If your dream is to open an online marketplace, now is the perfect time.
There are many reasons for the rise in popularity of the online marketplace, including the tremendous increase in the number of digital buyers. Also, the sense of community that is built between the merchants and consumers gives them the ability to support one another in a common market. It’s a win/win situation.If your dream is to open an online marketplace, now is the perfect time.Click To Tweet
An online marketplace can be rewarding to create but it does come with its own unique set of challenges. Similar to any eCommerce business, opening an online marketplace is going to take a financial plan. The good news is you won’t have to create or purchase any inventory to sell. This is a huge relief from the budget. Inventory is not required, which makes an online marketplace the perfect option if you have a service to provide for consumers.
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.” – Tom Goodwin
Although you won’t have to come up with the capital for inventory, there are other aspects of your online business that will require some budget. The three main aspects of your online marketplace startup budget will include:
- The Cost of the Platform
- Advertising to Merchants and Customers
- Growing Your Business
Let’s discuss them each in more detail.
The Cost of The Platform:
When you begin building your online marketplace, website development is one of the first decisions. This important decision can have a huge impact on the cost of your business. You can choose from two different options and the cost difference is significant. You can use one of the ready-made platforms or build a custom marketplace from scratch. Both options have their advantages.
The success of your online marketplace will be partially dependent on the actual online platform you use to create it.
If you are promoting a new or very specific service, it may be necessary to build a custom marketplace. This development requires a coordinated team with different skills from UX and UI design, layout and quality assurance. It can take over 1000 hours to develop a site with basic functions. The project can last up to 3 months and cost around $80,000. YIKES. What you will get in return is a site built to your exact specifications.
Fortunately, there are other options that can save you money by not hiring a developer. It makes sense to spend money in areas that take a large amount of time compared to the investment. Therefore, buying a ready-made marketplace platform can be a great option.
The great news is that the world of non-developer needed online marketplace creation companies has come a long way. You can now turn your idea into reality without the tremendous time and financial burden. There are many high quality options depending on the needs of your business.
If you are considering a service-based marketplace or video sales, with Yondo you can have your marketplace up in less time, for less money, containing your own branding. In today’s high tech market, it does not cost a fortune to build your dream online marketplace.
The Cost of Advertising:
Your time and money during the first year will be spent on two main things: perfecting the platform and spreading the word about your marketplace.
Before you spend too much money on advertising, put in the time to utilize free advertising from your own social media or through SEO. Once your online marketplace starts to generate revenue, the funds can be used for paid advertising. The growth may be slower using this route but it will give you a chance to validate your business idea before you invest too much.
It’s tempting to start with more intense strategies like content or viral marketing in an attempt to gain users. The complex strategies should be built once you have built a strong foundation. Building the foundation begins with identifying the providers and consumers and then narrowing in on their problems. Once you know the problem, you can recruit other professionals for the marketplace. The final step is focusing on creating satisfied users. When they are satisfied, the same model can be used for the next persona and referrals.
The method is more time consuming than other social media strategies but spending the time to perfect the process will create a strong foundation on a budget.
The Cost of Growing your Marketplace:
Once your business platform is complete and advertising has established a provider and consumer base, the next item to tackle is growing your marketplace. The goal is to grow as quickly as possible knowing it will be difficult to generate much revenue during the first year. A marketplace business can be unpredictable in the beginning.
Knowing this information from the start, you can focus your energy on confirming the validity of your business idea. The goal for the first year is not to become a huge business, it’s to gather an engaged audience. If you do generate revenue, you have the added benefit of more resources and quicker growth. On the other hand, if the idea does not work, you will not have lost a large initial investment.
An inexpensive, effective means of growing your business includes a mailing list service. A great option that we recommend is MailChimp, which has a free option available. It also integrates easily with any Yondo store, learn more here. A mailing list service allows you to regularly engage with current and potential clients.
Another tactic involves creating ambassadors from employees or current customers. Offering an incentive for ambassadors to help spread the word, builds loyalty among the staff and clients as well. It can help to grow your business in a natural way.
Patience is key in the first few years. An online marketplace can take up to three years to become more stable and established. The safe route when creating a budget is to keep the cost low while you fine tune the business model. Invest enough to get the foundation in place and then give your online marketplace time to grow and earn revenue.