How to Build a Two-Sided Marketplace: Business Model and Essential Features

Alexei Falco /
 on 22 July 2022

Marketplaces have integrated massively into our lives. Can you imagine a life without shopping on Amazon or ordering a cab in the Uber app? I hardly can. Well, according to the PwC’s Global Consumer Insights Pulse Survey as of March 2021, Almost one in five poll participants say they go online to shop daily. Sounds impressive, doesn’t it?

We have already spared a word about marketplaces here. For now, I’d like to touch on two-sided marketplace development. 

So, what is a two-sided marketplace?

A two-sided marketplace is a medium platform designed to draw vendors and customers together for value selling-buying relations.

Putting a Two-Sided Marketplace Business Model in Picture

Two-sided marketplace business model designed for all sides (shoppers, merchants, owner) to benefit.

Customer’s Goodies

Multi-sided marketplaces ensure that shopping is money and effort-saving. It’s a single-stop place for shoppers to find goods or services they need. Look at the idea to build a two-sided marketplace like Airbnb.

Finding housing to stay in while traveling has become easier and more money-saving. Travelers don’t have to hire a specialized agency and pay them to find a place to stay. The platform joined together the landlords and renters to bring benefits to all.

Vendors’ Goodies

2-sied marketplace success leans on the vendors’ success. So, when developing a two-sided marketplace the goal is to come up with tools that will help vendors to generate more revenue than if they operated their business independently.

Owner’s Goodies

A two-sided marketplace has enormous potential to soar. Alongside the marketplace evaluation and value shooting up among the users, the more rewarding it gets for the owner. 

Enabling word of mouth and cross-side virality approaches will clear the way to be out in front. 

For example, let’s take a look at Fiverr where every new client can switch to selling and by doing so attract new clients. This is the case of seller-client turnover or cross-side virality. 

Essential Features in Building a Two-Sided Marketplace

Customers’ Features

Signup

The signing-up process should be quick and easy. You may add several registration options: signup with email, phone number, Apple ID, etc. It’s up to you if you prefer to make signup to be binding. If this isn’t the case, you may offer goodies for completing registration. Examples: access to the newfangled features.

Search option

Searching is a core function of a two-sided marketplace. The search engine may auto-suggest the search inquiry to make the process easier and faster. The search filters can be tacked too to boost user experience.

Order forms

When creating order forms, organize the fields in a logical manner. Don’t go for excessive information, we recommend including full name, phone number, delivery address, and comments sections.

Payment

Make as broad a payment selection as possible that corresponds to the modern world’s requirements. Possible payment methods: by card on the website, by cash or card when goods are delivered, By money transfer, by PayPal, or by Payment systems accepted in your country.

Feedbacks Rating and reviews are to win the clients’ trust and boost platform reliability. Feedback can accelerate the decision-making by convincing or turning down the buying.

Features for Vendors

Signup

The vendor’s registration process should be slightly extended in order to improve sellers’ trustworthiness. We recommend adding extra signup fields for legal entity information, licenses, and other documents required by law in your country.

Company Profile

The success of deals is trust. The trust may be achieved by providing describing the seller. The customer needs to know basic information about the seller: the company’s name, locale, value’s to be sold, and certificates to prove the quilty of goods or services.

Vendor’s Control Desk

We believe the best marketplace to sell the values is the one that is easy to use. The convenience is achieved not by design only but also by the features set. Introduces the sellers’ control desk to be of service to regulate selling, delivery, promotion, and sales. Integrate the statistics charts to see what item is best-selling.

Analytics and Statistics Analytics and Statistics may be integrated into the control desk or be a separate marketplace section. The purpose is to beef up sellings. When developing a 2-sided marketplace keep in focus that you’re creating an assistant for vendors that will pitch in tracing sellers’ progress, analyzing their listings and deals enactment, concluding reports, and summing revenue.

Key Features for Admins

Creating a two-sided marketplace that will fly high calls for a trouble-free admin console to manage two-sided marketplace business flow:

  • Preside over sellers (adding, blocking sellers, orders, values sold)
  • Set and regulate fees (managing fees administration that can go in the form of a fixed percentage or as individually agreed)
  • Govern platform access (providing admin access to your employees)

These aren’t the must-to-follow features list. The list may be modified or extended pivoting on a two-sided marketplace business model, your wishes, needs, or requirements.

Challenges in Building a Two-Sided Marketplace

Wish I could tell you that when building a two-sided marketplace platform, you surely won’t face any pitfalls. I brought about the common knots and tips for building a two-sided marketplace platform.

Causality Dilemma or So-Called “The Chicken and Egg Problem”

It’s quite a philosophical issue that massively affects the user flow. What comes first an egg or a chicken, a customer or vendor? The problem is that vendors can’t do their business without buyers and reverse customers can’t buy values if they aren’t sold by sellers.

Bringing supply when demand is about may serve as a solution. Which is to say bring customers simultaneously with vendors. Sounds good but how do we bring it into action?

Keep Access Within Bounds

Creating a two-sided marketplace that is to be operating in private beta to gradually climb the platform. Initial users may be tolerant of such limitations in case the marketplace seems to be promising and scalable.

Strangle the Niche

The multi-purpose Amazon set off as an online bookstore and has scaled to the giant we know now. Specifying the scope will attract vendors and customers aimed for the same values.

Supply Clinches the Spot

Have you heard about the network effect? The term refers to a phenomenon when the value increases as more people use a product or service.  This may be applied to build a two-sided marketplace business. Creating supply will attract demand, e.g. shoppers.

Upholding Client Delight 

In order to keep both user roles in the marketplace, you are to offer benefits to please them. On top of mentioned, you ought to stand over users’ needs. You may make up questionnaires to collect feedback. It’s up to you what feedback-gathering method to pick. An important thing here is to not overpromise. 

Keeping Budget and Time

When clients ask for tips for building a two-sided online marketplace with wise money and time allocation, we advise starting with an MVP development.  

MVP stands for Minimum Viable Product and means the first functioning iteration fitted with core features. The arguments for developing a two-sided marketplace MVP are the following:

  • It’s less time-and-money-consuming 
  • It helps to test your concept before going for a big thing
  • It allows attracting first users 
  • A marketing and promotion campaign may be launched at the MVP stage

Read also: Marketplace MVP Development: Types, Features, and Costs

How to Build a Two-Sided Marketplace From A to Z

1. Specify Your Area

One-area-focused marketplace reaches its audience faster. Once you’ve built a reputation, It’s time to expand the platform. 

2. Discover User Roles

To build a successful two-sided marketplace, you are to take care of all types of users: you, shoppers, and sellers. Learn your audience and their needs by conducting TA research. 

At Celadon, we built TA discovery in the pre-production stage of the development process.

3. Start with an MVP

I’ve spared a word about MVP above. As it may take not even months but years to build a 2-sided marketplace. Yet, large sums of money and massive efforts are spent on the development that would be wasted in case the marketplace won’t give it a shot. MVP is a life savior for your new beginning. 

Let’s talk about marketplace MVP in detail here.

4. Prepare for Modifications 

It’s completely fine if your concept isn’t favored in the first place. You can always pave the path from zero to hero by more thoroughly users’ needs research and wise development. 

5. Don’t Neglect Communication

We believe communication is a key to a killing 2-sided marketplace. Communicate with your audience and employees. Communication allows steering clear of errors and missteps. At Celadon, we prioritize communication with clients to deliver desired outcomes.


 

Develop a Two-Sided Marketplace Platform with Trusted Celadon Partner 

Wondering how to build a two-sided marketplace like yelp or any other famous example? Celadon is a reliable partner to build a two-sided marketplace platform that will go great guns in the market. We provide end-to-end development services and lead your project from idea to full-blown marketplace.  Our gurus use top-notch technologies to deliver top-hole products. A number of clients devoted their two-sided marketplaces to us. Let us blow the gaff about some of them:

2-sided marketplace focused on second-hand books, CDs, DVDs, and games. This is a great example of cross-side virality. The buyer can start selling their own goods and draw more buyers. We share our experience on how to make a two-sided marketplace website based on the slacking website. We went for redesigning, adding new functionality and features, and integrating the admin panel, and other core elements. Android and iOs apps have also been handcrafted. Automatic price setting was built-in with ISBN and EAN scanning. 

Android and iOs multi-sided jewelry marketplace. The app is fitted with the core features we talked about: an admin control desk, vendors’ console, filters for search optimization, automatic pricing, wishlist, and personal profiles. 

A case study tells how to create a two-sided marketplace specializing in housing construction. The project was launched as an MVP. We used a top-notch technology stack and complex DevOps approach to deliver a high-quality product that significantly simplifies construction processes.  

More case studies describing our expertise are available here

Drop us a message to transform your idea into a strong going marketplace.

Authored by  Alexei Falco /
Co-founder of Celadon Software House, manager of projects, has over 8 years of business management and entrepreneurship experience.

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