The online marketplace model’s flexibility and scalability have made it a dominant force in ecommerce. According to Digital Commerce 360, 2024 saw the top 100 global online marketplaces are projected to achieve a total Gross Merchandise Value (GMV) of $3.832 trillion, demonstrating remarkable growth from $2.67 trillion in 2020. Moreover, these online marketplaces, including giants like Amazon, Tmall, Taobao, and JD.com, commanded 77% of the top 100 marketplace sales in 2023. Notably, third-party sellers on Amazon captured a substantial share, earning $0.54 for every dollar spent by shoppers according to a recent report by Bluehost. indicating how these dominant players have created entire commerce ecosystems.
Figure 1: A high-level overview of McFadyen Digital’s marketplace platform evaluation process when working with our clients to choose the best possible platform and tech stack for their use case.
This trend aligns with the broader growth of the global ecommerce market reported on by eCommerce Insights, which is expected to reach $5 trillion by the end of 2024, driven by a 15% annual growth rate from 2019 to 2024. The rapid expansion of online marketplaces is a key driver of this growth, reflecting their dominant role in the ecommerce ecosystem.
These statistics underscore the degree to which the online marketplace model has become a juggernaut as they provide a platform for businesses to sell their products and services to a broader audience. Many businesses are considering launching their own online marketplace to expand their reach and increase revenue. However, the process of selecting a marketplace platform can be overwhelming, especially if you are unfamiliar with the different options available.
Let’s take a look at the steps an organization should take in order to make an informed marketplace platform decision:
Step 1: Define your requirements and objectives
The first step in selecting a marketplace platform is to define your requirements and objectives. This will help you identify the features and functions you need in your marketplace platform. For example, if you plan to sell physical products, you will need a platform that supports shipping and handling. If you plan to sell digital products, you will need a platform that supports secure digital downloads. You should also consider your overall goals for the platform, such as increasing revenue or expanding your customer base.
Step 2: Research potential platform options
Once you have defined your requirements and objectives, it’s time to research potential platform options. There are several marketplace platforms available on the market, each with its own unique features and pricing structures. Some of the most popular marketplace platforms include Shopify, WooCommerce, Magento, and BigCommerce. You should consider factors such as ease of use, scalability, and pricing when evaluating different options.
Step 3: Evaluate platform capabilities
After researching potential platform options, it’s time to evaluate their capabilities in detail. This involves examining factors such as user interface, payment processing, search functionality, and customer support. You should consider how easy it is to use the platform, how well it integrates with your existing systems, and how well it meets your specific requirements.
Step 4: Assess scalability
Scalability is an essential consideration when selecting a marketplace platform. You want a platform that can grow with your business and handle increased traffic as your customer base expands. You should evaluate the platform’s ability to scale to meet your needs and whether it offers the flexibility to add new features as your business evolves.
Step 5: Consider security and compliance
Security and compliance are critical considerations when selecting a marketplace platform. You should evaluate the platform’s security features, such as data protection and fraud prevention, to ensure that your customers’ information is safe. You should also consider whether the platform complies with relevant regulations, such as GDPR or PCI DSS.
Step 6: Analyze costs
The next step is to analyze the costs associated with each platform option. This includes setup fees, ongoing fees, and transaction fees. You should consider whether the platform’s pricing structure aligns with your budget and revenue goals.
Step 7: Select a platform
Based on the evaluation process, by now it should be clear which platform will meet the needs of the new marketplace. Reach out to the selected vendor and being the process of contract negotiation.
Step 8: Select an implementation partner
Since implementing a marketplace platform is a nuanced endeavor and far more complicated than implementing a traditional first-party ecommerce platform, engaging an experienced partner for the build and launch process is highly recommended. Speak to the selected platform vendor and perform your own evaluation. Be sure to select true marketplace experts to assist you, not marketplace hobbyists.
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Conclusion
Selecting a marketplace platform can be a daunting task, but it’s essential to make an informed decision to ensure the success of your online marketplace. By defining your requirements and objectives, researching potential platform options, evaluating platform capabilities, assessing scalability, considering security and compliance, and analyzing costs, you can make a well-informed decision that meets your business’s specific needs.
McFadyen Digital has been building online marketplaces for over 17 years, helping organizations digitally connect with their customers for over 37. We produce the industry’s #1 marketplace and drop ship platform report, The Marketplace Suite Spot Report, the most recent version of which profiles 19 total platforms. If you need any assistance with a platform evaluation of your own, either marketplace or ecommerce focused, reach out to us at info@mcfadyen.com and we’ll connect you with an expert who can help.