Building a successful marketplace app is harder than it looks. It’s a balancing act between buyers and sellers, pricing and perception, growth and retention. Get one wrong, and your business can suffer greatly. Whether you’re building the next Amazon in your industry or something more niche, selling socks, you’re solving big problems. You’re also figuring out the classic chicken-or-egg problem in real time, optimizing your platform for take rates, stickiness, user experience, and iterating as you go.
As app developers of numerous marketplaces, we’re excited to share our learnings to help you go from 0 -> 1 fast. Here’s what’s important to keep in mind when building a resilient marketplace:
1. Solve the Chicken or the Egg Problem for Your Marketplace
Which comes first, the buyer or the seller?
Here’s one approach that we’ve used to guide our partners to an answer: always start on the side with the strongest demand. In doing so, you’ll find it easier to commercialize this demand.
As you build out your buyer and supplier sides, consider these other buyer-seller forces:
- Buyer and Seller equilibrium: It’s rarely a 50-50 split, so it’s perfectly fine to have more on one side.
- User behavior patterns: Buyers and sellers have habits that can change over time. Lean into what’s relevant now to design a stickier app.
- Market maturity: Is your industry ready to embrace your marketplace? It could be a timing issue.
- Purchasing power: Which personas and buyer/seller side generate the most money? Tap into that early on.
- Early adopters: For any app, you must go after them. Going after anyone else is harder and can put your platform at risk for failure.
- Niche opportunities: Is there an “Amazon” of your market, or has it started to fragment? Fragmented markets are easier to compete in.
Even with all this knowledge, there’s no easy way to solve this problem. You must A/B test, iterate, and refine your marketplace to find the right balance between buyers and sellers.
2. Understand Your Take Rate (And Why It’s So Important)
Another question you’ll face is defining your service fee or take rate. It’s the percentage your platform charges per transaction. So, if your take rate is 20%, you earn $20 for every $100 spent on your platform.
The math is simple. But the impact is huge.
Even a small percentage change can drastically influence whether people choose your platform or go elsewhere. A high take rate can easily deter buyers and sellers from joining, while a low one may put you out of business. It’s a tricky balance that you won’t fully optimize until you fully understand your marketplace’s operating costs.
To get a better grasp of the take rate, we suggest financial modeling different take rate scenarios and pressure-testing them on real users. Their reactions will let you know if you’re off with the numbers. Oftentimes, marketplaces make money elsewhere to offset lower take rates. You might do the same and explore other revenue streams, such as:
- Subscription models: Monthly or annual payments for using your marketplace.
- In-platform credits: Credits to be purchased for accessing certain marketplace functionality.
- Advertisements: Opportunities for buyers/sellers to promote themselves across your marketplace.
- Gamification: Marketplace rewards and offers for buyers and sellers to purchase.
- Personalization: Adding paid customization to buyer/seller profiles and experiences.
The take rate is probably what people remember the most, so start thinking about how to structure it.
3. Build Stickiness into Your Marketplace App
Great marketplace apps are addictive. And what brings them back is the stickiness factor.
We’ve seen gamification work in some verticals, but it’s overused and is not always the answer. In fact, the most effective approach is often the simplest: understand what your users value most, and double down on them.
Stickiness can be:
- A unique and engaging process designed for buyers and sellers
- Push notifications
- Loyalty rewards
- In-app messaging
- Personalized content
- Saved preferences and reordering features
- Recommender systems
User retention is a critical part of app development, and stickiness helps increase it. However, it’s often “out of sight, out of mind” for your end users. Without it, even the most beautifully designed marketplace will struggle with high churn rates and revenue loss.
4. Be Intentional with App Design
“Modern” design doesn’t always mean slick interfaces and minimal layouts because design preferences are deeply cultural. For example, we found that Asian markets prefer information-dense screens to white space, as Western audiences do.
If your app doesn’t feel intuitive to your users, it won’t matter how polished it looks. Spend time researching user behavior and design your marketplace around that, especially during the discovery phase of app development. It also helps to include subject matter experts. For help with localizing your marketplace, explore our Local IQ™ service or connect with our team today.
5. Focus on Solving the Root Problem
Founders and teams try to pack every feature imaginable into the first version of their marketplace. The result?
- Over-design.
- Confusion.
- Performance issues.
- Frustration from users who want you to fix their problems.
- Overspending.
- Delayed launch.
The best apps solve a root problem really well: Amazon with hassle-free purchases and Facebook with engaging social networks. So, before you add that new filter or calendar integration, ask yourself: Will it help solve the primary issue for your buyers and sellers? If not, put it in the backlog or toss it out.
6. Test. Learn. Refine.
Oftentimes, we find ourselves alongside our client partners, testing pricing models, experimenting with app designs, and scaling user growth from nothing. What we learned the most was that what works today may not work tomorrow. And what doesn’t work today may work tomorrow. That’s why you must keep iterating.
The Bottom Line
Here’s what to do when building a thriving marketplace:
- Understand which side of your marketplace to prioritize first.
- Deeply understand your take rate and test it with real users.
- Build stickiness into your app with intentional user experience.
- Build your app around your audience.
- Keep it common sense. Focus on the core problem before expanding.
- You don’t need to know or do everything so long as you keep moving forward, learning, and iterating.
At Uplancer, we help businesses build successful marketplace apps. If you’re ready to take your app to the next level, get in touch with us today. We’d love to help!
