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Whether you are developing a multi-vendor marketplace or a single-vendor online store, pivots should always be part of your e-commerce game plan. We are such fans of a good pivot that we have <a href="https://www.cobbleweb.co.uk/pivoting-startup-business-purpose/">written</a> and <a href="https://www.cobbleweb.co.uk/adapt-or-die-cobbleweb-discusses-lean-startup-pivoting-on-bbc-radio/">spoken</a> extensively about its strategic value for lean startups.&nbsp; 



Up till now though, we have mostly discussed pivoting as making calculated changes to different aspects of an existing business model. In other words, experimentation with different revenue streams, market segments, product lines, or redefining how you solve your target audience’s problems. But what if there was an opportunity to pivot from a single-vendor to a multi-vendor business model?&nbsp; 



The examples are out there. E-commerce behemoth, Amazon, is probably the biggest example, having successfully transitioned from selling books to building a marketplace whose third-party sellers contribute <a href="https://www.statista.com/statistics/259782/third-party-seller-share-of-amazon-platform/">60% of its retail revenue</a>. 



Shopify's founders started out with an online store for snowboarding gear and ended up with a $36bn SaaS platform for e-commerce stores. In fact, you can say integrations like its Fulfillment Network have transformed Shopify into a gigantic meta marketplace. 



Even an iconic consumer electronics retailer like Newegg has leveraged its multi-million strong client base to launch the successful Newegg Marketplace.



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<h2>Marketplaces and online stores are different ball games</h2>



As we explained in a <a href="https://www.cobbleweb.co.uk/single-vendor-e-commerce-or-multi-vendor-marketplace-which-strategy-is-best-for-your-digital-business/">previous post</a>, there are different pros and cons attached to building single-vendor stores as opposed to multi-vendor marketplaces. The fairly low barrier to entry for most online stores (cheap plug-and-play e-commerce templates, simple site architecture, and fast set-up times) means that their numbers far outweigh that of marketplace platforms.&nbsp; 



Marketplace platforms, on the other hand, are far fewer, because they take longer to set up, cost more to develop, and require additional technology and effort to establish product-market fit.&nbsp; 



The carrot for marketplace entrepreneurs though, is their imminent scalability due to a combination of <a href="https://www.cobbleweb.co.uk/grow-marketplace-value-with-network-effects/">network effects</a>, multiple <a href="https://www.cobbleweb.co.uk/revenue-streams-for-marketplace-business-model/">revenue streams</a>, and the ability to rapidly expand product ranges via multiple vendors. That means more market share and bigger revenues. Which is why marketplaces have grown to make up 60% of the $2.86 trillion global e-commerce market.



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<h2>How do you know your online store is ready for a pivot to a marketplace model?</h2>



Timing is everything. If your online store has not gained sufficient traction, you first need to establish the reason. In all likelihood, a lack of product-market fit means that you are not ready to pivot to a marketplace model. Maybe focus on a product- or market-based pivot first. 



Conversely, as a successful solo e-commerce vendor you would have developed a good understanding of the market segment that you operate in. Those insights could help you identify an opportunity for a marketplace platform. 



Pivoting to a marketplace model simply based on a hunch, however well-informed, is not advisable though. Test your idea first with an <a href="https://www.cobbleweb.co.uk/ultimate-guide-to-minimum-viable-product-mvp/">MVP version</a> to make sure that you are solving a real problem for vendors. You also need to make sure that the target market is big enough to sustain multiple vendors. 



Another way of minimising risk is to retain your existing client base by implementing a hybrid model. That way you can continue selling your own product line in conjunction with other vendors on your platform. Once the new vendors have shown that they can sell their goods or services you have the option to step back and continue with only third-party vendors. 



Your knowledge of the market segment can be a powerful advantage in other ways too. Business intelligence about competitors can be used to identify the first vendors for your platform. You can also leverage your insights to help your sellers up their game via tutorials and a knowledge base. <a href="https://www.airbnb.co.za/help/hosting">Airbnb</a> does this really well.



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Need help turning your e-commerce business into a multi-vendor marketplace? You are in the right place. <a href="https://www.cobbleweb.co.uk/">CobbleWeb</a> has a proven track record of successful marketplace conversion. <a href="https://cobbleweb.co.uk/request-quote/">Get in touch to learn more</a>.



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<h2>Eight challenges that differentiate marketplaces from online stores</h2>



It’s best to be fully cognisant of all the challenges that are unique to the marketplace model before setting out on this new adventure.&nbsp; 



Quality control can be a headache since you have less control over the products and services offered by third-party vendors. Buyers receiving inferior goods or services and fraudulent accounts can tank your brand very quickly. You will need to vet your vendors and conduct regular product checks to ensure your buyers get what they asked for. 



You will need to decide what technology stack you are going to use for your marketplace. This can be a critical decision since marketplaces require a lot of additional functionality (seller dashboard and analytics, third party shipping, review systems, etc) and much more complex information architecture and navigational structures. Are you going to attempt DIY using an online marketplace builder or trust an experienced marketplace development agency to do the job right the first time? <a href="https://www.cobbleweb.co.uk/marketplace-technology-stack/online-marketplace-builders-vs-custom-web-developers/">Choosing the wrong option</a> could set you back seriously in terms of time and money.&nbsp; 



Security is a bigger concern on marketplace platforms due to the increased number of stakeholders and transactions. This includes user data which needs to be protected in a clear and transparent manner. Choosing a suitable <a href="https://www.cobbleweb.co.uk/marketplace-solutions/key-features-list/marketplace-payment-systems/">payment gateway</a> is key to building trust with users. For example, you will have to make provision for new features such as escrow and split payments. 



The marketplace model offers a variety of ways to monetize your platform. Potential revenue streams include commissions, listing fees, subscriptions, and advertising. Figuring out which ones to pursue can be difficult if you are used to a more straightforward single-vendor revenue model. Experience has shown that it’s best to test revenue streams as you chase product-market fit with an MVP version. 



A key challenge is how to drive traffic to your marketplace. Unlike an online store where there is a singular focus on enticing buyers to your site, a marketplace needs both buyers and sellers. Do you ‘stock the shelves’ with vendors first or do you attempt to drive both sides at the same time? If you have already built up a solid customer base with your online store it will make the job much easier since you only have to find qualified vendors. 



An often overlooked aspect of successful marketplaces is their team composition. Online stores tend to have much more localised teams due to their need for warehousing, manufacturing, and fulfilment. The marketplace model lends itself to a distributed organisation which means a larger pool of talent and reduced costs. An early-stage marketplace team should focus on product development and growing the platform community (buyers and sellers). As your platform matures you can get fancy with RevOps, DevOps and FinOps teams. 



You are going to have lots more data. You will need to manage it properly to stay on the right side of your users and the data privacy laws of the different jurisdictions that you operate in. Data should not only be managed; it should also be analysed properly so that you can make informed decisions about the evolution of your marketplace. To that end you will need to come up with <a href="https://www.cobbleweb.co.uk/aarrr-pirate-metrics-improve-marketplace-performance/">the right metrics to track.</a>&nbsp; 



All of the above are important for success, but your primary challenge is to define your value proposition aka unique selling point. Where online stores tend to be very product and price focused, marketplaces need to add extra value to differentiate themselves from existing solutions in the market. Are you going to emphasise a wide variety of goods or services and convenience like Amazon or are you going to focus on the user experience and transparent feedback like Airbnb?



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<h2>You will need to shift from a retail mentality to a mall sensibility</h2>



Online stores are linear one-directional businesses. Owners source or manufacture a product line which they then promote to a chosen target audience. Which pretty much makes them the digital version of a physical shop.&nbsp; 



Marketplaces are the digital equivalent of a shopping mall with multiple vendors selling a wide variety of products or services. As the owner of a marketplace platform, your role is to facilitate connections between buyers and sellers in a way that solves real pain points for both parties. That means building and maintaining a secure user-friendly infrastructure that can handle a myriad of features, such as customer feedback, shipping, and payments. 



Sellers will rely on you to drive traffic to the platform through various marketing channels. Are you going to use technical SEO and user generated content to generate organic traffic or will you be spending your marketing budget on pay-per-click campaigns, social media ads, and affiliate marketing? Once procured, your sellers will also expect that your information architecture distributes that traffic fairly. Review and rating systems, categories, custom search, and localisation matter. 



Buyers have different priorities. They want to find, compare and connect with qualified vendors in faster, more secure ways. Just like a brick-and-mortar mall, your goal should be to build a unified brand that offers them that centralised shopping destination. If you get it right, transparent competition on your platform should lead to better quality and prices and even greater brand loyalty. 



Transforming your online store into a fully-fledged marketplace can be a daunting project, despite the huge potential rewards. Minimise the risk by testing your idea with MVPs and rapid iteration based on user feedback. An experienced development partner can smooth that process and increase your chances of success.&nbsp;



 <a href="https://www.cobbleweb.co.uk/">CobbleWeb</a> has helped several e-commerce companies make changes that sped up their growth and increased their profitability. <a href="https://cobbleweb.co.uk/request-quote/">Get in touch</a> for a free consultation.

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pivot

The term pivoting has become something of a business banality. Any time any sort of problem arises for an entrepreneur, a “wise” mentor will sagely shake his or her head and utter pivot, as if it was some mystic cure-all. As a result, people take a variety of actions claiming that it is a pivot which will lead to a stronger business. More often than not, those actions lead to dead ends.



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This is a shame, because a pivot is powerful if put into play the right way. Pivots are a natural extension of the lean business model, which requires you to incrementally experiment to discover how to build a better startup. Many times, experimentation reveals that assumptions you held about your business are wrong and you need to make a change. Pivots are about making the right type of change. Think about the physical process necessary to pivot. You must plant one foot on solid ground and move around that point. Similarly in business, when you pivot you have to plant yourself in what you know from your experimentation and move around that point. 



Before you ask if and when you need to shift your business, you need to ground yourself in the right frame of mind so you can best act on the trends you discovered from your application of lean business model principles. This post will provide the information on which you can rely on while pivoting your way to a better company.



<h2>Pivots in Perspective</h2>



Pivots can have a lot of definitions, but the one that is most appropriate in context of the lean startup method is “<a href="https://grasshopperherder.com/cheat-sheets/cheat-sheet-pivot/" target="_blank" rel="noopener noreferrer">changing one aspect of your business model while keeping other aspects constant</a>.”&nbsp;Simple to say, but difficult to apply because what you change can have significant effects on the other aspects of your business.



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Consider the Pivot Pyramid provided by Selcuk Atli. Each level of the pyramid represents an aspect of a business model, where each previous level defines how the current level is constructed. For example, the customers you wish to target heavily define what problem you are going to solve. The problem you wish to solve is going to define your solution. If you pivot to a different customer base, not only is that going to influence what problem your business is going to try to solve but the answer you are going to provide. This is why it is absolutely crucial to try to find your product-market fit before you start prototyping answers and products. &nbsp;The more effort you put into the prototyping before locking down your target customer base, the greater risk you run in terms of building a product without a market.



<h2>Pivot vs Optimisation</h2>



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The lean startup method places a high premium on experimentation, but there are two types of experimentation you can run; optimisation and pivot experiments. Optimisation experiments are about refining parts of a business model so that it can be more profitable. Pivot experiments are about validating parts of business model to ensure that is scalable and repeatable. In other words, optimisation is about making a business model better while pivoting is about finding a business model that works.



The best pivoting business strategy is to do all pivot experiments first. You need to be methodical and test until confident in every level of the Pivot Pyramid before moving on to the next one. Establish your target customer base first, then identify your problem, and only after you have a high level of confidence in those answers move on to testing which answers and products work best. Optimisation of a business model should never occur you are confident that it is feasible and sustainable.



<h2>Designing the Perfect Pivots</h2>



Pivots are a function of experimentation, something you only do if and only if an assumption you had about your business is proven to be verifiably false. Pivots should be focused on one of three classes of questions:



<ul><li style="font-weight: 400;">Who has the problem?</li></ul>



<ul><li style="font-weight: 400;">What is the problem you are trying to solve?</li></ul>



<ul><li style="font-weight: 400;">How:
&nbsp;
<ul>
<li style="font-weight: 400;">Do you solve the problem?</li>
</ul>
&nbsp;
<ul>
<li style="font-weight: 400;">Big is the market?</li>
</ul>
&nbsp;
<ul>
<li style="font-weight: 400;">Are you going to reach this customer?</li>
</ul>
&nbsp;
<ul>
<li style="font-weight: 400;">Will you make money?</li>
</ul>
</li></ul>



In general, you should focus on the first two questions before pivoting to the how. This corresponds to the base layers of the pivot pyramid described above. These questions provide the foundation of what your pivot experiments should be about as they form the basis for any sound business model. If you design your experiments with these concepts in mind, you will begin to find a business model that works.



Good questions are a good start, but not enough. You need to ensure that the experiments you design are structured for success. Here are four steps, from Ash Maurya, about how to design the perfect pivot experiment:



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Maximise Learning: The whole point is to learn how to build a better business model. You should be structuring these experiments so that each is incremental, allowing you to only focus on one aspect of your business model at a time. Don’t fear failure – some say that to optimise learning you should fail approximately 50% of the time. In pivot experiments, do not be afraid to test bold changes and see how those changes affect the outcome of your business model.



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Focus on Retention: &nbsp;Businesses don’t survive because they make initial sales with customers, but because they provide an experience that keep customers coming back. Every experiment might require different metrics to gauge success, but the number one metric you should consider is how well the changes help your retention rates.



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Minimise Waste: Each experiment has a cost in resources and time, and as an entrepreneur you don’t have a lot of either of those things. &nbsp;You need to design your experiments so that you can get the most information you can while minimising the resources spent. For early stage experimentation to verify product-market fit, <a href="https://www.cobbleweb.co.uk/choose-right-mvp-type/">consider using low-fidelity MVPs</a>. These sorts of MVPs are designed to get you great information at a low price. So long as the MVP is aligned with one of the questions listed above, it will work.



<div class="wp-block-image"><figure class="alignleft size-large"><img src="https://www.cobbleweb.co.uk/wp/wp-content/uploads/2022/02/Validate-qualitatively-300x300-1.jpg" alt="" class="wp-image-7918"/></figure></div>



Validate Qualitatively, Verify Quantitatively. In early stages of developing your startup, you are not going to be able to have large groups of people to test your potential pivot on. That is ok, because a lot of the biggest, best pivots come from decisive moves that can be verified by face-to-face conversations with a small group of test customers. If your potential pivot works with a small body of potential customers, you can move forward to verifying that it works with a larger group of customers. This saves you time, money, and limits any potential harm to your reputation from a bad pivot.



Follow these steps and you should make all the right pivoting choices. But even with the best of intentions, it can be easy to stray away from the process to make pivots based on something other than experimentation and fact.



<h3>&nbsp;</h3>



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<h2>Pivoting Away From Success</h2>



The problem with pivoting as a concept is that it is misunderstood. Pivoting can appeal to certain instincts that might not be the best for a young startup. For example, there Is a real tension between when knowing when to pivot and when to persevere. &nbsp;Testing and experimentation is necessarily done with small batches of participants. This begs the question of how big of a change someone should really make when provided with information from one of these test batches; the threat of overreacting to information and making unnecessary pivots is just as big of a risk as not making a pivot when you should.



There is also confusion about what can be pivoted. For too many people, pivoting is a function of product and nothing else. Pivoting can be related to anything that is part of the business model. Many successful companies never pivoted their product, but at some point they did pivot another aspect of their business plan such as customer segments and revenue models.&nbsp;Do not become so focused on <a href="https://steveblank.com/2014/01/14/whats-a-pivot/" target="_blank" rel="noopener noreferrer">whether to pivot your product</a> that you do not focus on the other important parts of your business.



Which leaves the most dangerous, and alluring pivoting mistake at all. Pivots should be done based on information and feedback from carefully designed pivot experiments. However, many businesses choose to pivot based on other sources of information such as what is cool in the moment, whether a new approach will better help them secure funding from a particular VC, or even something that was on the morning news. It is tempting to follow these sorts of trends; after all these ideas must be backed by some sort of popular support and popular support means customers. 



Pivoting is not about chasing trends but making moves based on reason and logic that you understand. As an entrepreneur it is not your place to follow, but to lead. That means sticking to your process but making changes when you have information you verified. If you follow the trends and practices of others you surrender your initiative, which is the greatest advantage you have as a business owner.



Pivoting correctly and for the right reasons can be quite the challenge, but one that you can successfully navigate. If you are looking for someone to partner with on the pivot experimentation process, consider reaching out to CobbleWeb. We can keep you grounded with data but flexible and agile enough to build a better business.

Your Lean Marketplace  Development Guide

Client Highlights

June 2025

August 2024

June 2024

ADAPT OR DIE
Cobble Web discusses Lean Startup Pivoting On BBC Radio

Your Lean Marketplace Development Guide

Client Highlights

June 2025

August 2024

June 2024

ADAPT OR DIECobble Web discusses Lean Startup Pivoting On BBC Radio

Your Lean Marketplace  Development Guide

ADAPT OR DIE
Cobble Web discusses Lean Startup Pivoting On BBC Radio