Online Marketplace Development Pitfalls and Factors to Consider

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As a company with great experience in online marketplace development, we recommend the potential business owners to understand all possible consequences and what they will have to go through from the very beginning.

Nowadays you have many competitors among online marketplaces. So you need to have something else that makes you unique. Your own identity, values, the idea behind your brand. That are important elements you need to take into consideration when starting this complicated business route.

We think it’s important to make the whole process of online marketplace development of the best quality, offering the greatest pricing strategies as well as making every user happy. But let’s find out what we need to pay attention from the process of having an idea of a great marketplace in your mind till the actual result.

Online Marketplaces as the Heart of E-Commerce: What Benefits Do They Bring to Buyers and Sellers?

The main reason marketplace businesses popularity so huge is the ease of use by buyers, and by seller too. Moreover, you don’t need to invent anything by yourself to run one. Just think, you can create a huge business without having to spend a lot of money to buy the initial inventory and taking on a lot of risks. But of course before you get involved in developing your marketplace, you should take some time to focus on three main questions:

  • why?
  • what?
  • how?

If you are going to build a small business with a small staff, you’d better focus on a smaller market. If you have some other plans, like to go globally, and expect to get some money from venture capitalists, your market needs to be huge.

The purpose of the online marketplace is to grow customers loyalty by offering them a variety of different products. A company must use its expertise to make its marketplace successful and profitable.

We can point out some advantages of online marketplaces:

  • Vendors can sell goods without setting up their own online store
  • It provides a flexible business opportunity with relatively low start-up costs
  • Vendors are allowed to create and upload products
  • The commission structures provide the marketplace with the piece of the action
  • It offers a convenient way to compare prices and products from a single source
  • Good reputation causes the level of trust between the customer and the buyer
  • Online marketplaces provide transparency, as everything is in an open environment

Bearing all this mind, don’t forget to familiarize with many successful showcases of the online marketplace that had their own specifics and difficulties.

Besides, if you run the business, you should know that you should constantly move and be aware of the new technologies to gain more customers and profits. Remember about the main trends and innovations while implementing in your business, like:

  • Artificial Intelligence,
  • Progressive Web Apps,
  • Mobile payments,
  • Augmented Reality,
  • Voice search,
  • Use of chatbots,
  • Omnichannel marketing.

Using these kinds of innovations will help you improve the online shopping experience for your customers. The online marketplace development trends of 2019 prove that we need to expect fast e-commerce development in the next few years.

To be a successful entrepreneur in the multi-vendor e-commerce business, it’s also important to choose the right type of platform. And here we are talking about Horizontal, Vertical and Global types of marketplaces:

  1. Vertical marketplaces
    They are focused on a specific area or niche and are able to offer a greater depth of product as their sellers often have greater expertise.
  2. Horizontal marketplaces
    They sell products of many types by sharing a characteristic.
  3. Global marketplaces
    They offer an efficient marketplace for the community of people that can be done across long distances.

Yes, the process of online marketplace development can be much more complicated than it seems for the first sight.

The Most Famous Online Marketplaces

There are plenty of marketplaces available for you to use and explore that are known for millions of customers. We can highlight the most famous ones:

  1. eBay
    A multinational e-commerce corporation, facilitating online consumer-to-consumer (C2C) and business-to-consumer (B2C) sales.
  2. Shopify
    A Canadian e-commerce company that created a commerce platform that allows anyone to easily sell online, at a retail location, and everywhere in between.
  3. Amazon
    An American computing company that provides online shopping from the earth’s biggest selection of books, magazines, music, DVDs, videos, electronics, etc.
  4. Airbnb
    An online marketplace and hospitality service, enabling people to lease or rent short-term lodging including vacation rentals, apartment rentals, homestays, hostel beds, or hotel rooms.
  5. Etsy
    A peer-to-peer (P2P) e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items.
  6. Uber
    It operates the Uber car transportation and food delivery mobile apps.
  7. Alibaba
    A Chinese company which provides several types of Marketplaces at the same time: C2C (consumer-to-consumer), B2C (business-to-consumer) and B2B (business-to-business).
  8. App Store
    The most famous digital distribution platform developed and maintained by Apple Inc., for mobile apps on its iOS operating system.
  9. Google Play
    A digital distribution service operated and developed by Google.
  10. Spotify
    A music, podcast, and video streaming service.
  11. UpWork
    A global freelancing platform with twelve million registered freelancers and five million registered clients.
  12. Fiverr
    The world’s largest freelance services marketplace for lean entrepreneurs to focus on growth & create a successful business at affordable costs.
  13. Spree
    A multi-merchant B2C Marketplace with 3 million products from 50+ merchants, one checkout, one payment, multiple integrations.
  14. Airtasker 
    This is a trusted community platform that connects people who need to outsource tasks and find local services, with people who are looking to earn money and ready to work.

Syndicode explored and gathered the most complete information about marketplaces, their types, examples, technologies, features and online marketplace development. We use this information to develop the best e-commerce solutions for your business regardless of its scale and type.

Here are some of the cases of online marketplaces developed in Syndicode:

  • Fuzu is an online job and talent search tool tailored for the African job market. Included in TOP-10 best African startups with $2.8M funding, the platform is helping people embark on meaningful careers as well as helping companies grow by enabling them to find the right kind of talent.
  • KwikiMove is the on-demand “Movers Marketplace” based in USA (Atlanta, Georgia) where individuals needing quick moving service can price their moves and instantly connect with truck owners around town.
  • HelloCare is a marketplace platform that brings together senior citizens, lonely people, and families with qualified everyday helpers. HelloCare is a perfect case study of marketplace development as it has all the parts that any two-sided marketplace has to offer.
  • Wecam is a marketplace platform to buy and sell video production started in Berlin, Germany. It features talented videographers for potential buyers in different categories ranging from wedding video, promo video, fashion video to drone and product video.
  • Movinga is a unique revolutionary service which combines a simple booking process with a customer-friendly interface, making it easy to plan flawless removals, it offers the best relocation experience you could wish for.

Core Technologies Used in Online Marketplace Development

There is no doubt that knowing different types of marketplaces and platforms they can be developed with is important. That’s how you are able to know where to belong. A new project will have to fit into the existing categories. Let’s go through available technologies and their meaning:

To build an online marketplace you have 3 options:

  • Buy an existing off-the-shelf solution. Launching is relatively fast and easy but after requires time to customize and might be even inflexible to your needs.
  • Use one of existing open systems for providing eCommerce to develop your marketplace on its base. There are plenty of solutions for this option.
  • Build your own marketplace from scratch and develop an MVP platform with hired developers or company that will take your project. It might be the most time-consuming option. But only in case you’re not about using Ruby on Rails framework. Soon we’ll tell you how Ruby on Rails can save the situation.

There are plenty of marketplace open systems and platforms that are already created and you have to just use them for your own: Sharetribe, Mayocat, Spree, WordPress, Woocommerce, Near Me, Yo-Kart and Magento… All of them good but at the same time have pros and cons points you have to consider before using.

At Syndicode we develop Online Marketplaces with Ruby on Rails framework from scratch and highly recommend it.

Why Ruby on Rails Marketplaces Development Is a New Standard?

The list of the main RoR marketplace development advantages is below:

  1. With Ruby on Rails you can launch your product 2 times faster
  2. It’s absolutely free and you don’t need to pay anything for use
  3. It’s perfect for CRM, CMS or e-commerce system – everything that requires a lot of content input (remember Airbnb)
  4. Ruby on Rails has plenty of gems, so you don’t need to reinvent the wheel – in simple words, any needed solutions are already shipped, just choose one

Sure, there are different conditions for small startups and business dinosaurs. But both of them will benefit working with Ruby on Rails.

With Ruby on Rails, you’re likely to find hundreds of items on any given topic. When you’re running a sprint, such network effects are the most important consideration for a startup. All the patterns or structures you can desire already exist, you have just to configure something – and voila! This is great for rapid prototyping.

If you already have your business and don’t want to risk: the trick is in the availability of developers. Because Ruby is elegant and easy to start it has huge ecosystem and plugins for every possible need. The new generation of programmers in love with it. No more heartbreaks because of new hires to work on a project. They can jump in and start coding immediately. And you can expand your online marketplace with new features anytime you need. Flexibility is just what you need to stay ahead of the pack.

Pitfalls in Online Marketplace Development

There are many hidden steps in the process you might not even know about. But they’re viable for providing your product’ functionality and appropriate work. So before starting to develop an online marketplace you have to get acquainted with major pitfalls of the online marketplace that we listed for you.

While developing the marketplace you have to consider the following things:

  • Authorization and Security. All user data must be protected (name, gender, email, date of birth, phone number, password). According to the latest GDPR, the consequences of privacy policy violations might be dramatic.
  • Registration for vendors. Vendors will have access to all functionality provided in your online marketplace. And this task is not as easy as it seems. Flawless user experience demands reliable and fast work and data processing of your service and integrations with sellers/users/vendors databases.
  • Sign up via social network process which is much easier than classic way suggests. But tricky as well, because nowadays many social networks change the policy of working with their APIs.
  • Managing user profile and personal details update. Note, that sometimes the authorized users need to have the possibility to become publishers and add their content.
  • Managing Listing. Sellers need to publish and manage their items. This is the question of quality of the admin panel and the roles it provides on multiple levels.
  • Booking/order process for clients. Here developers need to add also a possibility for communication between viewers and publishers. This is the additional level of complexity.
  • Payment option. Online Marketplace requires advanced payment functionality: payment system, ability to use credit cards, cash, PayPal, billing and invoice operations.
  • Payout: publishers should retrieve their money from the system – this functionality demands additional code.
  • Reviews and ratings. This instrument aimed to help publishers and customers understand the situation on the market and build trust between each other.
  • Notifications. They used for tracking the process of building relationships between viewer and publisher: with them, users can be informed about the arrival of their order and so on.
  • Landing pages for clients and vendors. There should be a possibility to set and customize different layouts for landing pages depends whether they aimed to capture clients or vendors attention.
  • Browsing content. This feature lets the user find what he is looking for). And here the Artificial Intelligence can help.
  • Customer service. It allows to keep in touch with the customer and grow his loyalty. Chatbots and VoIP, for example, can save you a lot of time and resources.

Usually, the most difficult part is organizing the process. To get the result you want, – custom, the effective, and powerful marketplace, – you need to spend a lot of time developing all the stages. Sure, learning can be done while building your product. But it will take time. In this case, we advise you to deliver all the process to the team of dedicated professionals who have built many marketplaces before and know how to set the process from the very beginning to the release date not spending extra time (which is also = money).

What You Should Consider When Deciding to Have Your Own Marketplace? 5 Core Things to Plan

For now, you can start with the list of some books that can make you expert in online marketplaces. We collected many of them. But to keep interested the information should be given by portions.

From our experience, we recommend starting your marketplace development with these 5 core things:

1. Business plan, of course.

Composing a business plan isn’t so simple, as here you need to find a balance between including all possible small details you have in your mind and a structural draft of your main development stages. Whether you are going to find an investor or trying to start your business using your own resources, you need to write down your thoughts on paper. This will help you feel prepared and more focused.

Figuring out how do you want to find resources for your business, go and write all questions that you can be asked by potential investors. If you are going to use your own resources, you can share this plan with your team to help you get feedback.

We recommend you to make a plan that will have such elements:

  1. summary of your project
  2. objectives and mission of the company
  3. research of the market niche and competitors
  4. description of your target customers
  5. description of the services
  6. operational and management plan
  7. sales and marketing channels
  8. startup resources, costs, and financials

Keep in mind, that your business plan shouldn’t be just formally written. You are composing it for yourself as well. Thoroughly writing out your summary leads to your startup progress and gives you a much clear understanding of your business idea. The statistics show that companies with solid business plans have more high rates than those without a plan. Let’s see how it is better to present the elements mentioned above and what you need to know to get started.

2. Choosing to outsource product development

Let’s start with the fact that to be concentrated on the business processes, it’s better to delegate the development itself to professionals. And that’s why you have to thoroughly and elaborate select the team to work on your online marketplace development.

Despite a great number of advantages, there are still some significant blunders that businesses often make while outsourcing, which can result in failures, additional costs, and time loss. Therefore, it is highly important to be aware of possible traps and be ready to avoid them:

  1. Lack of research. There are a couple of areas you should research to make sure that you partner for your project.
  2. Keeping ambiguity in requirements and miscommunication. Your outsourcing partner must understand exactly what you want in order to find the most effective ways to implement your idea.
  3. Outsourcing to companies that are not in sync with modern trends. No region is worse than others, but it is necessary to check that the outsourcing partner meets your expectations on issues beyond technicalities.
  4. Lack of basic technical know-how on your end.  Regular checks are essential. Therefore, lack of technical knowledge from your end may pose some major risks for the project.
  5.  Underestimating Quality Assurance (QA) or Testing. Whatever you’re building, testing should be an integral part of software development from the very beginning.

Don’t forget that Syndicode team is the best choice for software development that meets all your requirements and ready to face the challenges of any project!

3. Technology 

There are many great technologies that meet all these requirements. But here in Syndicode, we think that Ruby on Rails is the best solution for the new startup. Here are some supportive facts:

  1. It’s lightning-fast
    As a result, you can launch your product faster.
  2. Rails is a complete framework
    Ruby on Rails is a ‘battery-included’ framework with many out of the box tools and solutions: database communication, schema migrations, email sending/receiving, WebSockets, internalization, caching, API mode, etc.
  3. It has a layered structure
    The MVC (Model–View–Controller) software architectural pattern is a simple and easy way to split application logic into separate layers with their respective responsibilities.
  4. RoR provides third-party components
    A huge collection of gems (third-party components) which significantly speeds up app development.
  5. It has strong support from DevOps services
    There are many hosting services with prebuilt Rails support, e.g.:

    • CircleCI
    • Codeship
    • Semaphore
    • Heroku
    • DigitalOcean
  6. Frontend tools support
    JavaScript and CSS preprocessors, such as Webpack or SCSS, can be integrated into an application in just a few steps.
  7. Code scaffolds are also provided
    Code scaffolds are auto-generated code snippets that can provide good basic defaults for new app components.
  8. Convention over configuration strategy that saves dozens of lines of configuration and boilerplate code.

And as the main RoR disadvantage, you can name its scalability. But not anymore! Rails 6 started making Rails scalable by default with parallel testing and improved support for using multiple databases.

4. Payment gateway 

Marketplaces with high volumes typically need to deal with issues related to credit card disputes and tax reporting. PSPs often offer tools that help marketplace founders handle these issues.

The payment service provider needs to support the following features:

  • knowing your custom process
  • splitting payments
  • delayed payout and escrow
  • dispute handling and fraud prevention
  • tax reporting
  • subscription payments
  • your target market support

In order for you to deduct your commission from each payment to your providers, your PSP needs to support splitting payments. All of the companies discussed in this article offer this feature, but in case you need to split your payment between more than two parties, your options are limited to Stripe, MANGOPAY, and Adyen.

5. Product marketing 

Anyone who has ever worked in a startup knows perfectly how much time, efforts and nerves it takes to develop the product. And this long-awaited moment of the launch is just the beginning of a huge journey. How will you sell your product, find the customers and promote it? Your product can be unique and qualitative, but if you will not apply the marketing methods to make it ‘necessary’ for the customers, it will not survive.

Nowadays main marketing channels are split into two big groups:

  • Outbound marketing
    Outbound marketing is based on direct sales when you get the ‘potential consumer’ attention by presenting your product on exhibitionsforums, and conferences.
  • Inbound marketing
    Inbound marketing differs from outbound-channels because it doesn’t use the ‘cold method’ of attracting customers. Instead, in Inbound marketing, you have to warm up the client to such a state, when she or he would like to buy your product. Thus, inbound marketing implies the creation of useful content.

Most importantly, don’t be too persistent, but make it clear that your product really solves the customer’s problem. This could be a dialogue with the potential customer. Be brave, be smart, ready to provide a dialogue with the customers and ready to improve for your end-user!