Launching a marketplace has become a real trend for exchanges between professionals (B2B), individuals (C2C), or from professionals to individuals (B2C). Companies are no longer hesitating to rethink their business model to adapt to new consumer needs. Before creating a marketplace, let’s look at the main steps to follow for success.
Define your Market for your Marketplace
When you create a marketplace, you have to start by conducting a market study in the sector that suits you. What are your competitors doing? What products or services will be most relevant for your marketplace? Are you targeting a niche market or a more general one? Depending on the nature and volume of products or services you will offer on your site, the presentation of your information will differ.
Remember that the primary clients of your marketplace are the sellers, not the buyers. Therefore, you need to recruit sellers who match your market and offer them an attractive proposition. Adjust your prices based on the market but also according to your clients’ profiles: a premium client will have more favors than a standard client!
What Business Model for a Marketplace?
Many marketplaces charge a commission for each transaction between a seller and a buyer. This is the most widespread business model. Market leaders like Amazon, Airbnb, Etsy, and Uber have opted for this system as their main resource.
Other marketplaces offer a subscription system to sellers, especially when the price cannot be fixed in advance. For example, codeur.com, a site connecting project owners with service providers, offers three levels of subscriptions to its members. Depending on their subscription, the provider can contact more or fewer project owners.
In some cases, it is more advantageous to offer sellers the option to pay one-time fees only when they list products for sale. The classified ads site Leboncoin is a perfect example. Professionals pay insertion fees to post their ads online.
For certain marketplaces, it is customary to charge buyers a membership fee. This is particularly the case with Spotify. It’s up to you to study the most suitable business model for your marketplace!
The Legal Context of Marketplaces
To collect payments legally, a number of rules must be followed.
The marketplace can set up the payment collection system on behalf of a third party in the following way:
- The order is placed by the buyer on the marketplace
- The buyer makes the payment by credit card, bank transfer, or other methods offered on the platform (“pay-in” or “cash-in”)
- The money is stored in an escrow account while the order is processed
- The seller is paid into their bank account (“pay-out” or “cash-out”)
This procedure mainly applies to B2C and some B2B marketplaces. Note that for larger B2B projects, payment management becomes more complex and requires specific functionalities.
For large structures ready to invest, obtaining a Payment Institution (PI) or Electronic Money Institution (EMI) license allows for providing payment services directly.
In some cases, marketplaces can request an exemption from the Payment Institution license. However, this exemption is subject to strict conditions and is reserved for sites offering a limited range of products and services.
Marketplaces can also rely on Payment Institutions, Credit Institutions, or legal entities with a license or delegation allowing them to provide payment services. The PSP (payment service provider) is then in direct contact with the marketplace sellers. If the operator does not manage payments, they still retain control through the PI or EMI status conferred by the PSP.
Knowing the Accounting Specificities
Like any business, marketplaces are subject to accounting obligations, allowing for correct transactions and financial flow. Information on transactions carried out by sellers must be stored.
Actors also have obligations regarding VAT management. This VAT must be rebilled to the seller. An important point: VAT must also be charged on commissions. In the specific context of C2C transactions, provided the annual amount received for a client’s activity does not exceed the thresholds set by Article 293-B of the General Tax Code, the user will be non-taxable for VAT.
Content Control: Who Is Responsible for Content on the Marketplace?
The marketplace operator is fully responsible for the content broadcast on their platform. Before a product goes online, it is recommended, but not mandatory, to check the content written by sellers. This is a “prior” check. Part of the marketplace’s role is indeed to ensure that no comments and reviews that are offensive to public order, insulting, or defamatory against brands are published. The work of a moderator can ease and ensure compliance with the legal framework of marketplaces. Be vigilant!
The Logistics Issue
Logistics is a skill and must meet real requirements. Set the rules with your sellers to avoid unpleasant surprises.
You can delegate all logistics to the sellers on your marketplace, as Etsy does. You can also handle the logistics for products where you have expertise. This is often the case with the storage and delivery of fresh products, for example. Like Amazon, you can choose to centralize everything and manage the delivery of your sellers’ products yourself. You can also have multiple storage locations.
Regarding the return policy, some marketplace operators promise complete management of product returns: form for the buyer, information on the product awaiting reception for the seller… Whether you handle the entire logistics chain or delegate part of it, remember that your marketplace’s image is at stake.
Choosing the Right External Services for Your Marketplace
The success of your marketplace relies not just on its core functionality, but also on the ecosystem you build around it. These are the external services – the search engines, payment processors, and marketing tools – that seamlessly integrate with your platform to provide a smooth user experience and efficient operations.
Precision Search for Happy Buyers:
Imagine a marketplace where finding the perfect item is a breeze. Specialized search engines like Algolia make this a reality. They optimize search speed and accuracy, even with global distribution. They also handle faceted navigation (think search filters), allowing users to refine their searches quickly, leading to happier and more engaged buyers.
Building Trust with Security:
Protecting your users’ data is paramount. SSL certification encrypts online data exchanges, ensuring a secure environment for transactions on your marketplace. Users will feel confident knowing their information is safe.
Optimizing Communications:
Emails are your lifeline for notifications and promotions. Reliable email routers guarantee optimal deliverability, ensuring your messages reach intended inboxes. This keeps both buyers and sellers informed and engaged.
Streamlining Operations:
Imagine a system that automatically synchronizes orders, stock management, and delivery. Enter ERPs and CRMs. These powerful tools provide a centralized hub for managing your marketplace’s information. They even connect with invoicing and payment systems, saving you time and minimizing manual data entry.
Boosting Sales with Personalization:
E-merchandising specialists like Netwave unlock the potential for increased sales. They use dynamic content personalization to show tailored product recommendations to each user. This can include cross-selling, upselling, and highlighting products based on user profiles. By presenting relevant options, you encourage customers to buy more.
Seamless Transactions with Secure Payment Solutions:
Financial flow is the lifeblood of your marketplace. Thankfully, there’s a vast array of payment operators built specifically for marketplaces. From Stripe Connect to MangoPay, these solutions ensure secure and efficient transactions between buyers, sellers, and your platform.
The budget for your Marketplace
Launching a marketplace obviously has a cost. Depending on the chosen solutions, the features offered on your marketplace, and your strategy, this cost will vary.
As a guideline, here are some elements to consider when launching your project:
- Project design and management: €0 to €50,000
Custom front-office design: €5,000 to €15,000
- Note that with a marketplace solution, design costs will be less than €500 if you opt for one of the proposed templates.
- Marketplace creation solution: €35,000 to €75,000
- Human resources for administrative management and seller animation: 2 FTE (Full-Time Equivalent)
- Marketing: This budget is the most variable, ranging from €0 for startups using artisanal methods or “growth hacking” to several million euros for TV campaigns. A recommended rule is that the marketing budget should be higher than the technical budget!
Therefore, the average budget needed to launch a marketplace is highly variable. In the case of startups, minimum costs are often retained to build an MVP (minimum viable product) in “lean startup” mode. The budget can then be €50,000. However, for SMEs or large groups, it can reach €150,000 (excluding marketing). This difference is due to the functional scope of the marketplace, processes requiring more workshops, or even technical integration with the company’s IS (information system).
Marketplaces builder
Imagine building your dream house on a foundation of sand. It might look good initially, but cracks will soon appear, threatening the entire structure. The same principle applies to online marketplaces. Your chosen marketplace builder serves as the foundation for your platform, impacting its stability, functionality, and ultimately, its success. Here’s why selecting the right builder is crucial:
- Solidifying Your Vision
- Ensuring Smooth Operations
- Scalability for Growth
- Standing Out From the Crowd
- The Power of Expertise
By investing time in selecting the right marketplace builder, you lay a solid foundation for your online venture. With a reliable and scalable platform, you can focus on what truly matters: attracting vendors, building a strong user base, and fostering a thriving online marketplace.
