At Omnyfy, we’ve had many coffees, Zoom meetings and conversations with organisations and start-ups that have big bold ideas of becoming the next Amazon, Etsy or Fiverr. Over the years, we’ve realised the key indicators of what will lead to a successful marketplace.
Most marketplace advice talks about creating the “network effect” or “tribes”. They suggest striking a chord with the right target audience to attract more customers to your marketplace, thereby attracting more vendors — the holy grail of the two-sided marketplace. But we’ve seen that the “network effect” is an outcome of a quality marketplace, not a driver of its success.
We’ve outlined the three things you need for a successful marketplace below.
You need: A sector or niche that is fragmented, both on the demand and supply side, with a sufficiently large number of buyers and a large enough group of disintermediated sellers with a product or service that are largely perfect substitutes.
Marketplaces work in industries that are fragmented. You need sufficient number of vendors that would be happy to pay you a commission or a fee to be part of the marketplace that you create. This isn’t possible in industries where there are only a few established players or where there is consolidation. There simply isn’t a need for a marketplace and customers already know where to go to find what they’re looking for.
Identifying a fragmented industry or sector also isn’t enough. The sector must be one where each seller is relatively independent and offers a negligibly differentiated offering. Uber wouldn’t work if a small group of drivers differentiated themselves massively from the rest. The same goes for Etsy, or Fiverr or Airbnb. The cream does rise to the top at the end of the day and this is where ratings, reviews and “superior” offerings create differentiated tiers of the marketplace (think Uber Black and Airbnb Select).
2. Experience in the sector
You need: sufficient knowledge or at least a passion that runs deep enough that you are entrenched in it can intrinsically see the gaps and opportunities that the sector offers.
Experience is critical! Every time we hear a marketplace idea that is unrelated to the sector that the person is in, we slowly back away. The most successful marketplaces we’ve worked on are ones where the founder or organisation has decades of experience and has a simple, clearly articulated opportunity that a marketplace almost instantly solves. Marketplace, not unlike eCommerce, is highly nuanced and it is the unique, often invisible user experiences and engagement mechanisms that drive the magic and the demand. After all, every marketplace is competing with Google — how to you make a customer want to find a service, product or provider on your marketplace? It’s because of the specialised focus on and the journey which is built through experience in understanding how customers search for, compare, select and transact in the specific sector.
3. Power and leverage
You need: sufficient immediate relationships to establish the supply side of the marketplace, thereby setting the foundations on which to build demand.
Finally, power and leverage on the supply side is critical. Two-sided marketplaces need almost double the effort of a basic eCommerce site, because you don’t have anything to sell yourself. You need vendors to create products or services that customers can search for. Starting from nil is painfully slow. Having established relationships and “sector power” to influence and drive suppliers to join your marketplace provides a step-change in success potential and lifts your chance of success instantly.
The Fourth Factor – finding the technology to power your vision
Why would you consider building a marketplace from scratch when there are now powerful marketplace solutions that can deliver virtually everything you need straight out of the box?
Marketplaces live and die on their vendors and customer onboarding and creating a unique, nuanced engagement that is specific to the industry and buying requirements of the sector.
Omnyfy has created a marketplace platform that enables organisations to leverage 200+ features that are specifically developed to enable multi-vendor marketplace commerce, combined with the powerful eCommerce features right out of the box with Magento. The platform effectively takes the capabilities of Magento and multiplies it for every vendor on the marketplace.
With Omnyfy, the journey starts from creating a seamless vendor onboarding process, complete with vendor subscriptions and approval workflows. The versatile subscriptions solution allows marketplace owners to monetise their vendors through the creation of different tiers and inclusions; from product limits to enquiries, quote requests, and more.
The platform supports product, service and booking marketplace; and most notably, enables marketplace owners to created combo marketplaces where a single vendor can sell a product, while also being available for bookings and service products. The opportunities this creates for education marketplaces, tradie marketplaces, service marketplaces and distribution marketplaces are endless.
Integrating a comprehensive commercials management solution, Omnyfy also takes care of fees, charges and payouts management and is fully integrated with Stripe for plug and play launch of the marketplace payouts, KYC processes and withdrawal management.
Taking the plunge
Marketplaces are some of the most lucrative, scalable and valuable eCommerce businesses in the market today. Organisations and startups that tick the three critical boxes are in a prime position to be a first mover to “take” their entire sector with the establishment of a successful marketplace. Powering these visions just became a whole lot easier with a solution like Omnyfy.