3 Mistakes to Avoid in your Marketplace Business

Marketplace business is quite different from an online store. It is a challenging task to build a successful marketplace as you need to lure service providers/merchants while building a strong customer base. In an attempt to succeed, many marketplace businesses have failed.Marketplace website design & SEO

Let us look through the three main mistakes to avoid in your marketplace business.

1. Do not focus on every online user – solve their real problems

While it is exciting to target every online user, solve their problem and by doing so grow your business, it doesn’t always work. Let’s take a look at some peer-to-peer marketplaces that have failed and try to learn about the common pitfalls and the best strategies to avoid them.

Peer-to-peer marketplaces are popular businesses with an idea where every consumer can also be a provider. There are many successful businesses like Airbnb, Etsy, etc. Many businessmen and aspiring entrepreneurs draw inspiration from them and start their venture.

Despite the enormous popularity and interest shown by people for the idea of P2P marketplace, it doesn’t necessarily mean they will use it. Hence, it is important to find the right problem to solve and this is a major challenge for marketplaces. Confused? Let me explain this with an example.

An insightful story was written by Adam Bert about his experience with Neighborrow, which he co-founded in 2006. It is one of the first “share with your neighbors” style startups. There are many things such as a camera, sports equipment, or machine tools in each person’s house that are not used often. These things can be shared with neighbors and we can reduce the amount of wastage. Though this startup brought a lot of hype in the beginning, the concept could not succeed as even the people who said the concept is good never used it in real life.

Marketplace website focus

This issue is rightly described by Jeremiah Owyang in a report, ‘Sharing is the New Buying: Winning in the Collaborative Economy. The report explains that people like this concept – getting the best quality services and products at a lower price and at convenience. They find sustainability and a sense of community as important values, but they have never influenced their actions.

P2P marketplaces that enable sharing inexpensive goods are likely to struggle solving a problem of the users. The money they save with these low value items is not enough to make up for the inconvenience.

The idea of sharing marketplaces should not be assumed as doomed to failure. The entrepreneurs should always validate their ideas carefully. For example, Dutch Peerby has shown exponential growth and gained popularity in this space by standing out with innovation. The idea proposed by Peerby was slightly special. The company proposes a reverse marketplace that focuses on borrowing requests instead of an inventory-based tool model. The service offers to optimize the convenience to receive the tool within half an hour, which is a lot more quickly than even going to a store to buy it and hence, is a more successful approach among the users.

So, make sure to solve the real problem of the users and that people will use your idea.You need to find a niche and target your audience accordingly, otherwise yours will be one of those many businesses that have great business model on paper but in reality, it will fail.

Many people have this idea of ‘Sharing/Offering Everything’. This idea is so tempting and promising to scale the business quickly. But in reality, people look for a trustworthy single-purpose company that offers excellent service.

Building that trust and offering excellent service is much easier when you go with a single service. While trying to serve everyone, you will end up serving no one!

Streamlining the processes, building the initial supply, targeting the customers is always easier with a single service. By focusing on one niche, you can offer a variety of products or services to a customer coming to your site. While targeting ALL categories, you have more chances of disappointing the customers with empty pages or ‘out of stock’ messages – this can seriously impact your brand image.

2. Do not spend a ton of money upfront on building the marketplace platform

Do not spend a ton of money in launching your website if you have not tested your business idea yet. Focus on building a minimum viable product (MVP) to solve the core problem of your target users.By evaluating the business idea, a successful Minimum Viable Product (MVP) can be built, but it requires a lot of work. Investing too much time and money on developing the platform before the launch is one of the biggest mistakes that start-ups make.

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The main goal during the initial phase of the project should be to develop MVP and launch it as soon as possible. This helps in validating your business ideas without having to take a bigger risk or capital investment. Ensure that your first product has just enough features to solve your users’ core problem, and focus on creating a perfect marketplace platform.

Airbnb, for example, started with a site designed on WordPress. Most of the current features were built at a later stage when their basic concepts were accepted by people. Targeting millions of users right away should not be the focus. Instead, the focus should be to attract a small group of people who find the platform you built has all the features they are looking for.

e-Commerce tools such as WooCommerce is the pre-packaged marketplace solutions that can be used by the entrepreneurs who want to start with and get validation of their ideas as quickly as possible.

3. Do not build your MVP on software that is not scalable

Do not build your MVP on software that is not scalable or customizable. Also, if the software is too expensive to scale, it would kill your marketplace business.

Choosing existing online marketplace software to launch your business serves a lot of purposes – easier, faster, and most importantly cost-efficient. But with new ones launched almost every month, it is important to compare the software providers carefully and choose the right one that allows you to launch your marketplace faster and get the audience validation. Wrong software will set you back months before you realize that your idea did not work you thought.

The initial launch of your online marketplace platform is just the first step of your process. After the launch, the users get back to you with the feedback, and then you would constantly need to fine-tune your platform according to your analytics. And for this, software solutions should be easily customizable.

The best solution for validating your business idea is by using a ready-made marketplace software tool build on your MVP. This can be later used to build more features specific to your concepts. Building an altogether new platform on a later stage is an option, but that would need an investment of time and money all-over-again, that could be used in your business growth instead.

Hence, it is very important to think thoroughly while choosing online marketplace software. Ensure to check the possibilities of extending the platform that the vendor offers as you grow your marketplace. The pre-packaged software would have all the basic features in a pre-built version.

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And to tweak a pre-built platform depending on the marketplace needs is cheaper than building an e-commerce software solution from scratch. CMS such as WordPress or e-commerce such as Magento solutions can be converted into marketplaces by using a host of third-party plug-ins.

Open-source vendor software such as that of WooCommerce would be easier to use – take the code, install it to your server and start building your customization based on your business requirement. The drawback of pre-packaged software is that it could be quite complex with features that your business would not need and can slow down the customization.

The developers would also need to spend time studying the software instead of using the language and frameworks they are most comfortable with. Ensure to check with the developer for the customizability of the code base of the open-source solution.

The second option is to use the software architecture based on an Application Programming Interface (API). API allows the developers

  • To fully customize the workflow and user interface of the platform
  • Integrate third-party software
  • Build mobile apps

It also helps with all the essential marketplace functionality offered by the vendor such as search, payments, messaging, comments and reviews, schedule and availability, and even analytical tools.


One final thing in the conclusion, while there are successful marketplaces like Airbnb, Fiverr, Etsy, etc., there are many marketplaces that fail and go unnoticed. There might be many reasons for a marketplace to fail. The three reasons we have mentioned here are the most common pitfalls and every budding marketplace business has to consider them.

At GrayCyan, we will help you with more guidance on building a successful marketplace here in this blog. Feel free to browse through our website to get informed and inspired. At GrayCyan, you can let us know if you need any help with building a platform or business model on the whole.