marketplace metrics, marketplace entrepreneurs can identify any problems or issues in their chosen target market and develop solutions to address them. This can help increase the chances of marketplace success and long-term sustainability.</p>



<p>The next steps in that process would be to create a <a href="https://www.cobbleweb.co.uk/design-test-mvp/">low-fidelity MVP</a> as part of the discovery phase of the custom development process.</p>

When should you use off-the-shelf ecommerce software for online marketplace development?

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problem-solution fit

Are we there yet? How to measure product-market fit in marketplace startups

<p>If you are building an online marketplace, you might have heard of the term MVP, or minimum viable product. An MVP is a version of your product that has the minimum features needed to test your core value proposition with real customers.&nbsp;</p>



<p>But before you rush off to build a fully-functional <a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/">high-fidelity MVP</a>, it’s important to first find out if there’s a real problem in your chosen market and whether customers are willing to use and pay for your solution. The best way to validate this <strong>problem-solution fit</strong> is with a low-fidelity MVP as part of the discovery phase.</p>



<p>In this blog post, we will explain what a low-fidelity MVP is, why it is useful in the discovery phase of marketplace development, and how to create one.</p>



<h2>Definition of a low-fidelity MVP</h2>



<p>A low-fidelity MVP is a simple and cheap way to test your assumptions about your product and market. It does not have to be a fully functional product, but rather a prototype, a mockup, or even a landing page that shows the main value proposition of your product. The goal of a low-fidelity MVP is to get feedback from potential customers as quickly and cheaply as possible, without spending too much time and money on development.</p>



<h2>The discovery phase in marketplace development</h2>



<p>The first stage of building an online marketplace is known as the discovery phase, where you identify and validate the problem you are solving, the market you are targeting, and the solution you are offering. On a practical level, it means gaining an in-depth understanding of user personas, user flows, and business parameters.&nbsp;</p>



<p>The discovery phase helps you avoid building something that nobody wants or needs, and instead focuses on finding the <strong>problem-solution fit</strong>. Problem-solution fit means that you have a solution that solves a real problem for a specific segment of customers who are willing to pay for it.</p>



<h2>Advantages of a low-fidelity MVP</h2>



<p>A low-fidelity MVP can help you evaluate the various components (features) of your solution in terms of friction and impact. There's no sense in wasting resources on features that irritate or confuse initial users. Using a low-fidelity MVP in the discovery phase has many advantages:</p>



<ul><li>It helps you test your assumptions and hypotheses before investing too much time and money into development.</li><li>It helps you get feedback from real customers and learn about their needs, preferences, and behaviour.</li><li>It helps you iterate and improve your product based on customer feedback and data.</li><li>It helps you reduce the risk of failure and increase the chances of success.</li></ul>



<h2>Types of low-fidelity MVPs</h2>



<p>There are many types of low-fidelity MVPs that you can use in the discovery phase of marketplace development, depending on your goals and resources. Some general examples include:</p>



<h3>Landing page:&nbsp;</h3>



<p>A landing page is a single web page that showcases your value proposition, your target market, and your call to action. You can use a landing page to test your value proposition, generate interest, and collect email addresses or sign-ups from potential customers.</p>



<h3>Explainer video:&nbsp;</h3>



<p>An explainer video is a short video that explains what your product does, how it works, and why it is valuable. You can use an explainer video to demonstrate your product concept, show its benefits, and attract attention.</p>



<h3>Mockup or wireframe:&nbsp;</h3>



<p>A mockup or wireframe is a visual representation of how your product will look like, without any functionality or interactivity. You can use a mockup or wireframe to show your product design, layout, and features, and get feedback on usability and aesthetics.</p>



<h3>Prototype:</h3>



<p>A prototype is a simplified version of your product that has some functionality and interactivity, but not all the features or polish. You can use a prototype to test your product functionality, user experience, and value proposition with real users.</p>



<p>You can discover more specialised low-fidelity MVP types in our blog post: <a href="https://www.cobbleweb.co.uk/choose-right-mvp-type/">6 Minimum Viable Product types You need to Look at Before Building your Product</a></p>



<h2>The difference between problem-solution fit and product-market fit</h2>



<p>As we mentioned earlier, problem-solution fit and product-market fit are two important concepts in the discovery phase of marketplace development. But what is the difference between them?</p>



<p><strong>Problem-solution fit </strong>means that you have validated that your solution solves a real problem for a specific segment of customers. To achieve problem-solution fit, you need to answer questions like:</p>



<ul><li>What problem are you solving?</li><li>Who are you solving it for?</li><li>How are they solving it now?</li><li>How does your solution solve it better?</li></ul>



<p><strong>Product-market fit </strong>means that you have validated that there is a large enough market that is willing to pay for your solution. To achieve product-market fit, you need to answer questions like:</p>



<ul><li>How big is your market?</li><li>How much are they willing to pay?</li><li>How do they find and buy your solution?</li><li>How do you acquire and retain them?</li></ul>



<p>Problem-solution fit thus comes before product-market fit. You need to first find a solution that works for a specific customer segment before scaling it to a larger market. However, both are iterative processes that require constant testing and learning.</p>



<h2>Well-known online marketplaces that used a low-fidelity MVP to establish problem-solution fit</h2>



<h3>Etsy</h3>



<p>Etsy is a global marketplace for handmade and vintage goods. The founders of Etsy started with a paper prototype, which is a simple sketch of the main features and user interface of the website. They used this prototype to test their assumptions about the customer problem, value proposition, and market size. They also interviewed potential sellers and buyers to get feedback on their idea. The paper prototype helped them validate that there was a demand for a niche marketplace that connects crafters and customers.&nbsp;</p>



<h3>Airbnb</h3>



<p>Airbnb is a platform that allows people to rent out their spare rooms or properties to travellers. The founders of <a href="https://www.linkedin.com/posts/airbnb_the-evolution-of-airbnb-activity-7054511213984038912-12o9/">Airbnb used a landing page as their low-fidelity MVP</a>. They created a simple website with photos of their own apartment, which they offered to rent out during a conference in San Francisco. They posted the link on various forums and blogs, and managed to get three bookings. The landing page helped them validate that there was a market for peer-to-peer accommodation rentals, and that people were willing to pay for it.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2023/10/Airbnb-2007.jpg" alt="Airbnb 2007 first version" class="wp-image-8843"/><figcaption>The first version (2007) of Airbnb was pretty much just a landing page built by co-founder Nathan Bielarczyk.</figcaption></figure></div>



<h3>Zappos</h3>



<p>Zappos is an online retailer that sells shoes and clothing. The founder of Zappos used a functional prototype as his low-fidelity MVP. He went to a local shoe store and took photos of the shoes he wanted to sell online. He then uploaded the photos to a simple website, and waited for orders. When someone ordered a pair of shoes, he went back to the store, bought the shoes, and shipped them to the customer. The functional prototype helped him validate that people were comfortable buying shoes online, and that he could make a profit from it.&nbsp;</p>



<h2>Conclusion</h2>



<p>A low-fidelity MVP in the discovery phase of online marketplace development can help you validate your problem, market, and solution quickly and cheaply. By using different types of low-fidelity MVPs, such as landing pages, explainer videos, mockups, wireframes, or prototypes, you can test your assumptions on real customers. Their feedback will allow you to iterate and improve your product until it solves their problems in a satisfactory manner. This will set your marketplace idea up for the next phase: <a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/">How to establish product-market fit for your online marketplace with a high-fidelity MVP</a></p>

Why marketplace startups should test problem-solution fit with a low-fidelity MVP

product-market fit

<p>One of the greatest causes of marketplace startup failure is insufficient budget planning. This is often the result of conflating the initial setup costs with a full product development road map that is geared towards product/market fit. Many startups fail to make provision for dynamic and recurring items that are key to their platform’s successful operation and optimisation.</p>



<p>We have previously written about <a href="https://www.cobbleweb.co.uk/how-much-does-it-cost-to-build-an-online-marketplace-in-the-uk/">marketplace development costs</a>. That mostly covered the initial design and implementation of technology. However, this basic cost should not be seen as a static or final amount. </p>



<p>Marketplace success, especially product/market fit, is dependent on ongoing iteration and experimentation. Startups should therefore also include the cost of these processes in their marketplace development budget.&nbsp;</p>



<p><strong>CobbleWeb</strong> has created a budget calculator to make it easier to estimate the various costs for custom marketplace development that will ensure a higher chance of success.</p>



<figure class="wp-block-image size-large"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/Budget-Calculator-1.png"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/Budget-Calculator-1.png" alt="Budget calculator for marketplace development" class="wp-image-5375"/></a><figcaption>Budget calculator for marketplace development</figcaption></figure>



<h2>The basic cost to build your marketplace platform</h2>



<p>As we mentioned in our <a href="https://www.cobbleweb.co.uk/how-much-does-it-cost-to-build-an-online-marketplace-in-the-uk/">previous post</a>, custom marketplace development can cost anywhere from £10,000 to £100,000 plus. This includes the following once-off services:</p>



<h3>Discovery</h3>



<p>This stage is used to gain a deep understanding of your business and the market that it operates in. This includes mapping out the unique selling points, user journeys, user personas, and transaction flow.&nbsp;</p>



<p>We also investigate the suitability of technologies to be used. The goal is to design a marketplace solution that will inspire high levels of confidence in the end product. The discovery stage is a good example of the powerful extra value that custom development provides.</p>



<h3>Development&nbsp;</h3>



<p>This is the technical implementation of the user stories as defined in a storyboard created during the discovery phase. User stories are the building blocks of any development road map and are grouped under top-level categories (epics) that cover the main user flows of your marketplace. e.g. user management, product management, navigation, buying funnel and shipping.</p>



<p>Knowing when to prioritise which user stories is an important part of your budget calculation. As can be seen from the storyboard example below there are a number of variables that can affect the initial development cost.&nbsp;</p>



<p>Priority one items are those user stories that will be included in the first release of your platform. Changing the priority will update the total development cost in the calculator.&nbsp;</p>



<p>The number of advanced and standard days will also affect the development cost. Advanced days comprise the estimated workload for senior developers with seven plus years experience, while standard days are the workload for junior developers with three to seven years experience. The more complex the user story or feature, the more advanced days will be required.</p>



<figure class="wp-block-image size-large"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/User-storyboard-1.png"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/03/User-storyboard-1-1024x395.png" alt="Segment of user storyboard with variables such as priority status" class="wp-image-5374"/></a><figcaption>Segment of user storyboard with variables such as priority status</figcaption></figure>



<h3>UX/UI design</h3>



<p>During this phase the required user interfaces, page layouts and graphic elements are designed for testing during the development stage. Designs are then iterated based on user feedback till sufficient results are achieved.</p>



<h3>Infrastructure set up</h3>



<p>This is a once-off cost that covers the setting up of platform infrastructure through scalable cloud-based platforms such as Amazon Web Services. Basic infrastructure usually comprises data storage (Amazon S3), database engines (Amazon RDS), and virtual servers (Amazon EC2).</p>



<h3>Hosting</h3>



<p>This is a recurring cost and will depend on platform traffic. In general it’s best to use a scalable service like AWS to ensure continuity and minimal service disruptions.</p>



<h2>Additional resources</h2>



<p>The following additional services promote product-market fit and maximise opportunities for business success. These are usually estimated costs that will be refined during the discovery phase and before the launch.&nbsp;</p>



<h3>Contingency</h3>



<p>Contingency costs cover those elements that were omitted during the initial storyboarding stage. They are then added as additional user stories during development.&nbsp;&nbsp;</p>



<p>Example: Our client wanted recommended sellers to be highlighted in search results. During development they realised their business model required the manual tagging of recommended sellers. Thus, a new story had to be created on a contingency basis.&nbsp;</p>



<h3>Optimisation</h3>



<p>Optimisation costs are incurred with the implementation of refinements that drive further marketplace growth. These refinements are based on opportunities identified during the tracking of user behaviour after platform launch.</p>



<h3>Preventive &amp; corrective maintenance</h3>



<p>Preventive support focuses on monitoring the technical health of the platform. It includes the exploration of data to pre-empt issues that may crop up in future. Corrective support involves tracking and fixing platform errors.</p>



<h3>Business intelligence</h3>



<p>This is the cost for implementing and managing technology that measures user behaviour. <a href="https://www.cobbleweb.co.uk/aarrr-pirate-metrics-improve-marketplace-performance/">Tracking the right metrics</a> can increase chances for success and identify new opportunities such as additional revenue streams.&nbsp;</p>



<hr class="wp-block-separator"/>



<p>Creating a detailed development budget for your marketplace startup not only gives you a better idea of the total costs involved, it helps you clarify your business case and development priorities. A software development agency that specialises in custom marketplaces can help you make sense of this critical step.&nbsp;</p>



<p class="has-very-light-gray-background-color has-background">Get in touch with CobbleWeb to discuss your custom marketplace budget.</p>



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Marketplace development: budget vs cost (they're not the same)

How much does it cost to build an online marketplace in the UK?

<p>One of the most critical decisions you'll face when embarking on the journey of building an online marketplace, is selecting the right technology stack. This choice is often a balancing act, with each option presenting its own set of challenges and considerations.</p>



<p>In this post we will touch on:</p>



<ol><li>&#x2705; &#x274c; Pros and cons of the two main tech approaches to marketplace development </li><li>&#x1f504; Whether you should use different technology for different stages of marketplace evolution </li><li>&#x1f52e; How assumptions affect tech choices </li><li>&#x1f9f1; The main building blocks of a custom marketplace</li><li>&#x1f916; Whether AI can help design a marketplace tech stack</li><li>&#x2696;&#xfe0f; Confirmation bias in software selection</li></ol>



<h2>The Balancing Act: Turnkey vs Custom Marketplace Solutions</h2>



<p><strong>Challenge number one</strong> is usually whether to go DIY with a no-code or low-code turnkey solution or commit to a custom development process in partnership with a software agency. Each of these approaches have pros and cons that need to be weighed up against each other.</p>



<p><a href="https://www.cobbleweb.co.uk/when-should-you-use-off-the-shelf-ecommerce-software-for-online-marketplace-development/">No-code/low-code turnkey solutions</a> offer speed (rapid development and deployment), relatively lower upfront cost, and accessibility (they require less technical expertise to get started).&nbsp;These advantages are offset by a number of downsides. The most common of which include lack of flexibility (i.e. not suited to all user flows and business models), lack of scalability (as your marketplace grows, these solutions might struggle to keep up), and lack of extensibility (limited options to add new capabilities or functionality such as APIs).&nbsp;</p>



<p>For an in-depth analysis of all the major pitfalls of using an off-the-shelf turnkey solution for your marketplace project, have a look at our blog post, <a href="https://www.cobbleweb.co.uk/6-ways-turnkey-software-solutions-can-kill-your-marketplace-startup/">6 ways turnkey software solutions can kill your marketplace startup</a>.</p>



<p><strong>Custom development</strong>, on the other hand, allows you to pick and choose which technologies you want to use to build your marketplace platform. This neatly counters all the downsides of turnkey solutions: flexibility to use technology best suited to your business model and user flows, scalable technology that is designed to grow with your business needs, and unlimited extensibility to add features and functionality that best suit your users.</p>



<p>Another important advantage of a custom tech stack, which is often overlooked, is its strong support for a <strong>product-focussed development process</strong> such as <a href="https://www.cobbleweb.co.uk/marketplace-development-process/">the Lean Startup Method</a>. This Build-Measure-Learn Loop - a combination of hypothesis-driven experimentation, iterative product releases, and validated learning - can significantly increase your chances of success.</p>



<p>However, like all good things, implementation of a custom tech stack can be quite resource thirsty. In terms of time, development takes longer, which can delay your go-to-market deadline. <a href="https://www.cobbleweb.co.uk/marketplace-development-budget-vs-cost-theyre-not-the-same/">Budget-wise</a>, it requires a higher initial investment. And you will need the requisite expertise, i.e. a team with the necessary technical and business model skills.</p>



<h2>Tech Stacks for Every Stage of Marketplace Evolution</h2>



<p>It’s important to point out at this stage, that choosing a tech stack for your marketplace is not necessarily a zero-sum game. In many instances it does make sense to use different technologies for the various phases that your marketplace project will traverse.</p>



<h3>Product-solution fit: Prioritising speed and affordability</h3>



<p><a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/">A low-fidelity MVP</a> (minimum viable product) can be a valuable tool in the early stages of developing an online marketplace.&nbsp; By creating a simple prototype, landing page, or mockup, you can test core assumptions about your target market and if they are interested in the problem you're solving before investing heavily in development. This helps ensure you're on the right track and limits your chances of heading down an expensive rabbit hole.</p>



<p>Popular technology options include <a href="https://www.cobbleweb.co.uk/when-should-you-use-wordpress-to-build-your-multi-vendor-marketplace/">WordPress</a>, Magento, and Sharetribe.</p>



<h3>Product-market fit: Balancing flexibility and agility</h3>



<p><a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/">High-fidelity MVPs</a> are useful tools for validating product-market fit. They allow testing of usability, business and revenue models, and iterating based on user feedback. Custom marketplace development is best suited for high-fidelity MVPs due to its flexibility for unique user flows and features. That includes the ability to test core functionality and features without the one-size-fits all clutter of turnkey solutions, which can obfuscate user feedback signals.</p>



<p>Popular technology choices include <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/nodejs-express/">Node.js/Express</a>, <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/react-js/">React</a>, <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/mongodb/">MongoDB</a> and <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/stripe/">Stripe</a>.</p>



<h3>Scaling your online marketplace</h3>



<p>At this stage high-performance and security are paramount. Marketplaces at the growth stage are best served by technologies like cloud-native architectures and microservices. Microservices not only allow for flexible scaling (the ability to adjust resources for individual features), but also makes large enterprise applications more resilient to failure. That means, even if one microservice fails, the whole application won't crash. </p>



<p>We cover some more key aspects of building a scalable marketplace infrastructure - automation, flexibility, efficiency - in this post: <a href="https://www.cobbleweb.co.uk/5-ways-to-set-your-marketplace-infrastructure-up-for-scalable-growth/">5 ways to set your marketplace infrastructure up for scalable growth</a></p>



<h3>Future-proofing your marketplace platform</h3>



<p>Whatever stage your marketplace is at, it’s important to balance current needs (and resources) with potential growth. Some ways to navigate this challenge include:</p>



<ul><li><strong>Modular Architecture:</strong> Choose a tech stack that allows you to add or modify features without overhauling the entire system.</li></ul>



<ul><li><strong><a href="https://www.cobbleweb.co.uk/5-ways-to-set-your-marketplace-infrastructure-up-for-scalable-growth/">Scalable Technologies</a></strong>: Opt for technologies known for their scalability, such as cloud services that can adjust resources based on demand.</li></ul>



<ul><li><strong>Community and Support:</strong> Consider the community and support around a technology. A strong community can be a rich resource for problem-solving and hiring talent. If you chose custom software, your development partner should offer structured support that includes close collaboration and easy communication.</li></ul>



<ul><li><strong><a href="https://www.cobbleweb.co.uk/7-software-performance-metrics-that-online-marketplace-startups-should-be-aware-of/">Performance Benchmarks</a></strong>: Evaluate technologies against performance benchmarks relevant to your marketplace's needs.</li></ul>



<ul><li><strong>Continuous Evaluation</strong>: Technology evolves rapidly. Regularly assess your tech stack to ensure it still aligns with your business goals and industry standards. A good development partner should assist you in this.</li></ul>



<h2>Assumptions Matter: Aligning Tech with Your Vision</h2>



<p>For online marketplaces, selecting the appropriate technology stack is akin to a chess grandmaster choosing the opening moves that will dictate the entire game. There are some key assumptions that play a pivotal role in technology selection. It is critical to map each one to the most suitable technology.</p>



<h3>Target Audience: Who are you serving and what are their needs?</h3>



<p>The cornerstone of any successful marketplace is a deep understanding of its target audience.&nbsp;</p>



<p>Take Etsy, for example, a thriving online marketplace for handmade goods.  Etsy's core demographic skews towards creative individuals who value a user-friendly platform for showcasing and selling their crafts.  Consequently, Etsy's tech stack prioritises intuitive UI/UX frameworks like <a href="https://www.cobbleweb.co.uk/fire-up-your-marketplace-front-end-performance-with-react/">React</a>, allowing for a seamless user experience that caters to both vendors and buyers.  </p>



<p>In contrast, a B2B marketplace for industrial supplies might prioritise back-end technologies like powerful <a href="https://www.cobbleweb.co.uk/are-you-using-the-right-database-solution-for-your-online-marketplace-project/">databases</a> (e.g. PostgreSQL) to handle complex product catalogues and integrate seamlessly with existing enterprise resource planning (ERP) systems used by its corporate clientele.</p>



<h3>Business Model: How will you generate revenue?</h3>



<p>The chosen tech stack must also align with the intended <a href="https://www.cobbleweb.co.uk/revenue-streams-for-marketplace-business-model/">revenue streams</a>. For instance, a marketplace like Airbnb, which relies on transaction fees levied on bookings, would prioritise secure payment gateways like Stripe to facilitate seamless financial transactions.</p>



<p>On the other hand, early-stage <a href="https://www.cobbleweb.co.uk/are-subscriptions-the-best-revenue-model-for-your-service-marketplace/"><strong>subscription-based marketplaces</strong></a> like <a href="https://www.unitedpetcare.com/members/">United Pet Care</a> (connects pet owners with vets) and <a href="https://goshippo.com/pricing">Shippo</a> (a shipping marketplace) will want to experiment with different pricing models, which often have to support multiple currencies. They will want to make pricing changes quickly and avoid complex billing logic and compliance hurdles. <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/chargebee/">ChargeBee</a>, an easy-to-implement <strong>recurring billing</strong> application, solves this by offering seamless integration with payment gateways and other applications such as CRMs and accounting software.</p>



<h3>What data security and privacy requirements do you have?</h3>



<p>In today's data-driven world, robust security and privacy measures are paramount for online marketplaces.&nbsp; This necessitates the selection of technologies that prioritise data encryption and user authentication.&nbsp;&nbsp;For instance, a healthcare marketplace handling sensitive patient data might opt for secure back-end technologies like Java, known for its robust security features.&nbsp; Additionally, strict adherence to data privacy regulations like the General Data Protection Regulation (GDPR) in Europe is crucial to maintain user trust and avoid hefty fines.</p>



<p>Fortunately there's been an explosion in dedicated security applications that integrate with marketplace platforms. <a href="https://www.perimeterx.com/">PerimeterX</a>&nbsp;is a behaviour-based bot management solution that protects websites, mobile applications and APIs from automated attacks. <a href="https://www.forter.com/">Forter</a>&nbsp;provides real-time fraud prevention solutions to ecommerce platforms, while <a href="https://sift.com/">Sift</a>&nbsp;offers end-to-end protection for customer journeys from login to checkout.</p>



<p>You can learn about building trust in your marketplace with compliance and anti-fraud mechanisms <a href="https://www.cobbleweb.co.uk/build-trust-in-your-online-marketplace-with-anti-fraud-and-compliance-mechanisms/">here</a>.</p>



<h3>Will your marketplace need to integrate with other systems?</h3>



<p>Most online marketplaces don't exist in isolation.&nbsp; They may need to connect with external systems for various reasons.&nbsp; For example, marketplaces that facilitate payments between buyers and sellers will have to integrate with payment processing platforms like Stripe Connect to streamline invoicing and other aspects of the payment processes.</p>



<p>To ensure seamless data flow and functionality, the tech stack should be built with integration capabilities in mind.&nbsp; API (<a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/restful-api/">Application Programming Interface</a>) compatibility with relevant third-party systems is a key factor to consider during the selection process. Don't forget that integration capabilities also include the ability of your development team to execute the integration. This is especially true of a complex system like <a href="https://www.cobbleweb.co.uk/which-stripe-connect-account-for-your-marketplace/">Stripe Connect</a> for marketplace payments.</p>



<h2>Building Blocks of a Custom Marketplace</h2>



<p>A short summary of the most popular tried and tested tech stack for custom marketplace development would include:</p>



<ul><li><strong>Front-end Technologies</strong>: UI/UX frameworks (<a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/react-js/">React</a>, Angular), <a href="https://www.cobbleweb.co.uk/marketplace-features/content-management-system/">Content Management Systems</a> (CMS) and APIs.</li><li><strong>Back-end Technologies</strong>: Programming languages (Python, Java, <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/nodejs-express/">Node.js</a>), Databases (MySQL, PostgreSQL).</li><li><strong>Cloud Providers</strong>: <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/aws/">AWS</a>, Azure, Google Cloud Platform.</li><li><strong>Other Essential Tools</strong>: Payment gateways (<a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/stripe/">Stripe</a>, PayPal), search and analytics platforms.</li></ul>



<p>For a more comprehensive breakdown of custom marketplace technology you can <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/">check out this list</a>. It conveniently analyses each software option in terms of its use cases, marketplace benefits, popularity, and identifies some major platforms that use it.</p>



<h2>Tech Genie or Pandora's Box? Can AI help design your marketplace tech stack?</h2>



<p>AI-powered tools are emerging that can help with tech stack selection. However, these solutions have limitations. They obviously have a limited understanding of your business, since there is no <a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/#:~:text=money%20on%20development.-,The%20discovery%20phase%20in%20marketplace%20development,-The%20first%20stage">discovery process</a>. As yet, AI can't fully grasp your unique business goals and user challenges.</p>



<p>There are also ethical considerations with regards to Data Privacy. You should carefully evaluate the data privacy practices of any AI-driven solutions you utilise.</p>



<h2>Beware Confirmation Bias in Software Selection</h2>



<p>Confirmation bias occurs when people tend to seek, interpret, and remember information in a way that confirms their pre-existing beliefs or hypotheses. In software development, confirmation bias can lead founders or product owners to overlook valuable feedback or user requirements.</p>



<p>This is best illustrated by a description of two types of founders. Founder one, a sales and marketing guru, stubbornly went it alone and built an art marketplace with <a href="https://business.adobe.com/products/magento/magento-commerce.html#">Magento</a>, a turnkey ecommerce platform builder. This turned out to be a bad decision as Magento did not offer enough flexibility to support their concept's user and business flows. The whole platform had to be rebuilt with custom software. </p>



<p>In contrast, founder number two, who wanted to build a carbon credit marketplace, is a technical type who was comfortable mapping use cases to technology, with commensurate results. This resulted in a custom approach that better served users from the start.</p>



<h3>Selection is just the start of your Marketplace Tech Stack</h3>



<p>Evaluating and choosing the most suitable technology for your marketplace concept is only the beginning of the process. marketplace tech stack is just the start. Your tech stack should evolve with your marketplace, which includes ongoing maintenance and optimisation. A good marketplace development partner should be able to offer a seamless transition from technology selection to maintenance and optimisation.</p>

How to Choose the Right Tech Stack for Your Online Marketplace

Marketplace Development Process

<p>Imagine you've dreamt up a revolutionary online marketplace, a platform poised to disrupt the way we buy and sell. But before you dive headfirst into development, a crucial question arises: what features should your <a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/">Minimum Viable Product (MVP)</a> absolutely have?</p>



<p>Think of the MVP as your business idea's coming-out party. It's the first impression you make on potential users and investors.&nbsp; Overstuff it with features, and you risk obscuring your core value proposition.&nbsp;&nbsp;</p>



<p>But skimp on the essentials, and you might struggle to validate your <a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/">product-market fit.</a>&nbsp; Finding the sweet spot – the features with the highest impact – is paramount to proving your business case effectively.</p>



<h2>Why focus on core functionality?</h2>



<p>Here's the thing: bombarding marketplace users with a feature-laden platform can be counter-productive. It can be confusing to navigate, expensive to develop, and ultimately, distract from the core value you offer. Take the cautionary tale of Pets.com, the ill-fated e-commerce giant.&nbsp;</p>



<p>Their initial platform boasted a virtual pet cemetery, live chat with veterinarians, and even an online pet hotel booking service – all before they'd even proven the concept of selling pet food online. Unsurprisingly, they sputtered out in the dot-com bubble burst.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-3.png" alt="The very messy Pets.com site was an absolute nightmare to navigate." class="wp-image-9091"/><figcaption>The very messy Pets.com site was an absolute nightmare to navigate.</figcaption></figure>



<p>Instead, the MVP should be a laser-focused experience that validates your core offering.&nbsp; Think of it like a science experiment – you're testing a hypothesis (your marketplace concept) with a minimal yet functional setup. This allows you to gather real-world user data and feedback, which is invaluable for iterating and improving your platform before scaling up.</p>



<p>Remember, even industry titans like Airbnb started with a bare-bones MVP. Their initial offering? A simple platform connecting travellers with spare rooms.&nbsp; They focused on core functionalities like user profiles, listings, and a secure payment system. Only after validating the core concept did they introduce additional features like reviews, wishlists, and “experiences.”</p>



<h2>Tailoring your marketplace MVP features</h2>



<p>Now, let's delve into the factors that influence the selection of essential features for your online marketplace MVP.</p>



<h3>1. The marketplace type</h3>



<p>For <strong>product marketplaces</strong> like Amazon or Etsy, features like <a href="https://www.cobbleweb.co.uk/marketplace-features/product-listings/">product listings</a> with clear descriptions, high-quality images, secure <a href="https://www.cobbleweb.co.uk/marketplace-features/payment-systems/">payment gateways</a> with options for refunds and <a href="https://www.cobbleweb.co.uk/marketplace-features/product-returns/">returns</a>, and robust <a href="https://www.cobbleweb.co.uk/marketplace-features/custom-search-navigation/">search and filtering</a> functions are crucial.</p>



<p><strong>Service-focused platforms</strong> like Fiverr or Upwork require a strong focus on <a href="https://www.cobbleweb.co.uk/marketplace-features/service-listings/">user profiles</a> showcasing skills and experience, a clear <a href="https://www.cobbleweb.co.uk/marketplace-features/request-for-proposal/">communication system</a> (e.g. RFQ/RFP features) between buyers and sellers, <a href="https://www.cobbleweb.co.uk/marketplace-features/project-management/">project management tools</a>, and a secure escrow system to hold funds until the project is completed.</p>



<h3>2. The market landscape</h3>



<h3><strong>High-demand, limited selection</strong></h3>



<p>Marketplaces like <a href="https://www.cobbleweb.co.uk/projects/fanpass-marketplace-case-study/">FanPass</a>, which capitalise on high-volume events like sporting matches, might not require a sophisticated <a href="https://www.cobbleweb.co.uk/does-your-marketplace-mvp-need-a-search-feature/">search engine</a>. Their initial approach, simply showcasing a limited number of high-demand events and offering a seamless purchase experience, resulted in very rapid growth and made it much easier to prove product-market fit. </p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/10/image-7-1024x897.png" alt="Fanpass did not use a search feature in its early stage. Instead the events platform simply showcased popular high-volume events." class="wp-image-10151"/></figure>



<h3><strong>Low-demand, diverse delection</strong></h3>



<p>For marketplaces with a wider variety of products or services, especially those with a lower initial demand, a strong search and filtering system becomes essential to help users discover what they're looking for. Healthcare startup, <a href="https://www.cobbleweb.co.uk/projects/ihss-connect-marketplace-case-study/">IHSS Connect</a> implemented a highly granular navigation structure based on various category filters, so that care recipients could find suitable caregivers in a highly regulated and fragmented Californian market.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/10/IHSS-Connect-dropdown-filter-navigation-structure-1024x503.jpg" alt="IHSS Connect dropdown filter navigation structure" class="wp-image-10147"/></figure>



<h3>3. Supply and demand constraints</h3>



<p>If your marketplace has a <strong>curated selection of sellers</strong> – think of a marketplace for luxury goods offered by a select group of merchants – you might initially outsource shipping and fulfilment to these approved sellers. This allows you to focus on quality control and user experience.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/12/image-7-1024x433.png" alt="Luxury yacht delivery is probably best handled by vetted sellers." class="wp-image-10542"/><figcaption>Luxury yacht delivery is probably best handled by vetted sellers.</figcaption></figure>



<p>For marketplaces with a <strong>large pool of sellers</strong>, integrating shipping functionalities directly into the platform can streamline the buying process. It also allows for more competitive shipping options for buyers. Art marketplace, <a href="https://www.cobbleweb.co.uk/projects/affordable-art-fair-marketplace-case-study/">Affordable Art Fair</a> did this by allowing sellers to combine local last-mile delivery services with an international shipping provider, UPS.</p>



<figure class="wp-block-image"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/05/8inK2UKw.png" alt="The Affordable Art Fair shipping feature is powered by a UPS integration for international shipping and allows sellers to add their own delivery agents for local shipping."/><figcaption>The Affordable Art Fair shipping feature is powered by a UPS integration for international shipping and allows sellers to add their own delivery agents for local shipping.</figcaption></figure>



<h3>4. Prioritise for impact</h3>



<p>The key is to identify features that will have the highest impact on user experience and business goals.&nbsp; For example, features like social proof through reviews and ratings can significantly increase buyer confidence and conversion rates.&nbsp; Similarly, integrating a mobile-friendly interface is crucial in today's mobile-first world.</p>



<p>Unsure about the exact number of features you should prioritise? Apply the <strong>Pareto Principle</strong> - the universal observation that twenty percent of sources drive eighty percent of outcomes. Amazon famously expanded on this 80/20 rule by decreeing that product decisions should be 80% based on data and only 20% on experience or gut instinct. </p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/10/image-6.png" alt="Use the Pareto principle (80/20 rule) to prioritise features for your marketplace startup." class="wp-image-10144"/></figure>



<h2>What to leave for later: prioritising development resources</h2>



<p>Remember, your MVP is just the first step. There will be plenty of time to introduce bells and whistles later. Here are some features you can consider leaving for later iterations:</p>



<p><strong><a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/elasticsearch/">Complex Search Functionality</a></strong>: Analysing user behaviour through basic categories and filters can inform the development of a more sophisticated search engine later.</p>



<p><strong><a href="https://www.cobbleweb.co.uk/marketplace-features/analytics/">Advanced Analytics</a></strong>: While basic user data collection is important, in-depth analytics can wait until you have a larger user base to provide meaningful insights.</p>



<p><strong>Community Features</strong>: Features like forums or social media integration can be valuable for fostering user engagement, but they might not be essential for initial validation.</p>



<p>Should <strong><a href="https://www.cobbleweb.co.uk/marketplace-features/shipping/">shipping</a></strong> be integrated into your platform or done by sellers themselves? If the latter is the case, handpicked reliable sellers may be a better strategy.</p>



<h2>A framework for marketplace feature prioritisation</h2>



<p>You can avoid the hazards of implementing the wrong features by taking a structured (i.e. more data-driven and user-centric) approach to building your marketplace roadmap. One such framework entails grouping features into key themes and aligning them with business goals using an ICE score system.</p>



<h4>Components of ICE scoring</h4>



<p><strong>Impact</strong> measures the potential effect or value the feature could have if successfully implemented. Example question: How much will this theme or feature improve our goals or metrics (e.g. revenue, user engagement)?</p>



<p><strong>Confidence</strong> assesses how certain you are about the predicted impact. Example question: How confident are we in the data or assumptions supporting this feature?</p>



<p><strong>Ease</strong> evaluates the level of effort, resources, or time required to create or integrate the feature. Example question: How simple or straightforward is this feature to implement compared to other options?</p>



<p>Each component is scored on a predefined scale (e.g. 1 to 10), and the scores are multiplied to produce an overall ICE score for comparison:  ICE&nbsp;Score = Impact × Confidence × Ease. </p>



<h4>E<strong>xample of using ICE to score marketplace</strong> features</h4>



<p>Let's consider a hypothetical online marketplace and evaluate three potential features:</p>



<ol><li><strong>Personalised Product Recommendations:</strong><ul><li>Impact: 9 (High potential to increase sales and customer engagement)</li><li>Confidence: 7 (Based on successful implementations in similar marketplaces)</li><li>Ease: 5 (Requires data analysis, algorithm development, and integration with the product catalogue)</li><li>ICE Score: 9 x 7 x 5 = 315</li></ul></li><li><strong>Improved Search Functionality:</strong><ul><li>Impact: 8 (Can significantly enhance user experience and conversion rates)</li><li>Confidence: 8 (Well-understood problem with proven solutions)</li><li>Ease: 7 (Requires development and testing, but relatively straightforward)</li><li>ICE Score: 8 x 8 x 7 = 448</li></ul></li><li><strong>Social Sharing Integration:</strong><ul><li>Impact: 6 (Potential to increase brand visibility and customer acquisition)</li><li>Confidence: 6 (Depends on effective marketing and user adoption)</li><li>Ease: 9 (Relatively easy to implement with existing social media APIs)</li><li>ICE Score: 6 x 6 x 9 = 324</li></ul></li></ol>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/12/image-6.png" alt="Example of ICE scoring used to prioritise marketplace features" class="wp-image-10539"/></figure>



<p>Based on the ICE scores, the team should prioritise the proposed features as follow:</p>



<ol><li><strong>Improved Search Functionality:</strong> With the highest ICE score, this feature offers the most significant potential impact, high confidence, and relatively easy implementation.</li><li><strong>Personalised Product Recommendations:</strong> While it has a high impact potential, the lower ease score suggests it might require more time and resources.</li><li><strong>Social Sharing Integration:</strong> This feature has a lower impact and confidence compared to the other two, despite its ease of implementation.</li></ol>



<p>There are some caveats with the ICE method to keep in mind. For example, it does not implicitly account for external factors like dependencies or opportunity costs. </p>



<p>ICE can also be further refined by adding <strong>Reach</strong>, which measures how many users will be affected by the feature over a certain period of time. In that case the formula will change to: RICE score = (Reach x Impact x Confidence)/Effort. Reach works well with solid user data at the growth stage when you're trying to decide which features will scale your marketplace the best.</p>

Choosing the Right Features for Your Online Marketplace Launch

<p>In the competitive world of online marketplaces, <a href="https://www.cobbleweb.co.uk/why-ux-design-is-key-to-online-marketplace-success/">user experience</a> (UX) reigns supreme. A well-designed platform can turn casual browsers into loyal customers, while a clunky interface with an inaccurate search feature can send them fleeing to the competition. </p>



<p>When it comes to <a href="https://www.cobbleweb.co.uk/marketplace-features/custom-search-navigation/">navigation,</a> two primary methods guide users towards their desired products or services: <strong>browsing</strong> categories and utilising a <strong>search</strong> bar. But for a Minimum Viable Product (MVP), essentially a streamlined version of your marketplace, the question arises: is a search feature absolutely necessary?</p>



<h2>Browsing vs. Searching: Charting the User Journey</h2>



<p>Search holds a powerful hand in user engagement. Unlike browsing categories, which presents users with a pre-determined structure, search caters directly to user intent.&nbsp; Think of it as a conversation starter. A user enters a search term – "running shoes for women" or "freelance graphic designer" –&nbsp; effectively stating their goal. This immediate focus on what they're looking for streamlines the user journey, leading them straight to relevant results and potentially accelerating the path to conversion.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/Browsing-vs-Searching.jpg" alt="User intent difference between browsing or searching a website" class="wp-image-9083"/></figure>



<h2>The Power of Search: Refining the User Experience</h2>



<p>However, implementing search effectively goes beyond simply slapping a search bar onto your MVP.&nbsp; Think of it as a strategic development process, not a single feature. Here's why: User segmentation plays a crucial role.&nbsp; Are your users primarily of the "exploratory" type, casually browsing for inspiration?&nbsp; Or are they "transactional," with a specific product in mind?&nbsp; Understanding your user base will influence your decision.&nbsp; For instance, an exploratory user might benefit greatly from well-curated categories, while a transactional user could get frustrated with the extra step.</p>



<h2>Search Engines: Not Always Necessary</h2>



<p>Now, let's explore scenarios where a search engine might not be the first priority.  Imagine a high-end service marketplace specialising in concierge services.  Here, manual connections between skilled professionals and discerning clients might be more appropriate.  Similarly, a <a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/">low-fidelity MVP</a> with a limited product offering might not necessitate a complex search function.  In these cases, focusing on clear, <a href="https://www.cobbleweb.co.uk/how-to-design-a-winning-marketplace-category-structure/">well-organised categories</a> can be sufficient for a successful user experience.</p>



<div class="wp-block-media-text alignwide is-stacked-on-mobile"><figure class="wp-block-media-text__media"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-1.png" alt="" class="wp-image-9085 size-full"/></figure><div class="wp-block-media-text__content">
<p class="has-text-align-left has-large-font-size">As shown above, <a href="https://www.cobbleweb.co.uk/projects/ihss-connect-marketplace-case-study/">Care Connect</a>, a jobs marketplace for caregivers, utilises dropdown filters (instead of a search feature) to produce highly granular results.</p>
</div></div>



<h2>Building Search Later: Data-Driven Decisions</h2>



<p>But hold on – what if you're unsure whether search is necessary?&nbsp; Here's where user data becomes your best friend.&nbsp; Before launching a complex search feature, consider gathering data on user behaviour regarding product/service discovery. This could involve tools like clickstream analysis or user surveys that explore how users navigate your MVP.&nbsp; This data can then inform the future development of a search feature, ensuring it caters to your specific user base.</p>



<h2>Search as a Data Collection Tool</h2>



<p>Speaking of data, search functionality offers an invaluable tool for understanding user behaviour.&nbsp; By analysing high-volume search terms, you can gain valuable insights into user needs and preferences.&nbsp; These insights can be used to refine your categorization system and develop additional filters, making it easier for users to find what they're looking for in the future.</p>



<h2>Search and Marketing: A Strategic Alliance</h2>



<p>Search also goes hand-in-hand with strategic marketing efforts.&nbsp; Imagine leveraging popular search terms associated with seasonal events – "Xmas gifts" or "Mothers Day ideas" – to create targeted landing pages optimised for search engines (SEO).&nbsp; This marriage of search and marketing can attract potential buyers right at the moment they're actively seeking solutions in your marketplace.</p>



<h2>Indexing Products and Services: The Art of Relevance</h2>



<p>Now, let's delve deeper into the technical side of things.&nbsp; A key element for effective search functionality is product/service indexing.&nbsp; This involves assigning relevant characteristics and attributes to each product or service, allowing the search engine to match user queries with accurate results.&nbsp; Choosing the right attributes is crucial – think size, color, price, location, or service type – depending on what your users are most likely to search for.</p>



<h2>Advanced Search Features and Technology</h2>



<p>There are even advanced search functionalities available with tools like <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/elasticsearch/">ElasticSearch</a>.  This application allows platform operators to assign weights to different criteria within a search query, further improving the relevance of results.  For instance, a user searching for "running shoes" might prioritise brand over price, so ElasticSearch would prioritise results showcasing desired brands.</p>



<p><a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/visii/">Visii</a> develops visual search solutions for ecommerce businesses. Their technology uses artificial intelligence (AI) and image recognition to allow users to find information or products based on images. For instance, you could upload a picture of a piece of furniture and Visii would search for similar items in the marketplace catalogue.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-5.png" alt="Saatchi's Art Marketplace utilises visual search powered by Visii to help visitors better explore its huge selection of over one million artworks." class="wp-image-9131"/><figcaption>Saatchi's Art Marketplace utilises visual search powered by Visii to help visitors better explore its huge selection of over one million artworks.</figcaption></figure>



<h2>An Ongoing Search for Success</h2>



<p>The decision to implement search in your online marketplace MVP hinges on several factors – user base, marketplace maturity, and data availability.  Remember, search optimisation is an ongoing process – regularly review user behaviour and search trends to refine your platform and ensure a seamless user experience.</p>



<p>For those interested in a deeper dive into search functionality for online marketplaces, consider exploring resources offered by industry leaders like <a href="https://www.cobbleweb.co.uk/marketplace-features/custom-search-navigation/">CobbleWeb</a>. Their expansive portfolio provide valuable insights and tools to help you build a search engine that empowers both your users and your business.</p>

Does your marketplace MVP need a search feature?

<p>Building a successful online marketplace isn't a one-shot deal. It's an ongoing journey of discovery, adaptation, and evolution. This is where iteration, the cornerstone of agile marketplace development, takes centre stage.&nbsp;</p>



<p>Iteration is a <a href="https://www.cobbleweb.co.uk/marketplace-development-process/">process of building, measuring, learning</a> - constantly refining the product based on user feedback and market data. This approach is crucial to avoid the pitfalls of a bloated, unusable product – a Frankensteinian monstrosity of features that nobody loves.</p>



<h2>Frankenstein vs. Phoenix: the iteration difference</h2>



<p>Imagine launching a marketplace with every feature under the sun, a "kitchen sink" approach driven by grand ideas rather than user needs. This could result in an overwhelming, confusing interface, slow loading times, and features that nobody uses. This Frankensteinian product becomes a burden to maintain and fails to attract or retain users.</p>



<p>In contrast, an iterative approach allows you to build a <a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/">Minimum Viable Product</a> (MVP) – a core version of your marketplace with the essential functionalities needed to validate your concept and capture user feedback. This MVP is like a phoenix rising from the ashes. It may not be feature-rich, but it's functional and allows you to gather real-world data based on user behaviour.</p>



<p>This minimalist approach has been successfully adopted by pretty much 99.9% of the world's most successful online marketplaces, from Airbnb to Amazon.</p>



<p>Have a look at the below image. The first version of Amazon.com (1995) was a pretty barebones affair. Only one product type, books, was on offer, supported by a limited number of features. <a href="https://www.cobbleweb.co.uk/marketplace-features/custom-search-navigation/">Navigation</a> consisted of simple links and a basic search engine. There was a notification service that let users know via auto-generated email when their favourite books were added to the catalogue was one of. It also featured the first iteration of Amazon's famous product <a href="https://www.cobbleweb.co.uk/build-trust-in-your-marketplace-website-with-customer-review-software/">review feature</a>.</p>



<p>But it gave Jeff Bezos enough data to plan the next iteration of his marketplace, as we elaborate on in this <a href="https://www.cobbleweb.co.uk/amazon-online-marketplace-case-study/">Amazon case study</a>. The 1997 version of Amazon.com (see second image below) offered an easier-to-use interface with improved navigation and a more prominent review system. That same year Amazon went public at a market valuation of $438 million - only 2 years after launching!</p>



<div class="wp-block-image"><figure class="aligncenter is-resized"><img src="https://www.versionmuseum.com/images/websites/amazon-website/amazon-website%5E1995%5Ewelcome-to-amazon-books-homepage-restored.png" alt="The original Amazon website (August 1995)" width="635" height="619"/><figcaption>The first (1995) version of Amazon.com</figcaption></figure></div>



<figure class="wp-block-image"><img src="https://www.versionmuseum.com/images/websites/amazon-website/amazon-website%5E1997%5Eamzn-homepage-restored.png" alt="The 1997 version of Amazon.com had a much cleaner interface than the first (1995) vesrion."/><figcaption>The 1997 version of Amazon.com had a much cleaner interface, but still looks pretty basic compared to modern platforms.</figcaption></figure>



<h2>The MVP to MVP Journey</h2>



<p>Iterative marketplace development is a process that guides you on a path of continuous improvement, moving from<a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/"> low-fidelity MVP</a> to <a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/">high-fidelity MVPs</a>. Here's how it works:</p>



<p><strong>Gather Feedback:</strong> After launching your initial MVP, the real learning begins. Collect user feedback through surveys, user interviews, A/B testing on different features, and user behaviour analytics. Don't just rely on <a href="https://www.tableau.com/learn/articles/vanity-metrics">vanity metrics</a> like active users or page views; identify user pain points, areas of confusion, and features they find most valuable.</p>



<p><strong>Prioritise Based on Data:</strong> Analyse the data to see which features resonate with users and which ones are causing friction. This data-driven approach helps you prioritise improvements and determine if specific features need to be tweaked, removed, or replaced.</p>



<p><strong>Iteratively Refine:</strong> Based on the data, plan the next iteration of your marketplace. This could involve adding new features, streamlining existing ones, or improving the user interface for a smoother experience. The key is to focus on measurable improvements that directly address user needs and business goals.</p>



<p><strong>The Continuous Cycle:</strong> This process becomes a continuous feedback loop. Each new iteration is built on the insights gleaned from the previous one. This iterative approach allows you to incrementally improve your marketplace, ensuring it remains relevant, user-friendly, and competitive.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/Iteration-in-marketplace-development.jpg" alt="The build-measure-learn iterative loop in marketplace development" class="wp-image-9099"/></figure></div>



<h2><strong>The Power of Collaboration</strong></h2>



<p>A successful iterative process hinges on close collaboration between the marketplace development agency and the entrepreneur. Here's why:</p>



<p><strong>Shared Vision and Goals:</strong> At the outset, both parties should co-create a clear vision for the marketplace, defining objectives, target audience, and key success metrics. This shared understanding ensures everyone is working towards the same goals and ensures the iterative process stays focused.</p>



<p><strong>Transparent Communication:</strong> Regular and open communication is vital. The development team should keep the entrepreneur informed of progress, challenges encountered, and potential solutions. The entrepreneur, in turn, should articulate any shifts in vision or priorities, ensuring the team can adjust the development roadmap accordingly.</p>



<p><strong>Data-Driven Decisions:</strong> Both sides need to be data-driven. The development team provides user data and analytics insights, while the entrepreneur shares market trends and competitor analysis. This collaborative exploration of data fuels informed decision-making about priorities and feature development in each iteration.</p>



<p><strong>Flexibility and Adaptability:</strong> The online marketplace landscape is constantly evolving. Both entrepreneurs and software development agencies need to be open to unexpected learnings and adapt the development plan when needed. This flexibility allows them to take advantage of new opportunities or address emerging market trends through iterative tweaks and features.</p>



<h2>Further <strong>Benefits of Iteration</strong></h2>



<p>The benefits of an iterative approach extend far beyond avoiding the Frankensteinian product:</p>



<ul><li><strong>Reduced Risk:</strong> By starting with an MVP, you limit upfront investment and minimise the risk of building a product that nobody wants. You can learn more about risk management in marketplace development <a href="https://www.cobbleweb.co.uk/risk-management-for-marketplace-startups/">here</a></li><li><strong>Faster Time to Market:</strong> Iterative development allows you to launch quickly with a core offering and gather user feedback early. This accelerates your path to market dominance.</li><li><strong>Enhanced User Experience:</strong> Each iteration is informed by user data, leading to a marketplace that is intuitive, user-friendly, and addresses the specific needs of your target audience.</li><li><strong>Cost Efficiency:</strong> Focusing on the most impactful features first ensures you're investing resources wisely. This can make marketplace development more cost-effective in the long run.</li></ul>



<p>Marketplace entrepreneurs should therefore carefully consider their development partners in terms of the above. Do they offer a transparent and collaborative process that leverages iteration to ensure the best possible results at the lowest possible risk?</p>



<p>Event ticketing marketplace, <a href="https://www.cobbleweb.co.uk/projects/fanpass-marketplace-case-study/">FanPass</a>, have released 43 versions of their platform since 2016. That approach secured them £50,000 sales per day in the first eight months after launch!</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-4-1024x470.png" alt="Event ticket selection on FanPass marketplace platform." class="wp-image-9118"/><figcaption>The latest version of the <a href="https://www.fanpass.co.uk/">FanPass event ticket marketplace</a> is a technical marvel with plenty of advanced features that enhance the user experience. But it is important to understand that they were only fully implemented after being thoroughly tested in previous iterations.</figcaption></figure>

The critical role of iteration in marketplace development

tech stack

<p>The online marketplace landscape is teeming with potential, but building a successful platform requires more than just a brilliant idea; it demands highly-focused expert execution. Your choice of marketplace development partner therefore plays a critical role in shaping the trajectory of your project from inception to launch and beyond.</p>



<p>The opportunity is indeed huge, but also <a href="https://www.cobbleweb.co.uk/how-to-choose-the-right-tech-stack-for-your-online-marketplace/">technically</a> and <a href="https://www.cobbleweb.co.uk/how-much-does-it-cost-to-build-an-online-marketplace-in-the-uk/">financially</a> very challenging. The new frontiers for marketplace entrepreneurs include vertically specialised marketplaces (often supercharged by SaaS, Fintech and Artificial Intelligence), as well as <a href="https://www.cobbleweb.co.uk/will-b2b-marketplaces-be-the-next-online-gold-rush/">the massive B2B market</a>, which is driven by complex value-adding features, such as end-to-end procurement ecosystems.</p>



<p>It should therefore be clear that a <strong>fit-for-purpose </strong>software development agency, with a <a href="https://www.cobbleweb.co.uk/portfolio/">proven track record</a> of building (1) profitable and (2) advanced marketplaces, will increase your chances of success exponentially. This post breaks down some key selection criteria so that you can separate the champions from the contenders.</p>



<div class="wp-block-image"><figure class="alignleft size-full"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-7.png"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-7.png" alt="ccording to DealRoom's The State of Online Marketplaces (2023) report, supercharged marketplaces, which leverage advanced value-adding features, are the new marketplace frontier." class="wp-image-9224"/></a><figcaption><sub>According to DealRoom's <em><a href="https://dealroom.co/uploaded/2024/02/New-Marketplaces-Report-2023.pdf?">The State of Online Marketplaces</a></em> (2023) report, supercharged marketplaces, which leverage advanced value-adding features, are the new marketplace frontier. These technical complexities have raised the barrier to entry for marketplace entrepreneurs.</sub></figcaption></figure></div>



<h2>Experience is King: A Track Record of Marketplace Success</h2>



<p>Experience is an invaluable asset in the world of marketplace development. While a diverse portfolio showcasing the agency's capabilities is impressive, the real gold lies in their track record of successful marketplace builds.&nbsp;</p>



<p>Look therefore for an agency with a proven history of delivering thriving online marketplaces. They tend to offer detailed case studies that explain how they solved particular challenges for their clients and how they contributed to <strong>relevant</strong> business goals.&nbsp;</p>



<p>Top tip: What metrics do they use to track their clients’ success? <strong>Vanity metrics</strong> like ‘number of active users’, for example, don’t indicate if any transactions are being concluded - which is kind of the purpose of a marketplace.</p>



<p>The fact is, development agencies with a sound track record have a deeper understanding of the unique challenges and opportunities that marketplace projects present. They'll possess the expertise to navigate the complexities of unique user flows, third-party platform integrations (e.g. a payments service provider like <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/stripe/">Stripe</a>), and <a href="https://www.cobbleweb.co.uk/7-growth-strategies-to-scale-your-online-marketplace-post-product-market-fit/">scaling your marketplace</a>.</p>



<figure class="wp-block-image"><img src="https://lh7-us.googleusercontent.com/docsz/AD_4nXdPo5OETfh7FAkpusdhO3gFyFKqQOm3YW9NLzvtA9Gbnf51gZm8X-CcnCxlA0E2WYCm7ZjDdlCEm87XUPfir6MYi9HTw_Cku_eaNgbfrO2amapFLAUTRNQZK3Ywtk8XynoPwuY1koHo4vAavA8KUvRf2x0?key=szeZEHX1hQ2gP3uHcr5x4A" alt="When choosing a marketplace development partner evaluate the metrics they use to promote their portfolio."/><figcaption>These are the kind of metrics you want to see reported in a marketplace development agency's case studies.</figcaption></figure>



<p></p>



<h2>Beyond Code: Skills &amp; Insights Matter</h2>



<p>Building a marketplace requires more than just coding prowess. A capable development partner boasts a symphony of skills across the entire development lifecycle. This includes:</p>



<ul><li><strong>Grooming:</strong> The ability to refine your vision and translate it into an actionable roadmap.</li><li><strong>Discovery:</strong> Conducting thorough market research, user analysis, and business model interrogation to lay the groundwork for a winning platform.</li><li><strong>Design:</strong> Developing an intuitive user interface (UI) and user experience (UX) that fosters user engagement and facilitates seamless transactions.</li><li><strong>Development:</strong> Delivering a robust and scalable platform built with the <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/">latest technologies</a> and best practices.</li><li><strong>Scaling:</strong> The foresight and expertise to ensure your platform can effortlessly handle growth and accommodate future needs.</li></ul>



<figure class="wp-block-image"><img src="https://lh7-us.googleusercontent.com/docsz/AD_4nXd4JrFfpRQYXIdOMQ8ORPxpA_UGjgXisyk5shE2BDjfNGHClydTvTmlVx3hakjeveFCfM1ELrg75dUTXYkQOE28j3aeBbm_p_kqS-lBVmGfCBuo61pnHhWdgOs1hFi0gQeOXTPb6o3h9xZ8gxjznCs4keVJ?key=szeZEHX1hQ2gP3uHcr5x4A" alt="Marketplace development requires a number of specialised complementary skills."/><figcaption>Marketplace development requires a number of specialised and complementary skills.</figcaption></figure>



<h2>Process vs. Product: Striking the Right Balance</h2>



<p>The ideal marketplace development partner understands the nuanced difference between process and product. While a <a href="https://www.cobbleweb.co.uk/marketplace-development-process/">structured approach</a> ensures efficiency and quality, a partner solely focused on process can stifle creativity and innovation.&nbsp;</p>



<p>Look for a software agency that balances a robust process with a <strong>product-centric</strong> approach. They should be flexible and collaborative, engaging you throughout the development lifecycle – from brainstorming sessions in the discovery phase to iterative feedback loops during development.</p>



<h2>Attributes of a champion: What to look out for</h2>



<p>A successful partnership transcends technical know-how. Look for these attributes that define a marketplace development partner worthy of your trust:</p>



<p><strong>Collaboration is key:</strong> They actively involve you throughout the process through regular demos, feedback mechanisms like user acceptance testing (UAT), and open communication channels.</p>



<p><strong>Process oriented:</strong> They instill confidence and predictability in <a href="https://www.cobbleweb.co.uk/cobbleweb-client-journey-build-your-online-marketplace-the-smart-way/">your project journey</a> with a <a href="https://www.cobbleweb.co.uk/marketplace-development-process/">proven product development approach</a> and highly-efficient project management skills.</p>



<p><strong>Transparency reigns supreme:</strong> They provide clear timelines, realistic cost estimates, and communicate openly about potential challenges and roadblocks.</p>



<p><strong>Tech agnostic equals high-impact decisions:</strong> They are not beholden to any specific technology stack, but recommend solutions based on your unique needs and future scalability. Focus on informed decision-making, not just the latest tech trends.</p>



<p><strong>Accurate cost estimates:</strong> They provide transparent and accurate cost estimates, avoiding hidden fees and unpleasant surprises down the line.</p>



<p><strong>Quality over quantity:</strong> While a diverse portfolio offers insights, the quality of their past projects is paramount. Focus on metrics such as user growth, engagement, and overall success of marketplaces they've built.</p>



<p><strong>Expertise beyond code:</strong> Their team possesses not just technical prowess, but also expertise in user flow design, business model insights, and the intricacies of the marketplace landscape.</p>



<p><strong>Company DNA matters:</strong> A distributed development model offers significant advantages. It allows for easier resource scaling and can streamline client onboarding.</p>



<p><strong>Transitioning for success:</strong> They can also assist you in finding a CTO or building an in-house development team, fostering a long-term partnership beyond the initial development phase.</p>



<h2>Red Flags to watch out for</h2>



<p>Not all marketplace development partners are created equal. Keep an eye out for these red flags that might signal trouble down the road:</p>



<p><strong>&#x1f6a9; Hidden costs:</strong> Beware of agencies that present enticing initial offers, only to spring hidden fees later in the project.</p>



<p><strong>&#x1f6a9; Opaque process:</strong> A lack of a well-defined and transparent development process can lead to chaos and missed deadlines. Make sure your project is not being outsourced to sub-contractors without your knowledge. The exception would be when specialised expertise is required on a once-off basis, e.g. data modelling.</p>



<p><strong>&#x1f6a9; A one-size-fits-all approach:</strong> If they promote a single "silver bullet" solution without understanding your specific needs, be wary. Custom tailoring is essential for marketplace success.</p>



<p><strong>&#x1f6a9; Skipping the discovery phase:</strong> A thorough discovery phase is crucial for identifying potential challenges and building a marketplace that resonates with your target audience. Beware of partners who want to jump straight into development.</p>



<p><strong>&#x1f6a9; Unbeatable prices can be deceitful:</strong> Extremely low quotes may indicate a partner cutting corners and potentially compromising on delivering the best possible solution.</p>



<p><strong>&#x1f6a9; Accountability</strong>: Are the developers outsourcing your project to subcontractors?</p>



<p><strong>&#x1f6a9; Accessibility</strong>: Is it easy to get hold of the development team and clarify any issues?</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/image-6.png" alt="Even governments often face issues with the wrong software development partner." class="wp-image-9219"/><figcaption>Even governments often face issues with the wrong software development partner. &#x1f61e;</figcaption></figure></div>

How to choose a champion software developer for your marketplace project

<p>The allure of an online marketplace – a bustling platform connecting buyers and sellers – is undeniable. But the journey from vision to a fully functional platform can be daunting. One of the most pressing questions for aspiring marketplace entrepreneurs is: <strong>how long does it take to build a fully functional marketplace?</strong></p>



<p>The short answer (and a gross generalisation): three to nine months. But like everything else in the realm of the complex animal that is a marketplace, there are many variables to consider. The fact is, there's no one-size-fits-all answer. The development timeline hinges on several crucial factors, each demanding careful consideration.</p>



<h2>The Foundation: Existing Business or Startup Dream?</h2>



<p>What <strong>stage</strong> your marketplace project is at will have a significant impact on the timeline. Is your marketplace an extension of an existing business, leveraging existing infrastructure and customer base? Or are you embarking on a brand-new venture?</p>



<p>An established company with a development team and established processes might enjoy a head start. They can leverage existing resources and potentially adapt internal systems to accommodate the marketplace. Here, the focus might be on integrating the marketplace platform seamlessly with existing operations. This could shave off valuable development time.</p>



<p>Greenfield startups, on the other hand, need to build everything from scratch. This includes defining the marketplace concept, identifying target users, and choosing a <a href="https://www.cobbleweb.co.uk/how-to-choose-the-right-tech-stack-for-your-online-marketplace/">suitable tech stack</a>. While this might seem like a disadvantage, it also offers greater flexibility. Startups can tailor the platform from the ground up to perfectly fit their vision.</p>



<div class="wp-block-image"><figure class="aligncenter size-large is-resized"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/Stages-of-marketplace-development.jpg"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2024/06/Stages-of-marketplace-development-1024x704.jpg" alt="Stages of the online marketplace development process" class="wp-image-9174" width="768" height="528"/></a><figcaption>There are several key stages in a well-planned marketplace development process.</figcaption></figure></div>



<h2>Feature Frenzy vs. Strategic Selection</h2>



<p>Imagine a marketplace overflowing with features, from social media integration to complex logistics management. While it might sound impressive, an excessively ambitious scope can be a development time bomb. Building a "kitchen sink" marketplace can stretch resources thin, leading to delays and potentially even scrapping the project altogether.</p>



<p>The key lies in <a href="https://www.cobbleweb.co.uk/choosing-the-right-features-for-your-online-marketplace-launch/">strategic feature selection</a>. A thorough <a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/"><strong>discovery process</strong></a> is particularly useful. This involves in-depth research on the business model, the target users, and competitors to understand needs, identify pain points, and determine what functionalities will provide the most significant value. Prioritise features that directly address user needs and contribute to a smooth user experience.</p>



<p><strong>The bottom line</strong> - feature selection should be the outcome of a detailed process, rather than just ticked off a list of want-to-haves.&nbsp;&nbsp;</p>



<h2>The Development Tightrope: Kanban vs Scrum</h2>



<p>A factor that is often under-estimated is the effect of the project management approach on project timelines and budgets. Traditional project management approaches, like the waterfall model, tend to limit both the speed and agility of the development process. As we mentioned in our detailed post on <a href="https://www.cobbleweb.co.uk/kanban-vs-scrum-which-agile-methodology-is-best-for-your-online-marketplace-project/">marketplace project management</a>:</p>



<blockquote class="wp-block-quote"><p>"A rigid production-line approach simply can’t accommodate the vastly differing variables, such as user flows and go-to-market strategies, of individual marketplace projects.”</p></blockquote>



<p>To solve this inefficiency, <strong>agile methodologies</strong> like <a href="https://www.cobbleweb.co.uk/kanban-vs-scrum-which-agile-methodology-is-best-for-your-online-marketplace-project/">Kanban and Scrum</a> were adapted for software development.&nbsp;</p>



<p><strong>Scrum</strong>'s highly-specific framework provides important structure that keeps complex projects like marketplaces on track. It includes team role definitions (who does what), fixed-time work batches (sprints), and clearly defined meetings such as daily standups and sprint reviews.</p>



<p><strong>Epics</strong> - the collection of user stories that make up marketplace features - are the building blocks of Scrum and each Epic is usually executed over one or two sprints. This Scrum/Epic approach promotes close alignment between the development process and the client's business goals.</p>



<p>But what if there is a sudden change in plan or an emergency? If Scrum was applied it could disrupt the whole project timeline due to interdependencies between Epics.</p>



<p>Fortunately, <strong>Kanban</strong>, an interface for managing standalone issues, can fill the gap. It utilises a visual approach (to do, in progress, done) to quickly prioritise standalone issues and execute them subject to capacity constraints. It's a great way to avoid bottlenecks and build a healthy backlog of tasks.</p>



<p>So the million dollar question is, does your development partner offer focussed execution as well as agile prioritisation? The answer will have a huge impact on your project timeline . . . <a href="https://www.cobbleweb.co.uk/marketplace-development-budget-vs-cost-theyre-not-the-same/">as well as your pocket</a>.</p>



<div class="wp-block-image"><figure class="aligncenter"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2023/06/Integrating-Kanban-into-a-Scrum-sprint-diagram.jpg" alt="Diagram illustrating how Kanban tickets are integrated into a Scrum sprint."/><figcaption>A good development partner utilises proven methodologies for better productivity.</figcaption></figure></div>



<h2>Budgetary constraints: A Reality Check</h2>



<p>Building a marketplace requires investment. Development costs can vary significantly depending on the chosen features, development approach (in-house, outsourced, or pre-built solutions), and the level of technical expertise needed. </p>



<p>It follows that a limited budget might necessitate a more modest initial feature set or a longer timeline. Consider launching a <a href="https://www.cobbleweb.co.uk/how-to-establish-product-market-fit-for-your-online-marketplace-with-a-high-fidelity-mvp/"><strong>Minimum Viable Product</strong></a><strong> (MVP)</strong> that includes core functionalities and focuses on user acquisition. As the user base grows and revenue is generated, additional features can be introduced.</p>



<p>Since we are talking about budgets, it is very important to understand the difference between the initial marketplace development cost and the budget required for multiple iterations that can lead to successful product-market fit. We explain this aspect in more detail <a href="https://www.cobbleweb.co.uk/marketplace-development-budget-vs-cost-theyre-not-the-same/">here</a>.</p>



<p>The takeaway here should be that trying to build everything at once with a limited budget is a recipe for disaster. Be realistic about what you can achieve with your resources and prioritise features that offer the highest return on investment.</p>



<h2>The Perils of Speed: Cautionary Tales</h2>



<p>Trying to rush through development is a common pitfall that can derail the entire project. Here are some cautionary tales to consider:</p>



<p><strong>Eventerprise</strong> was an events services marketplace that ran out funds when it rushed to add too many bells and whistles to a fully-fledged first version of their platform. It subsequently gained very little traction, in large part because they skipped important aspects such as problem-solution fit. A <a href="https://www.cobbleweb.co.uk/validate-problem-solution-fit-for-marketplace-project-with-low-fidelity-mvp/">low-fidelity MVP</a> would have saved them a lot of money.</p>



<p><strong>Quibi</strong>, a short-form video streaming platform, launched with a bang but quickly fizzled out. One of the contributing factors was an overly ambitious feature set that wasn't fully tested, leading to a buggy and frustrating user experience.</p>



<h2>The Importance of Focus, Ownership &amp; Humility</h2>



<p>Building a successful marketplace requires a commitment to data-driven decision making and adherence to a proven development process.</p>



<p>Marketplace entrepreneurs often underestimate the impact of their own <strong>indecision</strong>. Constantly changing the feature set mid-development can throw timelines into disarray and demoralise the development team.</p>



<p><strong>Don’t outsource your learnings!</strong> Many founders are unwilling to take ownership of critical aspects of the development process. Such a hands-off approach will invariably let things slip through the cracks, since close collaboration between all parties is key to timely deliveries.</p>



<p>The opposite of the lackadaisical approach above would be <strong>hubris</strong>, when founders ignore expert advice. Many marketplace projects get bogged down in time-wasting arguments, because the founder may have done well in a different discipline, such as sales, but doesn't necessarily understand the complexities of marketplace development.</p>



<p>Lastly, many entrepreneurs <strong>lack experience</strong> with project management or software development methodologies. This can be an obstacle to close collaboration with the development team.</p>



<h2>The Takeaway: stick to the data; stick to the process</h2>



<p>Creating a thriving online marketplace is an exciting journey, but one that requires patience and calculated steps. By basing decisions on relevant data, carefully selecting features, and adhering to a <a href="https://www.cobbleweb.co.uk/marketplace-development-process/">proven development process</a>, you can take better control of the development timeline and significantly improve your chances of success.</p>

How long does it take to build a fully functional online marketplace?

epics

marketplace budget

Process

product roadmap

project management

software development

storyboard

<p>Imagine discovering a pile of gold dust in the middle of the road. You know that if you can get it to the local jeweller you will make some good money. You jam the gold dust in your trouser pockets and set off. Unfortunately, your pockets have small holes in them. By the time you reach the jewelry store most of the gold dust has leaked out. That my dear reader, is the equivalent of platform leakage, which can kill your marketplace.</p>



<p>Disintermediation, also known as platform leakage, has hurt the viability of many a marketplace concept. This happens when naughty users circumvent your payment systems and conduct transactions off-platform, resulting in a loss of <a href="https://www.cobbleweb.co.uk/revenue-streams-for-marketplace-business-model/">platform revenue</a>, such as commission or other transaction fees.</p>



<p>Platform leakage is something that especially affects service marketplaces, due to the longer, more complex procurement process. Once buyers have received a quote or proposal there’s nothing preventing them from connecting and transacting with the seller off platform</p>



<p>Thus, the holy grail for marketplace owners is to own as much of the procurement process as possible. This allows them to extract revenue from each transaction. However for this to work there have to be good incentives for users to stay and transact on your platform.</p>



<h2>Check your product/market fit</h2>



<p>This should be your first stop to prevent platform leakage. How useful is your platform (product) to your target market and are they willing to pay for it?</p>



<p>A marketplace with a good product-market fit satisfies a real need that users might not even know they have. It saves them time and money, by offering easier access, variety and quality of products and services.</p>



<p>A product with a good market fit is something that, once a customer tries it, becomes so indispensable that they can’t imagine trying to do their jobs or lives without it. As a result, they are willing to pay for it via your platform.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/11/image.png" alt="Establish product-market fit to prevent platform leakage" class="wp-image-7450"/></figure>



<p>The best way to establish product/market fit is by using a <a href="https://www.cobbleweb.co.uk/category/minimum-viable-product/">minimum viable product</a> (MVP). An MVP is “a version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”</p>



<p>Constructing an MVP is not a one-time event; it is an iterative process. You build an MVP to test one assumption in your business model, get feedback, make the appropriate adjustments, and then build a new MVP to test the next assumption. Getting the most from this process requires fast execution. To ensure speed and quality results, most entrepreneurs develop their minimum viable product process using <a href="https://www.cobbleweb.co.uk/lean-approach/">Lean Startup and Agile principles.</a></p>



<h2>Create value</h2>



<p>There are a number of ways to create incentives for users to transact on your platform. The most important would be to create sufficient value in the process of matching sellers and buyers that they prefer transacting on your platform. Value usually takes the form of discovery (how easy it is to find the right sellers), convenience (the speed and efficiency with which buyers and sellers can connect), and trust (the security provided by the platform).</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/11/image.jpeg" alt="Marketplaces that offer sufficient value in the form of discovery, trust or convenience suffer from less platform leakage" class="wp-image-7451"/></figure>



<p><strong>Lightly managed marketplaces</strong> like Airbnb use fast secure transactions, verified users and guarantees to build trust and peace of mind. Uber also qualifies as lightly managed, but relies on the speed and efficiency with which riders and drivers are matched to keep users on the platform.&nbsp;</p>



<p>In a <strong>commoditised services</strong> marketplace, the consumer doesn’t care as much about the specific producer performing the service. Instead, the consumer trusts that the platform will provide someone capable of performing quality work at a set rate. Think Uber, Instacart or Postmates.</p>



<p>Remoovaz, a B2C marketplace for home removals, is another good example of commoditised services. In order to prevent platform leakage they use standardised fees so that payments can be done at the booking stage. This removes the need for a quotation or negotiation process. In addition, customers are only introduced to their service provider within twenty-four hours before the scheduled service.</p>



<p>However, in a <strong>non-commoditised services</strong> marketplace, the buyers care more about the specific service provider they are contracting with. On Airbnb, each host’s property offers a unique experience. With platforms like Behance or Upwork, you want to choose the right designer or developer for your project. Thus the selection process becomes key. Your marketplace therefore needs to provide an efficient <a href="https://www.cobbleweb.co.uk/how-to-design-a-winning-marketplace-category-structure/">navigation framework</a> and communication channels (e.g. a quote request mechanism) so that customers can find and connect with the right service provider.</p>



<p>Value-added services that help to keep marketplace sellers within your platform’s payment flow include business intelligence tools (e.g. consumer and product trends), account analytics, digital marketing support, and content services (e.g. Airbnb’s professional photography service). Value-added services can even become a major revenue stream. In 2020, Amazon’s ad revenue of $15.73 billion made up over 10% of the total US digital ad market, for example.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/11/Upwork.jpg" alt="Upwork uses reputation and project management features to keep transactions on its platform." class="wp-image-7452"/><figcaption>Upwork uses reputation and project management features to keep transactions on its platform.</figcaption></figure>



<p><strong>Fintech</strong> deserves a special mention. Used car and real estate marketplaces like Cazoo, Kavak and Opendoor have experienced rapid growth by incorporating fintech solutions, such as payment plans and insurance, that reduce transaction friction. Plug-and-play technologies like Klarna and Afterpay, which both manage installment payment plans, have made it much easier for platforms to offer fintech services to customers.</p>



<p>Keep in mind that value needs to be provided to both sides of the transaction. A lopsided value proposition will not prevent off-platform transactions. <a href="https://affordableartfair.com/">Affordable Art Fair</a> balances its value offering by giving novice art collectors a safe, easy-to-navigate platform to peruse and purchase contemporary art, while helping artists and galleries showcase, sell and <a href="https://www.cobbleweb.co.uk/everything-you-need-to-know-about-planning-a-marketplace-shipping-strategy/">ship</a> their art pieces.</p>



<h2>Create risk</h2>



<p>Some marketplaces try to combat disintermediation by creating risk, in the form of legal repercussions or other penalties, for vendors that sell off-platform. This approach may alienate vendors if it is not balanced with a sufficiently high value proposition. It can also be time-consuming and costly to police non-compliance.</p>



<p>Upwork’s approach is to make sure off-platform communication channels are not shared. This includes a warning in their terms and conditions that off platform transactions will be penalised, with the potential for complete termination of access.</p>



<p><a href="https://www.mobypark.com/en">MobyPark</a>, a marketplace for parking spaces in several European cities, had to confront the challenge of recurring parkers who tried to work around the platform. The solution was to create an efficient chat feature for on-platform communication. Users are told that for security reasons they cannot exchange email addresses and phone numbers in the chat, since the system blocks this automatically.</p>



<p>This is supported by its terms and conditions which permits the platform to limit, suspend, deactivate or cancel accounts in case of breach. Drivers agree that they will, “not attempt to contact an Owner directly until a Booking has been confirmed; not attempt to book any Parking Space advertised on the Platform, other than through a Booking.”</p>



<p>A further non-solicitation clause states, “ No User shall not attempt to solicit or perform services for or induce or attempt to induce, any customer, supplier, licensee or business relation of MobyPark or any Driver or other Owner through any communication including written and oral communication made by yourself or a third party to transact outside of the Platform.”</p>



<p>In addition, MobyPark “reserves the right to inspect the Parking Space at any time to verify any fees due.”</p>



<h2>Make sure your marketplace payment system works well</h2>



<p>Managing the flow of funds between buyers and sellers is one of the most important functions of an online marketplace. A fit-for-purpose payment system is therefore central to protecting your revenue streams from platform leakage.</p>



<p>Due to the complexity of payment infrastructures, most marketplaces use third-party payment service providers like <a href="https://www.cobbleweb.co.uk/stripe-marketplace-payment-system/">Stripe Connect</a>, PayPal for Marketplaces, and MangoPay.</p>



<figure class="wp-block-image size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/11/image-1.jpeg" alt="Prevent platform leakage by using the right marketplace payment system" class="wp-image-7453"/></figure>



<p>A payment service provider should tick the following boxes:</p>



<ul><li>Accepts payments with no need for multiple merchant accounts.</li><li>Easy onboarding for sellers. Minimises documentation and other friction points.</li><li>Offers flexible payment options – credit cards, bank transfers, ApplePay, etc.</li><li>Offers multiple currency options, including exchange rate calculations.</li><li>As Merchant of Record it takes responsibility for the flow of funds and handles credit card disputes.</li><li>Can hold or delay funds until goods are delivered or services rendered.</li><li>Minimises risk through security mechanisms such as fraud filters and encryption.</li><li>Adheres to compliance regulations such PCI and Know Your Customer.</li><li>Can split payments – multiple sellers per cart, or tax and commission deduction.</li><li>Offers reporting tools to sellers and an admin dashboard to marketplace owners.</li><li>Reliability – a stable organisation with a strong track record of service delivery.</li><li>Flexibility – its API allows customisation for your business model.</li></ul>



<h3>Use a subscription revenue model to limit marketplace platform leakage</h3>



<p>OpenTable did this very successfully by selling subscriptions to its cloud-based reservation software to restaurateurs. This created sufficient supply for diners to flock to their platform without the need to police transactions.</p>



<p>Implementing a SaaS model for your marketplace can be done through payment service providers like Stripe Connect that support recurring payments. With technology like Chargebee platforms can even offer usage-based billing.</p>



<p><a href="https://cobbleweb.co.uk/marketplace-features/payment-systems/"><strong>Learn more</strong></a> about choosing a suitable payment service provider.</p>



<h2>Make sure your marketplace sellers are happy with your payout process</h2>



<p>Get your payout process wrong and unhappy sellers will leave your marketplace because they don’t get paid on time, while buyers will inundate you with chargebacks and payment disputes. A nightmare scenario!</p>



<p>On the flipside, offering timely seller payouts and buyer fraud protection can be a powerful incentive for sellers to use your marketplace. The better your marketplace caters for specific use cases, the higher the likelihood users will remain within your payment ecosystem.</p>



<p>For example, using multiple payout triggers to accommodate different types of sellers can be a great selling point for your marketplace. <a href="https://www.cobbleweb.co.uk/portfolio/fanpass-marketplace-case-study/">FanPass</a>, an event ticketing platform, offers three payout levels:</p>



<p>A standard option only pays sellers seven days after the event (to prevent duplicate or invalid tickets), while an instant option pays qualified sellers (who meet certain sales and service thresholds) immediately after receipt of the tickets by buyers. A third option caters for large corporate clients who receive monthly bulk payments.</p>



<p>A marketplace payment system must check a number of boxes in order to deliver a seamless seller payout experience. Here are some important aspects to keep in mind:</p>



<p><strong>Seller onboarding</strong>. Unnecessary friction points can frustrate sellers and lead them to abandon your marketplace.</p>



<p><strong>Compliance with local and international regulations</strong>. You will need to verify the identity of all sellers and/or their companies in order to comply with policies that combat money laundering and other illicit financial flows.</p>



<p><strong>Cross-border transactions</strong>. If your marketplace operates in multiple countries you will have to deal with currency conversions and language barriers.</p>



<p><strong>Holding function</strong>. Funds should therefore only be released to sellers or service providers after certain conditions are met to combat product fraud.</p>



<p><strong>Seller payout options</strong>. Flexible transfer methods can help you reach more potential sellers since seller location, demographics, and sales volumes can all affect preferred payout options.</p>



<p><strong>Split payments</strong>. Marketplace transaction flows almost always require separate transfers for seller payouts, marketplace fees, delivery fees or taxes.</p>



<p><strong>Refunds and chargebacks</strong>. Product returns and payment disputes are a fact of life in marketplaces.&nbsp;</p>



<p><strong>Seller dashboards</strong>. Providing a granular reporting function in an easy-to-manage dashboard promotes transparency and trust.</p>



<p><a href="https://www.cobbleweb.co.uk/seller-payout-guide-for-online-marketplaces/"><strong>Learn more</strong></a> about how and when to make seller payouts.</p>



<h2>Using marketplace liquidity metrics to track platform leakage</h2>



<p>Quantifying sellers’ chances of making sales or buyers’ chances of procuring the right products or services, can help you form a better picture of potential platform leakage in your marketplace.</p>



<p>You want to look at the rate at which buyers and sellers match on your platform. Exactly what gets measured will depend on your business model. Since marketplaces are two-sided, both buyer and seller liquidity have to be taken into account.</p>



<p>Buyer liquidity would track metrics such as the average number of visits, search queries or quote requests that lead to transactions, also known as the Search To Fill Rate. Seller liquidity would focus on The average number of seller listings that result in transactions within a specific timeframe is known as the Utilisation Rate.</p>



<p><a href="https://www.cobbleweb.co.uk/measure-grow-marketplace-liquidity/"><strong>Learn more</strong></a> about how to measure marketplace liquidity.</p>



<hr class="wp-block-separator"/>



<p>Let’s be clear, there’s no fool proof way to completely seal your marketplace from platform leakage. As we’ve seen though, there are a number of ways to staunch the bleeding to a trickle. Your level of success will depend on how well your platform is designed. An off-the-shelf template may not be enough to protect your precious revenue. CobbleWeb has helped a wide variety of marketplace to establish and grow revenue streams. <a href="https://cobbleweb.co.uk/request-quote/"><strong>Get in touch</strong></a> to find out how we can do the same for your marketplace concept.</p>

How to prevent platform leakage in your online marketplace

Marketing strategies followed by successful marketplace startups

Grow the value of your marketplace with powerful network effects

growth hacking

growth marketing

marketplace growth driver

marketplace growth strategies

<p>Online marketplaces are grabbing attention like never before. Not only has the Covid-19 pandemic put the already fast-growing e-commerce sector on steroids, but growing numbers of digital entrepreneurs are chasing the marketplace model’s promise of rapid growth via third-party sellers.&nbsp;</p>



<p>For those who want to get their marketplace up and running quickly there are several off-the-shelf and plug-and-play solutions to choose from. Options range from full-stack platforms, such as Sharetribe, Mirakl and CS-Cart, to general e-commerce frameworks like WooCommerce and&nbsp; Shopify, which can be extended with the Dokan multi-vendor plugin or the Webkul marketplace app.</p>



<p>Unfortunately, the easy-to-use marketing spiel of turnkey software providers often conceal pitfalls that have resulted in the sudden death of many a startup dream. At CobbleWeb we field numerous enquiries every month about how to get a marketplace up and running. Invariably, we receive lots of queries from startups that have hit a dead end due to choosing the wrong technology:&nbsp;</p>



<blockquote class="wp-block-quote"><p>“Hi there, I came across your website after searching for marketplace developers. I’m currently building a marketplace for custom sneaker artists using Wordpress, WooCommerce, and Dokan. To make a long story short, it sucks and I’m very unhappy with all the bugs and frustrations I have. Do you guys develop marketplaces? If so, I’d love more information.”</p><cite>CobbleWeb client</cite></blockquote>



<p>We've previously written about the general <a href="https://www.cobbleweb.co.uk/create-marketplace-website-builder-or-development-agency/">pros and cons of SaaS-type marketplace builders</a>. This follow-up delves a bit deeper to clarify six specific hazards that are common to the off-the-shelf scenarios that we have come across: user experience, user flow, scalability, shipping, APIs, and revenue streams.</p>



<div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div>



<h2>The user experience can make or break your marketplace</h2>



<p>Bill Gurley, a well-known Silicon Valley VC investor, wrote a classic essay on what makes marketplaces successful back in 2012. Number one on his 10-point list? User experience.</p>



<blockquote class="wp-block-quote"><p>"Great marketplaces do not simply aggregate a market; they enhance it. They leverage the connective tissue to offer the consumer a user experience that simply was not possible before the arrival of this new intermediary."</p><cite>Bill Gurley</cite></blockquote>



<p>Bill knows what he’s talking about; he invested in a host of successful marketplaces including eBay, Zillow, oDesk, Uber, OpenTable, GrubHub, and Yelp.&nbsp;</p>



<p><a href="https://www.cobbleweb.co.uk/portfolio/fanpass-marketplace-case-study/">FanPass</a>, an event ticket marketplace, is a good case in point. Event pages are at the core of their marketplace with each event page containing multiple ticket listings from different sellers. Popular events like a Liverpool vs Manchester United football match can easily see 1,500 plus users flock simultaneously to a single event page. If the page couldn’t provide an intuitive user experience to visitors, bounce rates would jump and ticket sales would dive.</p>



<p>CobbleWeb analysed user behaviour to improve key elements of the FanPass events pages. For example, we implemented a hover effect that highlights different sections on the stadium map when a user moves the cursor or a finger over one of the ticket listings.</p>



<figure class="wp-block-image size-large"><a href="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/07/FanPass-Stadium-location-hover-effect-2.jpg"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2021/07/FanPass-Stadium-location-hover-effect-2.jpg" alt="Hover effect that highlights different sections on the stadium map when a user hovers over one of the ticket listings. CobbleWeb UX improvement for FanPass marketplace." class="wp-image-5412"/></a></figure>



<p>Another element that we optimised was when a user selects (clicks on) a particular ticket listing. When this happens the exact seat is highlighted on the stadium map with a thumbnail view from the seat.</p>



<figure class="wp-block-image"><img src="https://lh3.googleusercontent.com/QUWRgwrCo2h0u8Rd8bJ3YoLt0rHMgZHOh6KiYZWaGqWx3zpA2NM8RjV9Pd0lGCfj45S5HW4d1jAGI4AVHeRaHX_ZRcbicQbiY2cygq16UYBg2YI_sXtO0RNAWlck73vja-enDr-5" alt="When a user selects a listing the exact seat is highlighted on the stadium map with a thumbnail view from the seat. CobbleWeb UX improvement for FanPass marketplace."/></figure>



<p>These UX optimisations had a two-fold effect. Firstly, it minimised the number of customer queries, reducing strain on customer service resources. Secondly, conversions happened faster and at higher rates. That means more money in the bank.</p>



<p>The bottomline - using a cookie-cutter user experience will not differentiate your platform from the competition. If UX is a key success factor (and it is 90% of the time) off-the-shelf solutions are simply not up to the task. Only a custom process can identify those unique opportunities to delight your users.&nbsp;</p>



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<h2>Flexible user journeys promote product uptake</h2>



<p>A typical VC scorecard for marketplace startups usually emphasises that the value proposition needs to include an intuitive user journey. That's because modern consumers want instant gratification. If they can't find a product or service quickly or struggle to navigate <a href="https://www.cobbleweb.co.uk/how-to-design-a-winning-marketplace-category-structure/">category structures</a> they will abandon your platform.</p>



<p>Our advice is to check the user journeys offered by ready-made solutions. If it doesn’t cover at least 80% of your requirements then there is a high risk that it’s not the right fit for your business. Of course, off-the-shelf software solutions will also not be helping you map out your optimal user journeys - you’ll have to do that yourself.</p>



<p>Here’s a case in point. One of our clients is busy pivoting from single-vendor e-commerce to a multi-vendor marketplace serving the fashion industry, a very competitive vertical. They originally kicked off with a Shopify multi-vendor template, but quickly started getting negative feedback from sellers.&nbsp;</p>



<p>Shopify was forcing additional steps when sellers added products that were not necessary for their business model. This caused unnecessary friction and seller abandonment. The clients then approached us to resolve the issue with a custom user journey.</p>



<p><strong>Bonus tip!</strong> The ability to customise the user journey is also key to establishing product-market fit. Without it you can’t <a href="https://www.cobbleweb.co.uk/iterating-mvp/">test assumptions</a> and may miss the tweak that ignites user growth.</p>



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<h2>Scalability is key to the growth of your marketplace platform</h2>



<p>One of our recent enquiries concerned a product marketplace built with WordPress and WooCommerce. The owner wanted to start scaling, but was held back due to the site’s slow performance and limited functionality. To his horror, optimising speed and expanding functionality would cost more than a brand-new custom solution.&nbsp;</p>



<p>The reality is that one-size-fits-all solutions that cater for all types of marketplaces add lots of bloat which can slow down your site significantly. These performance issues tend to increase as traffic grows. Magento’s marketplace extension, for instance, requires the installation of more than 5,000 files!</p>



<p>Since third-party software providers like Shopify or Sharetribe control your backend, there’s not much you can do to optimise your platform performance. The irony is that most marketplace startups only need a fraction of all those bells and whistles.&nbsp;</p>



<p>Specially developed tools or features are another powerful way to scale your marketplace. It is known as the 'come for the tool, stay for the network' strategy. For example, photography marketplace, Meero, entices photographers onto its platform with business management tools, while OpenTable uses reservation software to attract restaurateurs. This avenue is mostly closed to those making use of turnkey solutions.</p>



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<h2>Shipping can be a competitive advantage</h2>



<p>When there is lots of competition in your vertical, <a href="https://www.cobbleweb.co.uk/everything-you-need-to-know-about-planning-a-marketplace-shipping-strategy/">shipping options and costs</a> can be a deciding factor. Most ready-made marketplace solutions offer limited shipping options which could make your marketplace uncompetitive.</p>



<p>From Sharetribe’s community boards:</p>



<blockquote class="wp-block-quote"><p>“The reason why I can’t fully use Sharetribe. There are no shipping options. You can only enter shipping costs once. It must be possible to enter at least 3 shipping options: nationwide, within the EU and worldwide. Depending on the location of the seller and the buyer, an option should be automatically selected during the ordering process.”</p><cite>Sharetribe client</cite></blockquote>



<p>The ability to customise shipping for specific use cases can be a powerful differentiator. CobbleWeb’s client <a href="https://affordableartfair.com/">Affordable Art Fair</a> follows a model in which the buyer pays the shipping cost which is then paid over to the seller who is responsible for shipping the artwork. Originally they used Magento, where shipping costs had to be added manually for each seller, which put a huge strain on administrative resources.</p>



<p>CobbleWeb stepped in and streamlined the process with an automated real-time solution which uses UPS to calculate shipping costs. It solved two additional challenges:</p>



<p>Some sellers use special packaging (which cost more) and were unhappy with the amount paid over to them. This was solved by allowing the admin to add a percentage onto the UPS calculation for each seller.</p>



<p>Many sellers also wanted to pass local shipping discounts onto buyers. Our answer was to split shipping into local and international options.</p>



<figure class="wp-block-image"><img src="https://lh5.googleusercontent.com/64D6fTA1zGtJMyJUaPaGP61WNHJSDCvlXoHfES2SvnIAErD3Tu89n-BBIGDVoU3mNgFYzm0OtIUJBEXWlMpx8GsIu2Hvb5_KpHYCX4LjO4GA-AS2LXHlgkK7ynZHu95N01XMJ7d4" alt="Local and international shipping options for Affordable Art Fair marketplace developed by CobbleWeb."/></figure>



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<h2>Without a user-friendly API you will lose high-volume sellers</h2>



<p>Marketplaces are ecosystems that thrive on partnerships, and in the digital universe APIs (aka software interfaces) connect partner applications. A weak API means potential partners can’t join your marketplace ecosystem.</p>



<p>Large corporate sellers need your API for integration with their own platforms. They will only sign up to your marketplace if you make it easy for them to map and synchronise events between their platforms and yours. CobbleWeb built such an API for the <a href="https://www.cobbleweb.co.uk/portfolio/fanpass-marketplace-case-study/">FanPass</a> marketplace which resulted in several large sellers joining and boosting revenue significantly.</p>



<p>In contrast, few off-the-shelf solutions allow API integration, and almost none allow seamless API integration with a wide range of seller e-commerce platforms such as WooCommerce and Shopify. Sharetribe tried to fill this gap with its Flex option, but that pretty much takes you back to square one - custom development.&nbsp;</p>



<p>So, if your target audience are mostly corporate sellers you are out of luck with an off-the-shelf solution.</p>



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<h2>Activating the right revenue streams for your business model</h2>



<p>Off-the-shelf marketplace solutions are notoriously limited when it comes to monetisation. The rise of SaaS enabled marketplaces has made it even more challenging to integrate the right <a href="https://www.cobbleweb.co.uk/marketplace-solutions/key-features-list/marketplace-payment-systems/">payment technology</a>. This is especially important to consider in service marketplaces.</p>



<p>One of our clients built his marketplace with Sharetribe on a transaction-based revenue model. Feedback from sellers made it clear that his revenue should be subscription based. Sharetribe doesn’t have a built-in subscription option and its third-party workaround was too cumbersome. Which meant his whole platform had to be rebuilt.</p>



<p><strong>Conclusion</strong></p>



<p>Technically, a marketplace is an intricate digital ecosystem with many interconnected moving parts. This necessitates a <strong>responsive and adaptive approach</strong> to ensure each part serves user needs (of your unique business case) in optimal fashion.&nbsp;</p>



<p>That’s why rigid turnkey solutions rarely produce flourishing marketplaces. At some stage you are going to step into one of those pitfalls and have to reverse, rethink and redo your whole platform. Time, effort and money wasted, which could have been spent more productively.</p>



<p></p>

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Cobble Web discusses Lean Startup Pivoting On BBC Radio