What you need to know before starting an online marketplace business

What you need

to know before starting your

marketplace business

Online marketplaces

are HOT

There are no

shortcuts to success

Five things you need to know

Read the full article

and more articles about marketplaces

on the Free Marketplace Academy

5 things you need to know

1. Why marketplaces are booming

2. What the challenges are to building a marketplace business

3. Why it’s important to understand your personal motivations

4. Why the best way to learn is by launching as soon as possible

5. Why engaging your users should be a priority

1. Why are marketplaces booming?

Marketplaces are booming because…

Source: “The Sharing Economy - Sizing the opportunity”, PwC 2015)

• there’s enormous funding for the industry

• it’s a young industry with great growth potential

• a marketplace is a low entry business model with low risk

Enormous funding

5 x as much funding as most successful social networks.

Source: “The Sharing Economy - Sizing the opportunity”, PwC 2015)

Young industrywith growth potential

Current global market size:

$ 15B Expected market size in 10 years:

$ 335 B

Low entry business with low risk

• Technology has made it easier to create the infrastructure of a marketplace. Almost anyone can do this.

• No need for inventory to run a marketplace, so no large upfront investment.

2. What are the challenges?

Challenges

• Building a marketplace is a lot of work

• Solving the chicken and egg problem

• Your idea likely requires large-scale change in mindset

Building a marketplace is a lot of work

• Come up with a great idea. • Validate your great idea. • Build the platform. • Find the right business model & revenue streams. • Solve the chicken-and-egg problem. • Build the community. • Find sustainable growth channels.…and you have only reached the beginning.

Solving the chicken-and-egg problem

Before you start your marketplace, think about how to convince others to bring their inventory to your marketplace when there are no buyers yet, and how to attract the buyers when you don’t have inventory (yet).

See: "How to build supply for your marketplace” on The Marketplace Academy.

Large-scale change in mindset

Before Airbnb started, most people hadn’t thought of staying at the homes of unfamiliar people, or renting out their own bedroom to strangers.Changing this required time and effort in building an extremely convenient solution.

3. Your personal motivations

Your personal motivations

Why? What? How?

Why?

Why do you want to start a marketplace business?

• Do you want to quit your current job? • Do you want to save the world? • Do you want to make a lot of money? • Do you want build a profitable side business? Articulating your true motivations for being an entrepreneur is important because your strategy will depend on them.

What?

What are you planning to build?

• Are you really passionate about a particular idea? • Are you looking for a profitable niche? • Have you found a opportunity in an existing market? The more passionate you are about the subject area, the more likely you are to succeed.

How?

How to build your marketplace platform?

• Do you know how to write code? • Do you have money to hire developers? • Will you use an existing online platform? • Do you have previous experience running a startup? • Do you have previous experience in the target market? • Do you have a (technical) co-founder? Be pragmatic about your strengths and weaknesses. These will influence the way you should start your business.

4. Minimum Viable Platform

Minimum Viable Platform

• Launch as early as possible to find out if anyone is interested.

• Your first product should have bare minimum set of features to solve your user’s core problem.

• Don’t spend too much time and money upfront. Use of off-the-shelf tools, such as Sharetribe.

5. Engaging users is priority

Engaging users is priority“Listen to your users early on and engage them in the process at every step of the way”

Christopher Lukezic, Airbnb

Talking to users can take a lot of time, but is invaluable. You need to keep finding out:

• their needs • their pains • their problems to build a successful product.

Read the full article and more articles about marketplaces

on Free Marketplace Academy

Build your own marketplace at sharetribe.com