What To Think About When Starting a Marketplace

Starting a marketplace begins with a clear understanding of your goals, expectations and plans.

It goes without saying that you better have some kind of special advantage these days if you are trying to start a scaled marketplace.

But anything less than that, it needs to start with serious planning too. Here are the questions I encourage people to think about from the beginning.

Most people think of #marketplace when they think of "we don't want to own inventory" so that is the place I start this post.

Before I talk to them about anything else, I find you first need to clarify terms and expectations.

1 - Do you want the ability to set prices of supplier's goods?

If you do, it's a dropship program.

If you don't, it's a third-party marketplace and you will take a commission from sellers instead.

2 - Do you want to be able to book the entire revenue of the sale?

If you do, you cannot start a traditional commission-based marketplace.

If you do not, then you are essentially a software platform that takes a commission of sales from your suppliers.

3 - How important is unique supply to you?

Do you want to: (a) really own your supplier relationships, or, (b) do you want your platform provider to own your suppliers.

If you are asking software vendors if their already-onboarded list of suppliers matches a list you send them, then it is not unique supply and you may not be adding the value you think you are.

Another clue is that the supplier is paying some kind of monthly fee for whatever platform you are talking to. The platform owns that supplier and you are "yet another venue."

It is harder to acquire unique supply, it takes longer, but you are also building a moat that your competition might not take the time to build.

This is true of a #dropship or a true marketplace program.

Again, not everyone needs truly unique supply to generate revenue, incremental sales, or test new assortment. And even individual sellers will change their assortment across channels for a variety of reasons -- channel conflict, fees, trust, competition, audience demographics, traffic levels, buyer intent, margin, channel restrictions, onboarding time, data requirements, etc. So there are caveats.