If someone said a decade ago that they were planning on starting a company based on the premises of selling products they do not have, you would have either thought this is a experimental idea or simply a far-fetched fantasy. Nowadays, with the evolution of the internet, in literally everyone's home, marketplace platforms from Uber to AirBnB allow for businesses to make a lot of money by acting as middlemen, pairing buyers with sellers.
The proposition of setting up a profitable business - maybe even from the comfort of your home - that does not require inventory to be purchased and maintained would be enticing to most investors and entrepreneurs. An impressive income and potential yearly profit, can however blindside" young start-ups and founders leading them to commit common mistakes that many new marketplaces make.
Many marketplace start-ups, begin trading with a compelling business idea, but still the majority of them struggle to make an operating profit and soon close their "virtual doors". As there are many aspects of a marketplace platform that can go wrong, managers and entrepreneurs must learn from past marketplace failures.
So let's take a closer look at several common errors, mistakes or faults made by startups that often stagnate their growth and jeopardise years of planning.
MarketPlace vs E-commerce store
Even though people assume that online marketplaces and e-commerce websites are the same thing - considering they are both used for online business sales - but there are some distinct differences between the two.
In other words, a marketplace can also be an e-commerce website, but not all e-commerce websites are necessarily marketplaces.
These are 7 of the most significant differences between a marketplace and an e-commerce website you should know prior to starting your next MarketPlace platform.
3- Trend Indicators
4- Audience Engagement
5- Technical Aspects
6- Time & Money Needed
7- Marketing Approach
For more information on What a MarketPlace exactly is, keep an eye out for our next Blog.
Serve an Actual Need
Is your marketplace solving a real problem? A lot of new founders and entrepreneurs get too engrossed in their idea, hence not focusing on it actual effectiveness and demand. Make sure, you carefully choose your niche and ascertain whether you will be going for a vertical (nice) or horizontal (All-In-One) approach.
Risk Management & Awareness
When managing a marketplace it is key to be prepared for unexpected events, happenings and issues popping up. You should always try to contain these to a minimum when possible but being prepared is key to not letting your customers or brand down. Smart and proactive risk-management will lead in efficient processes and a steady flow of happy customers.
Wrong Business Model
We touched on a bit above, it is crucial to be clear on your objectives, targets, audience and market prior to starting a new marketplace. To start building a marketplace, you need to find a desire of your customers, offer a solution, and choose the right niche to grow in. After you’ve done this, it’s time to focus on how to make your marketplace profitable and sustainable via marketing and other tactics.
Marketing Your Platform
Making your platform attractive is key to any business and could not be any different for marketplaces online. Promotional offers are always a good way to start off (free trial, case studies, etc) but when it comes to getting new customers, you can also use other channels such as social media, paid marketing, and word of mouth.
A marketplace isn’t just a platform where multiple third parties offer their products and services so make sure to use smart tactics to educate your viewers and followers.
Every marketplace effectively consists of three key components: buyers, suppliers and distributors. The distributor (or market platform) connects buyers and sellers. Disintermediation occurs when the buyer circumvents the distributor and goes directly to the supplier. There is no marketplace that has not had to deal with disintermediation and what is key is to know your customers and the value you are giving to them through your marketplace.
To solve this, make sure to take a closer look at each stage of your marketplace funnel and focus on where user activity drops off to address this. You can then create case-studies to highlights your success, followed by actual testimonials.
Let us know of any errors or mistakes we may be aware, or perhaps actually made yourself whilst setting up your marketplace. We would love to hear more and are always happy to add content to our blogs, making sure we provide our followers with the best possible advice we can.
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