It’s been a real joy to watch the growth of our online marketplaces and it’s all a bit surreal sometimes to think it all started with Bike Exchange in 2007.
We’ve learnt a lot along the way about what it takes to make an online marketplace successful. There are some fundamental things you need in place for an online marketplace to be a success. Without having these things in place, a marketplace will struggle to secure a place for itself in the highly competitive world of eCommerce.
So here are a few things an online marketplace needs in order to be successful.
You need buyers and sellers
It almost goes without saying, but you need people who want to buy the products being sold in a marketplace. It seems like a no-brainer, but we live in an age where there are plenty of interesting products being invented but there’s no discernible market for these products. This is why it’s fairly common to see startups tweak and pivot their offerings as they realise their brilliant idea actually needs to connect with people willing to pay for it. The first step to monetizing anything is making sure you have a market for it.
Successful online marketplaces tap into a community of shoppers, a tribe focused on a particular niche interest, one that is interested in purchasing products and services on offer from sellers. So there needs to be an identifiable group with the means and interest to purchase and on the other side of the equation, a pool of sellers (vendors, retailers, private sellers, etc) who can provide the products and services. That makes it a community of interest with a commercial dimension.
Once you’ve identified this need and found a fragmented industry in which a marketplace presents an opportunity to bring a group of sellers together, you need to create trust within that community. This trust has to be engendered between all three participants: buyer, seller, and marketplace. The successful marketplace becomes the trusted intermediary, vetting sellers and creating the best possible experience for buyers. Once that’s achieved, the success of an online marketplace becomes self-fulfilling.
You need scale
Successful online marketplaces need a critical mass of both buyers and sellers in order to benefit both sides of the equation, as well as the online marketplace. There needs to be scale to the point where there are enough buyers to make it worthwhile for sellers; enough sellers to make it compelling for buyers; and enough scale on both sides for the marketplace to extract its share of revenues as the intermediary.
The internet has enabled the creation of new pools of buyers and sellers to converge and scale around all sorts of niche interest areas, e.g., cycling. Suddenly, what once was an area of marginal commercial potential becomes fertile ground for an online marketplace. When an online marketplace can effectively convey its unique value proposition to both buyers and sellers, it gathers the momentum required to scale.
You need the right platform
An online marketplace relies on its platform to do a lot of the heavy lifting to make it successful. The platform has to work both for buyers and sellers. The platform should be easy enough for sellers to quickly set up and start selling, and powerful enough to provide the capacity to carry out all the necessary eCommerce functions in terms of payments, etc. Alongside that, It should provide an excellent user experience for buyers, making shopping simple, enjoyable and fuss-free.
It needs to tick the box on factors such as inventory control, product display, international transactions, payment options, fraud prevention and reporting, just to name a few things. The platform has to be rock solid as well as having the flexibility required in the fast-changing online commerce world.
Bike Exchange once again provides a great example of the type of conditions required for an online marketplace to be successful – in this case, a fragmented industry. This is an industry in which there are many, smaller players rather than one or two major players, say as in the supermarket industry. An online marketplace provides a focal point for the sellers in a fragmented industry, bringing them all together in the one place for the ease of online consumers.
There are plenty of factors that go into making a successful online marketplace, but the above mentioned are among the fundamentals required to make it happen.