Despite the global drop in consumption during COVID-19, the rapidly shifting consumer behavior gave online commerce a boost. Mobile commerce sales in particular experienced a significant increase as the preference toward remote transactions continues.
Businesses of all sizes have focused on developing their mobile commerce channels, with some companies experiencing online sales that outperformed even the most optimistic forecasts. But the opportunity is still available for newcomers who want to capitalize on this financially stable industry.
A mobile marketplace is a digital store designed with a mobile-first strategy in mind. Consumers download the marketplace mobile app to shop online, find a new service, or simply window shop and explore goods. The marketplace hosts multiple vendors and allows shoppers to buy different products or services on a single platform.
Mobile marketplaces are a natural progression from ecommerce platforms and online stores. A mobile marketplace brings sellers closer to buyers and simplified the online shopping and selling experience for smartphone users.
Marketplace apps offer several features to facilitate product discovery and mobile payments.
Amazon, Alibaba, Etsy, and eBay are all examples of mobile marketplace apps that have done phenomenally well in recent years.
But marketplace apps aren’t limited to physical goods and the retail industry.
A marketplace can host services, courses, websites, apps, other businesses, and skills. For example, Flippa sells affiliate websites, SaaS businesses, and online stores. Gumroad sells a plethora of products made by contributing users. Humanoo has a whole package of fitness-related services and courses.
Types of Mobile Marketplace Apps
There are millions of marketplace apps out there. From the biggest ones like Amazon to small niche apps that sell customized jewelry or courses, mobile marketplace can be divided into the following categories:
Marketplace app types based on target audience
B2B marketplace apps
A B2B marketplace app targets business buyers who want to buy from other businesses. A B2B marketplace lists mostly wholesale suppliers and vendors who want to sell their services or products to other business owners, entrepreneurs, and resellers.
Alibaba is the most successful B2B platform that allows brands to connect with wholesalers in China. Buyers can quickly find the best manufacturers, discuss their requirements, and enjoy order protection while dealing with overseas suppliers.
B2C marketplace apps
A B2C marketplace connects businesses directly to end customers. A business lists a product or service on a marketplace app (that charges a commission on every successful sale) where buyers discover the product/service and buy directly.
B2C marketplace apps offer a huge variety to customers making them wildly popular all over the globe.
Amazon is currently the world’s biggest marketplace with millions of products listed by all kinds of businesses. There are B2C marketplaces other than ecommerce platforms, too.
Teachable is a great example of a B2C marketplace that sells digital products. Teachable allows teachers, coaches, and gurus to create, promote, and sell their information products like eBooks, courses, etc.
P2P marketplace apps
A peer-to-peer (P2P) marketplace app connects two individuals who want to enter a contract of exchange. For example, a listing platform that allows one user to upload a listing for his old car and another user to connect with the seller directly to buy the car.
P2P networks and marketplace apps allow a user to become a seller or a buyer at different times according to the need.
Airbnb, Etsy, Uber, Quikr, and OLX are all types of P2P marketplaces where people list their products, services, or properties for others to buy or rent.
Upwork is a great example of a successful P2P platform where buyers (businesses) and sellers (freelancers) find each other, complete projects, and pay securely.
Marketplace app types based on focus
General or horizontal marketplace apps
A horizontal marketplace app offers products across multiple product or service categories. Think of it as an online shopping mall where you can buy different products under a single roof. A horizontal marketplace app has the following characteristics:
Large group of customers coming from different socio-economic groups and having diverse needs
Wide range of products across multiple categories and industries
Sellers come from different industries and segments to promote their business on the same platform
Cross-selling, upselling, and personalized recommendations can help increase the average order value
Amazon, Flipkart, and eBay are examples of a horizontal marketplace. Customers with different needs browse these platforms to find products that meet their needs.
Niche marketplace apps or vertical marketplaces
Vertical marketplaces work really well in the B2B space by simplifying procurement and operations.
Marble is a B2B vertical marketplace in the grocery space that digitizes grocery procurement for retail stores. Chemnet is a vertical marketplace for businesses in the chemical industry.
With evolving needs of modern consumers, vertical marketplaces have also conquered the B2C segment.
Marketplace apps based on supervision
Unmanaged marketplaces are mostly P2P marketplaces where buyers and sellers discover each other.
The marketplace owner often doesn’t provide quality assurance or background checks. Buyers are expected to do due diligence on their own.
Reviews and ratings affect purchase decisions on such platforms. These marketplaces usually charge very little commission or work or freemium model.
Classified listing portals like OLX, Quikr, and eBay are the best examples of unmanaged marketplaces. Anyone can upload their listing to get discovered by the buyer and move ahead with a sale.
Partially managed marketplaces
Service delivery startups or aggregator platforms like Uber, Zomato, GrubHub can be considered as a partially-managed marketplace.
These marketplaces invest time, money, and effort in developing an onboarding process for sellers.
Marketplace-guided onboarding assures buyers that purchases are supervised to some degree. For example, when you book a ride via Uber, you expect the driver to be well-behaved and trained. Or when you book a stay via Booking, you don’t have to worry about the cleanliness of the room.
These marketplaces give buyers the best of both worlds — a large variety of independent choices, plus customer support to address any complaints or suggestions.
Fully managed marketplaces
A fully managed marketplace assists both buyers and sellers throughout the entire sales process. Such marketplaces operate in specialty industries where quality matters most.
A managed marketplace acts as an intermediary in a transaction, conducts background checks, and ensures minimal chances of fraud.
Notch, previously known as ChefHero, is a fully-managed marketplace for the restaurant industry. Notch acts as an aggregator for restaurant owners that assures them of high-quality restaurant supplies by onboarding select vendors and distributors in Canada and the USA.
Marketplace App Business Models: How They Earn Money?
Marketplace apps bridge the gap between buyers and sellers and cater to both sides of the supply chain.
Buyers browse a marketplace app and order their desired products or services. Generally, the marketplace charges some type of commission or fee for every successful transaction. But there are other ways to earn money as a marketplace, too.
The most common way for a marketplace to earn money is to charge commissions. Marketplace apps get fixed or variable commission on every successful order. Generally, sellers pay percentage-based commissions on sales. But some marketplace apps charge commissions from buyers, too.
Amazon, Airbnb, eBay, AppSumo, and Gumroad are marketplaces working on a commission model.
Commission-based marketplaces are free to join for sellers. They pay a commission only when a successful transaction happens. This model is quite viable for sellers who want to enter a third-party marketplace app for better reach and higher sales potential.
A commission-based marketplace app offers ancillary services such as payment processing, order management, and payment protection.
A subscription-based marketplace charges a monthly or annual membership fee from users. Users pay upfront and are charged on a recurring basis for accessing the platform features.
Such platforms have to deliver a continuous value to customers to encourage the renewal of memberships.
Dating apps, learning platforms, or real-estate marketplaces offer subscription packages to end-users. Other companies, institutions, and service providers upload courses, services, or products that are available for users for a fixed monthly fee.
HomeExchange is a subscription-based marketplace that allows its members to swap homes for holidays (or otherwise) for a fixed fee of $150 per year.
Other examples include dating platforms such as OkCupid and Match.com or professional platforms such as LinkedIn Recruiter.
In a freemium marketplace, users have the option to either subscribe to a paid plan for additional features or use the app for free. Both sellers and buyers can use the marketplace app without payment, but the free plan limits the functionality and features.
Monetization in a freemium marketplace happens through upselling and cross-selling of complementary services or products, or by offering subscription plans.
Craigslist is the best example of a marketplace working on the freemium model. Posting a classified ad on Craigslist is free, but if you want to list a house or real estate, you have to pay.
Freepik is another popular marketplace that works on the freemium model. Anyone can download select photos for free, but if a user wants access to a complete library, they need to subscribe to a monthly or annual subscription plan.
Marketplace apps that charge money for listing products or services on their platform fall under this category. eBay, Etsy, and Realtor and several other P2P marketplaces work on similar models.
A seller pays a listing fee to the marketplace app owner upfront to get visibility for its offerings. Such platforms don’t facilitate the buying and selling of the listed product. Instead, they prefer charging an upfront fee from the seller to launch the listing.
Listing model ensures that the marketplace never misses on the monetization of less popular items within its app. Generally, such a model is prevalent in real estate, automobile, and similar industries where high-ticket sales happen
Lead fee model
These marketplaces charge money from service providers in return for a qualified lead that’s ready to buy. You probably have used such marketplaces if you’re in the professional services industry.
Freelance marketplaces like Upwork work on a similar business model. Users post their requirements on the platform and professionals pay money to the marketplace for placing a bid on a listing. They’re also charged a small commission if a customer hires them for completing a job.
As the marketplace ecosystem evolves, apps have started monetizing their platforms with a mix of revenue streams. A hybrid marketplace model depends on multiple revenue streams such as commissions, listing fees, success fees, membership fees, and more all at the same time.
Etsy is the perfect example of a marketplace evolving into a hybrid business model, where sellers can either list for free, subscribe to a paid plan, and even get charged commissions on every successful sale.
Why Build a Custom Marketplace App?
Though third-party marketplaces show huge promise in terms of reach, listing on them is getting highly competitive. Top it up with a low barrier to entry and predatory commissions and marketplace listings lose their attractiveness.
Building a custom marketplace app can be a great headstart for you in any industry. With the right business model and plan, you can grow manifolds. Here’s why building a custom marketplace can be profitable in 2021:
More people are adopting mobile as their preferred choice for online purchases. As diverse marketplaces become more prevalent, this trend is likely to continue in the coming decade.
Marketplace apps give businesses an opportunity to grow and tap into the large mcommerce market share.
Price monopoly — Higher margins and profits
Having your own custom marketplace means you have total control over price and margins. Unlike third-party listings where you have to share your profits, you get to be the sole beneficiary.
As a marketplace grows, transaction volumes increase with the growing user base, leading to better margins. Plus, if you manage to dominate your industry, you can enjoy a price monopoly for products and further inflate profit margins.
Data creation — Enhanced personalization options
Owning a marketplace business means you are in complete control. All the data, customer shopping habits, wish lists, and preferences, belongs to you.
Data insights can help in building strong personalization frameworks and recommendation algorithms. The shopping experience will improve and users will spend more time on the app, increasing your revenues.
Best Practices for Building a Mobile Marketplace App in 2021
When you list your services or products on a popular marketplace app, you’re virtually locking your growth to a third-party algorithm. You’re also expected to follow the platform’s guidelines and accept their terms and conditions.
Think of building your marketplace app for selling directly to the end-user or becoming an intermediary for other service providers.
Here are areas you should focus on the most when building a marketplace app:
UX design and navigation
Mobile shoppers look for convenience — your job is to do everything to let them make a purchase quickly within the app.
The navigation and user experience of a marketplace app should facilitate choice and decision-making.
Easy navigation and mobile marketing activities like push notifications can only take you so far. For your marketplace to be successful, you also need to speed up the shopping process. UX design of a marketplace app should assist the buyer in every step. The general rule of thumb here is: the fewer clicks to finalize a purchase the higher the conversion rate.
Amazon has mastered the navigation and UX design over the years. Easy navigation and a one-click checkout option make it one of the most successful marketplace apps among mobile shoppers.
A marketplace app has to manage both sides of a coin — demand and supply. So, all your efforts should be focused on delighting end-users (either buyers or vendors).
To deliver user-focused features you need to have a deep understanding of your users — analyze each user group carefully to be able to determine their pain points, needs, and desires. The best way to do that is through analytics and user interviews. If you don’t have a product yet, go out and talk to your prospective user groups about their past habits in the selling or purchasing process.
Here are basic features you should think about having in a marketplace app:
These are just general features. The more you know about your target users the better you’ll be at delivering features that respond to the unique needs and desires of your users.
Data security and safety
Buying something without seeing, touching, or feeling is difficult. Your marketplace should instill confidence, trust, and a feeling of reliability in the minds of buyers.
People are less likely to hand over their personal details and card information to random mobile applications. They're also less likely to risk larger sums of money for transactions.
With Amazon, for example, people trust the company enough to give their card information and spend thousands of dollars.
Your mobile marketplace app should instill the same level of trust. The more confidence a user has in the security and safety features, the more they will spend. So, your app should be built with a security-first approach.
This is the minimum amount of security you should guarantee your buyers and vendors:
Payment protection across multiple mobile payment options
Privacy protection and GDPR compliance
Voluntary opt-in process for marketing or promotions
Because hacker attacks are happening more often, consider ensuring even more protection for your users:
End-to-end encryption of personal data in the local database, API communication, cache
IPC protection to avoid data sharing between apps, services, and content providers
UI security analysis to protect users from data leaks
Code obfuscation to minimize the chances of reverse engineering of the app for data exploitation
Implementing app transport security (ATS) for web connections on the iOS platform
Network effect — Organic growth potential
On a marketplace, buyers and sellers interact with each other, transact, and provide real-time feedback. As more buyers and sellers engage with the platform, more users are attracted to it. This is called a network effect.
When users are happy with a platform they use, they tell their peers about it. Think of referral systems on marketplaces, social media posts about recent purchases, or simply word of mouth.
Social media sites and marketplaces have been leveraging network effects to grow their reach for a long time. Facebook is the best example of network effects leading to the growth of a Facebook Marketplace.
Getting Started with Mobile Marketplace Development
Marketplace apps offer businesses an opportunity to tap into the large ecommerce market share. And while marketplace apps can be lucrative undertakings, the key is to build them with consumers involved in the decision-making. Only after listening to consumer shopping habits will you be able to draw conclusions that will let you create unique value in the industry.
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Maja oversees content production at nomtek. Restlessly creative, she has over nine years of experience as a content writer. Maja loves cats, long-distance running, and orbiting the Earth during meditation sessions.
Determined to understand users' behavior through hard data. Delighted with product/service simplicity. I find the biggest pleasure in discovering product&design leaks as well as growth leverages.