Which marketplace platform should you choose for your online marketplace business?

So you have 10-15 years of experience in your industry, know all about its potential, have contacts to the sellers, know how to reach the buyers, have read books such as “Platform scale” and plenty of blog posts, want to launch your own marketplace already, hope for the first-mover advantage and the last missing piece of the puzzle is the marketplace E-commerce software. Now, you’re wondering which marketplace platform would be a good fit for your marketplace business. Here’s a quick walkthrough.

Basically, there are two types of marketplace platforms:

open-source, free to use, self-hosted – Spree Commerce Marketplace is a good example
- best fit:
  - lets you start small (on a budget MVP) and then scale up as the business takes off
  - customize marketplace platform functionality to perfectly fit your business and its processes
  - keep iterating, innovating and adding features to follow your business model evolution
  - build your market position and a competitive advantage also through unique technology reflecting your business model
  - own your tech intellectual property (IP)
  - you can switch external dev teams relatively easily or hire an in-house dev team
- things to remember and trade-offs:
  - you need a software development team and your own hosting
  - the software framework is free but development time and hosting services are not
Software as a Service, subscription-based, cloud-hosted – there are 2-3 examples out there
- best fit:
  - you need a mostly generic, off-the-shelf solution
  - time to market is of the essence
  - you don’t care about the budget so much
  - market share and a new revenue stream are a priority over IP ownership and project valuation
- things to remember and trade-offs:
  - it’s going to cost you – some sources say that the minimal budget is $300k for the first year plus a revenue-sharing deal on top of it
  - you’re locked in with that particular SaaS vendor forever
  - you don’t own your marketplace platform technology IP

So which online marketplace platform should you choose for your marketplace project? It’s a question about your priorities and the kind of business you are building.

Are you a marketplace startup or a unique business model project which needs to:

watch your spending and maximize your ROI
enable custom, industry-specific:
- product category tree and product attribute matching between vendors and the marketplace
- product catalog and inventory sync for sellers
- product discovery for buyers
build advanced integrations with
- all kinds of vendors / sellers
  - small vendors – no in-house dev team, manual data entry or CSV product catalog & inventory sync
  - bigger vendors – automated product catalog & inventory sync:
    - FTP-based several times a day
    - API-based in real time
- 3rd party service providers
  - payments streamlining checkout
    - pay-ins: credit card, PayPal and other payment methods
    - pay-outs: manual or self-service
  - taxation as a marketplace facilitator
  - varied shipping and warehousing solutions depending on vendor capabilities and preferences
  - marketing automation for up-selling and cross-selling
  - advanced systems monitoring and analytics for making informed decisions
- 3rd party data sources
  - central product data warehouse
  - vendor credit screening services
ensure scalability – start small and scale up without any platform related limitations
own your tech platform and IP to increase your business valuation for the purposes of:
- fundraising
- exit strategy
- credit application purposes (in the B2B space)
operate and grow despite a high-risk merchant status and/or a strict regulatory environment, eg.
- alcohol
- tobacco
- CBD

Or are you a corporate marketplace project which needs to:

leverage a mostly generic marketplace platform functionality
upload and update an unsophisticated product catalog
achieve a short time to market
mitigate software development risks (by avoiding any development)

Long story short, a simplified recommendation would be that SaaS solutions are optimal for corporate projects with significant financial and human resources available which aim to rent a marketplace platform, launch a marketplace project quickly, set up operations, onboard vendors, test the market, run with it or shut it down and never look back.

On the other hand, using an open-source solution, such as Spree Commerce Marketplace, makes sense for building an online marketplace business relying on its technology to build a competitive advantage, having industry-specific requirements, planning to raise some funding and one day be acquired or go public.

It’s a rent vs. own decision.

Feel free to drop us a line and discuss your marketplace requirements.