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More and more consumers are reaching for their smartphones to make a quick purchase, especially in the wake of the pandemic. In fact, international e-commerce sales reached 5.2 trillion US dollars in 2021, according to Statista. This number is expected to increase by 56 percent over the next few years to surpass $8 trillion by 2026.
The beauty of e-commerce – or electronic commerce – is that almost anything can be bought or sold on the Internet. Items can also be purchased across a variety of devices, including computers, tablets and smartphones.
For businesses, e-commerce provides a means of expanding its offerings to a wider market. This ease and accessibility makes the e-commerce industry an attractive option for consumers and businesses alike.
Some companies have even utilized the e-commerce sphere to create their own online marketplace. Etsy, for example, has achieved international success by allowing artists and designers to sell their goods on the company’s platform.
In this article, we’ll discuss the ins and outs of developing an online marketplace, including its essential features, monetization options and the appropriate steps to take to ensure its success. Keep reading to learn more.
What Is Etsy?
Founded in 2005, Etsy is an American e-commerce company that focuses on handmade goods and vintage items, such as jewelry, clothing and home decor.
The Brooklyn-based online marketplace aims to support independent creators and small businesses by offering a unique space for sellers to list their items. According to Etsy’s Seller Handbook, the company only charges a 20-cent listing fee, as well as 6.5 percent of the item’s selling price.
Etsy Market Trends
The unique and custom items available on Etsy quickly resonated with people across the world, bringing the company to an almost instant success.
In fact, only two years after its founding in 2007, VentureBeat reported that the company had secured half a million registered sellers achieving $26 million in annual sales.
As it turns out, the company’s keys to success lies in its seller-focused business model that relies on a network of independent sellers to make and manage their own sales.
Etsy’s guiding principles also help set it apart from other e-commerce companies. According to its About Page, the company seeks to “keep human connection at the heart of commerce” even in the midst of increasing automation technologies.
Essential Features of an Online Marketplace like Etsy
If you’re interested in developing an online marketplace like Etsy, you’ll need to include some basic features to guarantee that your platform is functional and user friendly.
These features will not only help you, as a seller, to manage and promote your goods, they’ll also work to boost your credibility and, ultimately, build a trusting relationship with your customers.
A seller portal is one of the most important features of an online marketplace, as it provides a means of viewing products and sales statistics. It also permits sellers to easily list new products.
Product Listing Management
A product listing management system will allow sellers to manage their product listings by easily uploading images and editing listing titles and descriptions. This also enables an interactive way for sellers to check the status of orders made across all channels, including websites, brick-and-mortar stores and mobile apps.
Payment Processing Options
Because websites with various payment options are seen as more credible, your online marketplace should offer multiple ways for customers to securely pay. In addition to boosting your credibility, accepting multiple payment options will show that you understand your customers and their preferences.
Customer Order Management
A custom order management system is another essential component of e-commerce because it provides customers with a means of managing their orders. With this feature, customers can check their order status, cancel an order and receive delivery updates.
How to Monetize Your Online Marketplace
Now that you understand the essential features of an online marketplace, we’ll discuss how to start earning a profit. While there are various ways to monetize your marketplace, this article will focus on the most common: commissions, listing fees and pay-per-click advertising. The route you choose, of course, will depend on both your product offerings and your overall business model.
Sales commissions – or taking a cut of each sale a seller makes – is one of the simplest ways that online marketplaces can generate a profit. In this model, you will take a percentage of each sale a seller completes, usually anywhere between 5 and 20 percent.
This model is especially advantageous for sellers because it saves their time that would be otherwise spent on creating marketing strategies and building a client base. As the owner of an online marketplace, a commission-based model is also beneficial since it generally means earning a greater profit, as you are earning money from each sale made on your platform.
In this revenue model, the online marketplace owner will charge a small fee for each item listed on their website. Unlike a commission, a listing fee is collected for every item posted on the marketplace regardless of whether it ends up being sold.
Some companies might put time restraints on these fees, as well. Etsy, for example, charges a 20-cent listing fee for four months on the platform.
This revenue model allows individual businesses and sellers to place pay-per-click ads on the website. PPC advertising differs from both commission and listing fees in that brands are charged each time a website visitor clicks on these ads.
For marketplace owners, this means that you will have full control of where the ad is placed on your website, making it a good option for websites where customers are prepared to shop – like Amazon, which charges an average PPC rate of 89 cents.
When developing an online marketplace, it’s essential that you also consider various legalities to avoid any potential conflicts down the road.
These considerations include the sale of prohibited and restricted items, detailed guidelines regarding false advertisement and return and cancellation policies. The aim is to protect not only your company, but your buyers and sellers as well.
Any prohibited items – or items that a seller is not allowed to list like unlicensed weapons or humans – should be clearly outlined on your website.
You’ll also want to explain what items can be sold under certain circumstances, such as alcohol, which will likely require a license, depending on your location.
Because an online marketplace’s reputation relies on its network of sellers, it’s crucial to develop clear guidelines to ensure that sellers are being honest about their items and not misleading customers with fraudulent or misleading information. You’ll also want to hold sellers accountable if they break these guidelines by enlisting a false advertising fee or even blocking them from selling on the platform altogether.
Return and Cancellation Policy
Your marketplace should also have a detailed return and cancellation policy so that legal disputes of statutory rights don’t arise in the future. This should outline eligibility requirements for returns or order cancellations, the amount of time allotted to return an item, how refunds are given, if exchanges are allowed and if any items are exempt from being returned.
Building an MVP
A Minimum Viable Product is essentially a website or app that offers just enough features to make it usable during the product’s early stages. This allows customers to essentially test the website and provide valuable feedback that can be referred to when making future decisions related to functionality and potential features.
In addition to gathering user feedback, building an MVP enables a low-risk means of identifying your website’s most active users and how to retain these users. It also helps ensure your platform will be worth the investment in the long term.
6 Steps to Develop an Online Marketplace like Etsy
To verify that your online marketplace stands out among the competition, you’ll want to follow some basic steps, including determining your target audience and your desired design and functionality properties.
You should also complete beta testing before its launch and refine the overall experience based on user feedback.
1. Determine Your Niché
The first step is to identify your niché and audience demographic. This step will include rigorous market research to determine which users you plan on targeting and analyzing how this audience interacts across other sites and platforms.
You’ll also want to look at the market demand for your product and if it holds value for your target audience. If there are several competitors in this particular niché, you may need to look into narrowing your overall focus.
2. Conceptualize Functionality
Once you’ve determined your niché and audience, you’ll need to conceptualize your online marketplace’s functionality based on the interests of your target demographic.
This entails planning out your desired design and how you intend for that design to boost the user experience. The app should also be mocked up entirely and ready for development.
3. Build Your Marketplace
Now it’s time for the fun part – building your marketplace. In this step, you’ll actually develop your mock app based on its required functionality and desired design.
While this can be accomplished by using an existing platform, building your marketplace from the ground up is generally more profitable, as you can easily customize its functionality, features and design.
4. Beta Test
Before releasing to the public, your app will need to be tested to make sure it functions correctly. That means releasing it to a small group of people to explore if the app’s overall experience and usability is up to par.
Beta testing will enable these users to highlight any functionality issues so that you can make necessary adjustments before your platform’s official launch. By gathering this valuable feedback, you’ll be able to ensure that your app is high quality and accessible to its intended users.
5. Deploy and Maintain
If the testing deems that the app is working correctly, it should be deployed to app stores. At this stage, the developers should monitor the app to confirm that it’s well-maintained and continues to function correctly.
You should continue to be on the lookout for functionality issues and quickly fix any bugs that may arise.
6. Collect Feedback and Refine
Even after the app has been officially deployed in app stores, you’ll need to keep gathering user feedback and making refinements based on this input. This step will continue as long as your app is available on app stores, as the goal is to retain users and improve user experience.
Online Marketplace Website Development Cost
Ranging from about $10,000 to $100,000, the cost of developing an online marketplace varies greatly depending on the requirements, the scope of the project and the estimated timeline of completion.
It’s important to understand that your app should also be scalable. This means that you can start small in terms of development and build up its capacity over time.
Prioritizing scalability will ensure that your app’s overall experience remains top-notch even as its user base increases, as it will be better equipped to handle the extra traffic without lower loading speeds or a full-on crash.
But remember, the larger the app, the higher the cost.
Idea Maker’s Experience In Website Development
Specializing in mobile apps and web design and development, Idea Maker is experienced with a broad range of projects – from small business websites to enterprise-level solutions. The web and software development agency offers a transparent process to ensure that all your ideas are brought to fruition. Schedule a call with us today if you’re ready to take the next steps to bring your app to life.