Developing a marketplace is one of the most lucrative business ideas in 2021. In one of our recent blogs, we talked about how to build an online marketplace and why it is relevant in the era of on-demand services. Taking the discussion forward, let’s focus on the challenges you’ll face as an entrepreneur when you think of building an online marketplace platform.
Before we jump onto the challenges, let’s look at the global marketplace opportunity and why it is justified to create a marketplace. According to Harvard Business Review, the share of annual spending on online on-demand marketplace is increasing with each passing day.
(Source: Harvard Business Review)
The on-demand economy is definitely flourishing. Top it up with the mobile app development revolution, it gives the world a system to avail services, whenever, wherever required. From transportation to hospitality, F&B to handyman service sector, there has been a substantial boom post the rise of mobile apps and smartphones.
Surely, the marketplace revolution is at its peak, motivating entrepreneurs to dive in the attractive pool. However, building an online marketplace and operating the same is not an easy task. Here are some challenges you should be ready to tackle if you are thinking of building and launching your own marketplace.
1. Balancing Supply-demand Gap
One of the biggest issues any marketplace operator has to face is to analyze the market demand and create the right service mix. When you’re thinking of onboarding service providers for the on-demand marketplace, you need to be really careful in listing to customer demands and balance the demand with the right kind of service providers.
In fundamental terms, this is known as the classic chicken & hen problem. Customers will not come to the marketplace if they don’t find the right service providers and service providers would not sign up if they don’t see a large customer base.
As a marketplace operator, you need to balance the demand and supply in a way that promotes both customers and the service providers to join your marketplace. You can’t build the demand or supply first. Instead, you’ll need to balance both at least during the initial phases.
2. Boosting Reach & Online Promotion for Customer Acquisition
Every marketplace requires customers to boost sales revenues. In a crowded digital ecosystem, customer acquisition is a tough task to master. You will be required to promote your online marketplace using various channels and at the same time, focus on customer segmentation for maximum conversions.
Driving traffic and converting that traffic into leads and ultimately sales, is one of the hardest tasks to do. As a marketplace operator, you should focus on two or three customer acquisition channels in the beginning, learn more about your target customers and channelize your marketing efforts by creating segmented audience personas. This will help you transform potentials into customers and achieve your conversion and revenue goals.
3. Brand Recall
Even if you manage to expand your horizons and boost your marketplace reach, customer acquisition will remain one of the costliest marketing endeavors for your marketplace. In a competitive ecosystem, you’ll fight for attention of target audience, every moment.
So, if you really want to succeed as a marketplace, you’ll also need to tackle the branding challenge and improve your brand recall. Your aim should be to get into the minds of your existing as well as new customers.
Customers these days don’t remember the marketplace if branding is not done strategically. The information overload limits their recall power. So, you need to build your brand recall so that every customer that comes to you becomes a loyal customer.
There are several ways to improve your brand recall and ensure repeat sales. You can think of an online promotion campaign, offering deals and discounts, creating a loyalty program so that customers remember your brand and keep on buying from you time and again.
4. Creating a solid matchmaking algorithm
The most important part of an on-demand marketplace is its matchmaking algorithm. While building an online marketplace, you need to make sure that your marketplace facilitates discovery while providing customers with the most cost-effective service provider.
Customers come to a marketplace to find the cheapest service providers. And sellers come to the platform in a bid to find new customers. Without an efficient matchmaking algorithm, you will not be able to attract new buyers and sellers. So, your focus should be entirely on leveraging technology to build a robust algorithm that works from both ends- help customers find what they are looking for and connect service providers to customers in their locality.
5. Tackling Tech Hurdles & Building Sustainable Partnerships
When you are planning to build a marketplace, you’ll need answers to a lot of technical questions and would deal with tech hurdles on an everyday basis. From choosing the right technology to creating a scalable digital model for marketplace, you will need an expert technology partner by your side always.
Making a tech mistake while developing a marketplace or during operations can bring down your business growth plans. So, it is essential that you have the right technology partner by your side, for the entire development lifecycle and even beyond that.
A tech expert would help you build and manage your marketplace using the latest technologies that would automate operations, boost scalability potential and prepare your marketplace for future success.
Wrapping Up
Starting your own online marketplace is not an easy task. Not only are you required to deal with everyday business challenges, but you also need to tackle technology issues to make everything work, efficiently. Websoptimization is an experienced App & Website development company with specialization in building an online marketplace platform from scratch.
Our niche experts guide you through all the aspects and help you launch and run a marketplace, efficiently while keeping technical issues at bay, always. Planning to develop your own marketplace? Get in touch with our experts for an insightful consultation, today.
