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Marketplace Monsters: How to Avoid Multi-Vendor Commerce Pitfalls

Avoid these marketplace missteps by employing the useful strategies outlined.


Marketplaces are scalable by their very nature. Yet launching and operating a marketplace can be a complex endeavor with occasionally ghoulish challenges to face along the way to avoid being buried by these marketplace monsters. Let’s look at what we’re facing and how to vanquish these creepy critters.

#1 Vampires of Broad Focus

Our first monster is a real profit sucker. Too broad of a categorical mix makes it difficult to focus and even more challenging to analyze and improve the business effectively. Also, there needs to be more focus when doing broad horizontal, making it much harder to acquire sellers to cater to these broad scopes of products and services. Usually, it’s a better strategy to try and cater to a niche and grow/ scale from there as more opportunities start to get visible. To vanquish this monster, identify a niche where you can win. Start small, validate results as you, and become a master and authority in one area.

#2 Zombies of Development Rush

In their endless quest for braaaaaains…ahem…profits, commerce leaders often rush the development phase of a marketplace before it’s profit model and business plan have been fully realized. A recipe for sure-shot marketplace failure is to rush to the development phase before perfecting the business model. Remember, the marketplace is not a technology implementation project. It takes time, planning, and perseverance. Finalizing the business and revenue model before starting any site development program is essential. To vanquish this monster, have a clear business and revenue model before beginning development. Treat it as more transformational effort than technical implementation. Have a long-term plan for growth and scale.

#3 Werewolves of Inadequate Performance Measurement

Sure to take a bite out of potential GMV, chasing the wrong metrics leads to wrong decision and makes marketplace operators howling mad. The reasons why marketplaces fail may vary, but one common thread is the lack of an articulated performance management strategy. Marketplace performance management consists of people, processes, tools, and a governance mechanism that ensures the marketplace is constantly tuned, tweaked, and operated based on critical performance data. Chasing the wrong metrics leads to bad decisions and makes marketplace operators howling mad. To vanquish this monster, identify key performance areas and indicators. Set goals in each of those areas. Have a plan to turn those metrics into actionable.

#4 Scarecrow of Misalignment

.This scary scarecrow absentmindedly limits vital organizational support by failing to align executives and business units around the new multi-vendor effort. A multi-vendor marketplace is a whole different beast and needs alignment across the organization. A lot of times what happens is that it’s looked upon as an IT project/ technological implementation. Marketplace project should be looked upon as a business initiative that considers all of the critical elements needed to build a successful business. At its highest level the business case should be developed through the lenses of three key dimensions; they are the Business dimension; the People dimension and the Technology dimension. To avoid organizational misalignment, one must build internal awareness and consensus, maximize all possible organizational resources, and lastly provide regular internal updates.

#5 Grim Reaper of Seller Confusion

This infamous spirit takes the soul out of seller engagement in the marketplace with muddy communication, unclear direction, and a lack of actionable data. One of the reasons marketplaces fail is that they need a robust and aggressive seller onboarding plan in place. Because quality sellers are the most critical element in the success of a marketplace, the operator needs a seller acquisition funnel for continuous acquisition, activation, revenues, and retention. To vanquish this monster one must have a clear onboarding plan, have a clear communication charter with distinct calls-to-action, and have sellers empowered with vital data to drive outcomes.

#6 Frankenstein of Ecosystem Imbalance

This monster is a random mishmash of categories and sellers stitched together without a coherent growth plan, leading to an ugly imbalance of needs versus solutions.  Simply putting a platform online will not bring hordes of customers and sellers. The start of an online marketplace requires meticulous calibration of all the marketplace participants. When all parties are enabled and developed, it kicks in the network effects. To vanquish this monster, one must know the audience they seek to dominate, plan the next level out of related categories to develop, and create a plan to attract the right sellers. Lastly one must have a clear engagement plan for all the marketplace constituents for the platform to thrive.

#7 Creepy Clown of Bad Budgeting

This Big Top menace dooms marketplaces with ballooning costs in some areas and penny-foolish investment in others, making success no small feat.  Lack of budget is the most common reason for the failure of marketplace projects. The real reason behind it is this – many marketplaces start with the wrong assumption that one could directly generate revenue with Go-Live to fund the marketing and further growth organically. This is an apparent mistake. To vanquish this monster, one must formulate a financial model early-on, have realistic profitability timelines, and monetize first party data as soon as possible.

We hope you found this video and blog helpful. Running a marketplace is challenging. Scalable marketplace success starts with learning from the mistakes of others and seeking expert guidance to navigate the path. Now that you know how to slay these marketplace monsters, let us know if we can help safely continue your journey.

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