Challenges of the Online Marketplace

Challenges of the Online Marketplace

1. Quick Read

Creating a platform close to Amazon, Airbnb, or Lyft is a daring and thrilling concept. However, in order to run a profitable business, you must carefully consider your growth plan, predict future marketplace challenges such as a poor customer engagement rate, and choose the best development solution. In this post, we’ll go through some of the obstacles you might face when developing your marketplace platform, as well as some solutions. Let’s get down to it.

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2. Challenge 1: Choosing the Correct Development Strategy

If you take the wrong path to development, you’ll end up with a product that doesn’t fulfill the company’s or customers’ needs. Choose one of three growth methods to avoid this challenge and open the marketplace easily and affordably.

Make use of an open-source option.

With no programming knowledge, open-source tools enable you to launch your own marketplace in a matter of weeks. All you have to do now is choose a theme and plugins that are appropriate for your company.
If you want to try a new marketplace business concept for actual customers, this growth route is for you. You should keep in mind, though, that most open-source implementations do not encourage you to develop a custom interface design. Furthermore, the plugins and themes you use on your platform could jeopardize the security of your marketplace.

Take advantage of a software-as-a-service (SaaS) solution.

You can access the platform’s capabilities and use them to reach your business goals by subscribing to a SaaS platform.
If you need to get your marketplace up and running quickly, a SaaS platform is the way to go. However, if you want this option, keep in mind that you will be charged a high flat fee for the whole feature collection, regardless of how many features you actually use.

Invest in a white-label approach.

You purchase a ready-made software package with all the capabilities you need to incorporate in your marketplace when you choose a white-label product. All you have to do now is pick the features you like and add your own branding before going online.
Unlike open-source and SaaS systems, a white-label approach allows you full leverage of your marketplace and gives you access to the product’s source code. You can add additional functionality and change the platform as you wish because you have access to the source code. It’s quick to open a marketplace with a white-label product, and this is the safest choice if you want to develop a long-lasting site.

3. Challenge 2: Getting to the root of the chicken-and-egg dilemma of the marketplace

The first step in opening a marketplace is to establish supply and demand. The question is, who do you target first? We’ll look at a few possibilities below.

First and foremost, appeal to the vendors

Customers are more likely to turn around and leave if there are no dealers or retailers of goods and services in your marketplace.
Offering a minor cash reward or a perk is a popular way to entice sellers. When Uber first introduced its cab service, it paid drivers a living wage even though they didn’t get any fares. Uber became one of the biggest transportation firms as a result of this activity, which attracted many drivers and passengers.

Start by drawing customers.

It’s more difficult to draw customers first, then sellers, but it makes sense for certain marketplaces, such as Innovative Market. To entice early customers, Creative Market gave a $5 coupon as a cash incentive for registering. This piqued users’ attention and the website was able to attract a large number of users.
You should follow Creative Market’s lead and entice customers with virtual incentives such as discounts on first orders or vouchers on the first few sales.

Attracting both sides at the same time.

You will cater to both sellers and buyers at the same time with the correct approach and pla
Allowing sellers to serve as buyers — and vice versa — will help draw both sides. This ensures that a consumer will act as both a seller and a buyer on your marketplace when presenting goods. Sellers have similar goals and will support each other. This technique was effectively implemented by the Etsy marketplace, which attracted both buyers and sellers of handicrafts.

Taking on the role of producer

Amazon and eBay, two of the world’s largest marketplaces, began as producers. When a marketplace owner operates as a vendor, they will bring in the first buyers, create a client base, and then broaden their platform by bringing in more sellers.

4. Challenge 3: Poor Brand recognition.

When launching a new marketplace, you can run into the issue of your site not being well-known and accepted. Here’s what you can do to boost your brand’s popularity and increase your marketplace ranking.

Make use of search engine optimization (SEO) methods

According to Kelly Shelton, VP of Marketing at Boostability, 92% of consumers don’t look beyond the first page of Google search results. As a result, using SEO activities can be the first step in can brand recognition. SEO helps to improve the website’s role in search results in order to maximize platform traffic. You should expect more traffic and deals on your marketplace if you land on the first list of Google results

Collaborate with other brands

The process of co-branding can be used as part of a marketing campaign. Collaborations with other firms include partnering with a well-known brand with which you share a target audience. The aim of a relationship is to create favorable relations with your brand while also building popularity among your partner’s consumers. Working with a reputable company will help you raise your brand profile dramatically.

Take advantage of social media advertisements.

One way to easily obtain exposure for the marketplace is to use social media. This strategy will allow you to develop a community around your brand, share news, and cultivate long-term customer relationships.
Furthermore, social media is an ideal location for promotional campaigns. Well-targeted advertising, as well as a wise investment in them, will help you meet millions of people around the world and create a following.

5. Challenge 4: Customer acquisition costs are minimal.

The method of acquiring new solvent customers is known as consumer acquisition. It is possible to sustain marketplace growth and produce income by being able to turn potential guests into consumers in a systematic manner. We’ll show you how to boost brand value and create a good marketing plan to draw more consumers in the sections below.
According to Mention Me, 51% of UK customers prefer a friend’s advice over brand ads. This highlights how recruiting brand ambassadors can help you improve consumer acquisition dramatically.

Use storytelling to your advantage.

To make the marketplace more engaging to prospective buyers, incorporate storytelling into your marketing approach. Customer loyalty and confidence are increased, and consumers are encouraged to buy from you, thanks to stories that build an intimate bond between them and your brand. You create a memorable impression of your organization and its core values by telling a story rather than simply sharing information.

Recruit brand ambassadors.

People who use your marketplace’s services or buy goods and leave good feedback or inform their friends and family about their positive encounters are known as brand supporters. Brand ambassadors advertise the company for free and they want more people to enjoy the same positive experience they did.

Use social media to communicate values.

You will use social media to educate consumers of your marketplace’s mission and to broadcast your ideas to attract people.
You will determine users’ responses to the images, videos, or texts you share by being active on social media and using analytics software. This will help you find out what types of things your users want and hate, so you can erase the stuff they don’t like and add the stuff they do like to your social networks.

Create a personal blog.

A blog is a perfect way to boost website traffic, enhance your marketplace’s Google ranking, and give your customers useful knowledge. You must, however, know your customer personas and their pain points in order to produce the most useful content.
Depending on the type of marketplace, you can build different content on your site to engage consumers. Etsy, for example, uses instructional videos and DIY content to communicate with art lovers. To lure tourists, Airbnb, an accommodation rental marketplace, publishes travel guides to tourism routes with fascinating destinations.
Not only for consumers but also for sellers and vendors, you will publish valuable resources. To make your blog much more valuable, have informative materials about how to improve revenue on your marketplace or write guidance for aspiring sellers.

Provide consumers with guidance and promises.

To stick with you for a long time, your customers must trust your marketplace and each other. Customers would be more secure whether they purchase a product or use a service on your website if you provide them with guidelines and promises.
You may also use a ranking system for both buyers and sellers/vendors to improve confidence. Allow users to rate and comment on one another in order to build trust within the community.

6. Challenge 5: Abandoned cart rate is high

A high cart abandonment rate is one of the most prevalent problems with marketplaces, with almost 70% of shoppers abandoning their shopping carts. There are a variety of causes for this problem, but the most common is a bad user interface. Here’s how to get it sorted.

Make use of one-click checkout.

According to CisionPRWeb, if the checkout process is too long or difficult, 87 percent of online shoppers would leave their carts. Enable guests to preview items, add them to their carts, and check out with only one click without having to create an account. This would boost consumer perceptions of your brand and their ability to shop on your website again.

Reduce the number of steps in the checkout process.

Consumers are impatient and cautious about disclosing too much personal information on online marketplaces. Reduce the number of necessary fields while also obtaining enough information to process orders to make the checkout process simpler. Also, keep away from disruptive interface features that could create issues during the checkout process.

Provide a variety of payment options.

Analyze your target market, determine which payment mechanisms they choose, and incorporate them into your platform.
Some clients, for example, do not have credit cards and choose to pay via PayPal or Payoneer, which are online payment systems. To please all, offer a range of payment options so that users can pay in a manner that is easy for them.

Gain the confidence of your customers

One of the reasons why shoppers are hesitant to trust digital marketplaces with personal information is because of online fraud. To gain confidence and win over the visitors, have social evidence such as certificates of compliance, client testimonials, and a transparent return policy.

Make it easy to contact you.

Customers should not be left with unanswered queries. Include an online chat feature in your marketplace, or guide customers to a FAQ page or a callback button. Enable consumers to obtain assistance without difficulty.

7. Challenge 6: Keeping track of vanity metrics

Growing the number of likes and comments may seem to be enticing. However, these are vanity metrics that preclude you from making data-driven decisions and acknowledging your company’s performance or loss. A huge amount of likes does not tell you how many people have been clients for you or how much your profits have improved or decreased. Track actionable measurements to avoid being fooled and to keep updated about key performance indicators (KPIs). Read more on what metrics to track in the parts below.

The proportion of committed sellers/buyers

Measure the overall number of registered sellers and buyers and compare that to the number of new registrations and the number of sellers and buyers who are still active after a month to see if the marketplace is increasing. You’ll be able to see how successful your marketplace is by tracking the growth of your user base month after month or year after year.

The expense of acquiring new customers (CAC)

The total cost of obtaining a new customer is the customer acquisition cost. CAC is a metric used by marketers to determine the return on ad spending. CAC should be zero in the optimal case. That means your audience will grow organically and you will make the most money possible. Losses result from a high CAC.

Average order value (AOV)

Another useful statistic is AOV, which helps you to measure the average search size for each filled order and calculate the average revenue per visitor. This metric aids in the tracking of consumer behavior and the estimation of how much money consumers spend on goods and services. You can prepare your sales strategies more accurately if you know how much your consumers spend on average.

Gross merchandise value (GMV)

The overall value of products and services sold on a marketplace is calculated using the gross merchandise value (GMV). This metric depicts the marketplace’s actual development, including its popularity, efficiency, and sales.

Take rate:

This metric displays the net revenue generated by commissions, fines, and all other monetization techniques utilized by marketplace owners.

Liquidity

This KPI reveals how the marketplace’s supply and demand metrics function. It is important to measure the liquidity of sellers and buyers separately in order to achieve correct liquidity metrics. The data collected would reveal the number of listings that have been sold and the possibility of a buyer making a purchase.

8. Challenge 7: Poor customer retention rate.

Customer retention is almost as important as adding new ones. If the marketplace is experiencing consumer turnover, this is an indication that something is wrong. Find the following strategies to avoid such a situation.

Make use of a subscription-based business model.

If you have frequent customers who buy goods or services from you, you can give them a monthly membership to access such products or services on a regular basis. Subscriptions will help you attract clients in the long run, in addition to growing your earnings.

Encourage consumers to buy.

A consumer loyalty program is a perfect way to inspire consumers to make transactions and return to the shop. Customers are rewarded and feel good when they participate in a loyalty scheme. When your buyers buy a certain number of items or merchandise, you can offer them progressive discounts or free delivery.

Provide the best customer experience possible.

You’ll need outstanding customer support to attract clients. Ensure that the consumers’ questions are not left unanswered. Offer live chat assistance or the ability to order a callback. Demonstrate a desire to solve your consumers’ challenges and provide a positive customer experience.

Making the consumer service more personalized.

Another way to keep clients is to personalize their experiences. Customers tend to buy on marketplaces that offer a customized experience, according to 80 percent of customers. Customers will feel valued and cared for if you add a special touch to their experience. Conduct consumer surveys and research to ensure that personalization is effective. If you have the details, you can use social media or email newsletters to get customized deals and services.
For example, the Asos marketplace makes intelligent recommendations. When a customer selects a piece of apparel, the web suggests complementary pieces. As a result, Asos offers customized support and upsells customers, resulting in increased sales.

Make the marketplace more fun to be in.

Gamification increases customer satisfaction and makes the shopping experience more rewarding. It’s one of the most effective strategies for attracting consumers because it makes use of social factors like competitiveness and goal-setting.
There are various gamification techniques available. The most crucial thing is to pick the one that best suits your marketplace. Here are a few concepts that you can use in your marketplace.
Bars to show how far you’ve come: The ability to track progress when doing tasks encourages people to finish tasks quickly and feel successful.
A digital form of virtual currency: You can reward customers with in-marketplace currency by completing those tasks. Buyers may use this currency to get free shipping or goods from your business.
A lottery: Request that consumers try their luck by turning a simulated wheel of fortune. You’ll add an entertaining atmosphere and attract consumers by letting customers ask what reward awaits them.

9. Wrapping up

Building an effective online marketplace platform can be a challenge. However, startups in the online marketplace can have smooth sailing if they have exceptional fundamental information and tools. Adopting a client-driven strategy and picturing the purchase/sale cycle can assist you to create an efficient marketplace. All you require is well-crafted research and to remedy minor bits and pieces constantly. If you have any questions with respect to the online marketplace platform, feel free to contact our Marketplace Experts.

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Jan 25th, 2021|
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