“The Building Blocks of Online P2P Marketplaces”

The marketplace business model has proved successful and has gained a lot of traction. The idea of a peer to peer marketplace platform has been applied to a considerable number of workable use cases. For example, on AngelList alone there are 1,239 marketplace platforms. Entrepreneurs see value in peer to peer ecommerce, as it allows them to unite users on a global scale and enable efficient transactions. This market will be worth $355 billion by 2025 as per PricewaterhouseCoopers.

In this article, we’ll tell you how to start an online marketplace and provide a few peer to peer marketplace examples.

What is peer to peer marketplace?

A peer to peer marketplace platform is an online business model where buyers and sellers exchange products and services. For example, Etsy allows sellers to sell their handcrafted goods to consumers. Uber lets you order a ride to get anywhere. Buyers and sellers can typically change their roles on a P2P platform, as there’s no strong distinction between them. Today you can be a rider on Uber, while tomorrow you can easily become a driver. In other words, both user groups can exchange goods or services on a peer-to-peer marketplace.

A P2P marketplace platform removes the intermediary who connects consumers to product or service providers. This serves to lower the cost for goods and services, enable faster transaction times, and make the process of purchasing much more convenient for both parties.

For example, imagine you’re a craftsperson and you want to sell beaded jewelry. Building a store is time-consuming and requires big investments on your part. However, you can use an Etsy-like platform to host your beaded jewelry. The platform has an active user base and can become an online shop of its own. Or imagine you’re moving to a different city. You may decide to rent your current apartment on Airbnb or HomeAway instead of selling it. You don’t have to post an ad in the paper. You simply use an online service with an inventory management system, real-time analytics engine, and automated pricing tool.

Let’s see how some industry players have made it big with their marketplace solutions.

Famous players in peer to peer e-commerce

Airbnb

Airbnb’s story is quite interesting. Back in 2007, it was known as AirBed&Breakfast. The founders, Joe Gebbia, Brian Chesky, and Nathan Blecharczyk, saw that there were no hotel rooms for travelers and decided to create a marketplace website.

There was a conference for the Industrial Design Society of America (IDSA) in 2007. Because it’s one of the largest events in the industry, all hotels were overbooked. Joe, Brian, and Nathan decided to solve this problem. They set up mattresses in their living room and created a website in order to advertise this room for the weekend. As a result, three guests paid them to spend the night in their house.

Airbnb now boasts over 4.5 million properties in 81,000 cities across the world. They’ve had over 300 million guest check-ins over 10 years. And their hosts have earned over $41 billion.

Airbnb has kept their focus on reinforcing core experiences such as providing users with accommodation. They haven’t cluttered the app with unnecessary features and have stood fast to solving the core problem of letting people rent their properties.

Today, the platform lets users filter search results and book shared spaces, private rooms, entire homes, vacation homes, unique spaces, bed and breakfasts, and boutiques.

BlaBlaCar

BlaBlaCar is a French ride-sharing startup that managed to build a marketplace app which saves people money and time. The company has three cofounders: CEO Frédéric Mazzella, COO Nicolas Brusson, and CTO Frances Nappez.

Back in 2003, Fred couldn’t buy a train ticket to get home and asked his sister to give him a ride. It was quite a lengthy ride. While travelling in his sister’s car, Fred saw the train he could have been on and numerous cars driving the same way he was going. There were lots of empty seats in those cars. It dawned on Fred that those seats might as well be occupied by other travelers. That’s when the idea of building a marketplace was born. Later, Fred partnered with Nicolas and Frances to connect people with drivers going the same long distances.

BlaBlaCar attracted both travelers and drivers. Gas is expensive, and BlaBlaCar lets drivers share the cost with someone. On the other hand, travellers looking to save money on expensive tickets can ride with drivers who don’t mind a companion.

While BlaBlaCar is simply online marketplace software, people trust it. If they didn’t, why would they be willing to get into the car of a complete stranger? Before asking for a ride, users indicate basic information about themselves such as name, preferences, and willingness to talk during rides. This helps build trust. Also, travelers pay in advance so there’s no chance of fraud.

The idea of BlaBlaCar has taken off. Now, the company takes a percentage of what travelers pay to drivers. There are 35 million members on BlaBlaCar and the company claims to be the largest people-powered transport community, available in 22 countries.

Etsy

Love handmade and vintage things? If so, Etsy is the number one place to go. Rob Kalin, Chris Maguire, and Haim Schoppik created Etsy to let people sell their crafted goods. This happened back in 2005, when one of the co-founders wanted to find a well-crafted guitar and searched online. This drove him to think that many craftspeople would appreciate a place where they could come together to offer their products. Etsy has allowed thousands of craftspeople to sell their goods in one online destination.

Much of Etsy’s growth is due to the enthusiasm of buyers and sellers. “What really differentiates us from other e-commerce sites is the real personal connections and feeling that you get,” Etsy spokesman Adam Brown says. “It’s not like you’re buying stuff. It’s like you’re connecting with this person.”

Etsy successfully filled a gap by letting vendors create personalized online spaces to promote their handmade items and vintage supplies to millions of shoppers. The company lives on listing fees and a percentage of each sale.

We’ve chosen just a few popular examples of marketplace platforms, but there are many others such as Ebay, TaskRabbit, Craigslist, DriveNow, and GoFundMe.

How to build a marketplace website: essential building blocks

It’s time to create an online marketplace. In this section, we’ll list the main concepts that drive the development peer to peer marketplace.

Peer-to-peer business model

We all want to get the best deals. Traditionally, if you want to purchase something or book a service, there’s someone who facilitates this interaction. In logistics, it’s a broker; in real estate, it’s an agent; with a taxi, it’s a dispatcher. In other words, there’s normally an intermediary. In the case of an online solution, the platform itself becomes this intermediary, allowing buyers and sellers to connect with each other.

Let’s look at how Etsy’s business model works. Etsy charges sellers for listing their goods. The listing fee is $0.20 per item. Then the platform takes a 3.5% fee for sales completed on the website. The company has seen annual revenue growth as shown by Statista. In 2016, Etsy made over $364 million. In 2017, its revenue grew to $441 million.

Marketplace apps gave a good start to the sharing economy because they took away the intermediaries. People operate on the platform and it charges them a fee or percentage. This fee is much lower than if you were to purchase goods or services in a traditional way, so you can actually save money if you shop for goods or services on a platform.

Focused niche

When starting an online marketplace, you should understand where the problem is and resolve it with technology. BlaBlaCar and Airbnb were great at identifying a problem and targeting one niche. Airbnb spotted that people wanted to rent their apartments. BlaBlaCar focused on drivers and passengers who wanted to share the cost of a lengthy ride.

One of our American clients used to be an intermediary in the legal industry. Since they knew the niche well, they decided to create a marketplace platform that connects court reporters, interpreters, videographers, and other legal service professionals to courts. This on-demand court reporting platform we developed for our client is called NexDep, and it makes it really easy to find the right people for court hearings. Clients can post hearings with detailed descriptions, and legal service providers can respond to those requests.

If you want to develop a marketplace, you should do the same thing — find a problem and solve it using a marketplace business model. Creating a platform boils down to helping two markets connect and eliminating the need for an intermediary.

Сonvenienсe and flexibility

A peer to peer marketplace platform is convenient. It lets customers quickly find goods or services. Airbnb allows people to conveniently browse properties for rent. All you need to do is go to the website or mobile app and find a list of accommodation options with pictures. You can filter by number of guests, accomodation type, price, trip type, and more. You can then view details of listings with reviews and ratings and book right on the platform.

If you go to Etsy, you’ll find all sorts of sellers offering their handmade goods and vintage items. These sellers don’t have to create separate websites or build brick-and-mortar stores. The platform can feature all their goods, becoming an online shop for sellers.

TaskRabbit, a collaborative peer to peer space, lets you find verified taskers who can come to your house to complete tasks for you. Maybe you don’t know how to fix your broken chair or you have clogged pipes. The app features different tasks and a database of taskers who are matched to your query.

In other words, this growing market, a sort of eBay for services and goods, allows users to interact easily and perform transactions and exchanges by means of features each platform offers.

Trust

If you want your online business to succeed, you should create trust with your users. If you manage to build trust on your platform, you’ll be able to expand faster and sooner.

Creating trust means you should:

  • apply an actionable rating system
  • curate your content
  • keep your focus on supply
  • give your service a human touch
  • establish a verification policy

Let’s talk about each of these points separately.

Actionable rating systems. Most services have star rating systems that help rate users on both ends of transactions. For example, Uber and Lyft ask both drivers and passengers to rate their experiences. These ratings let the company filter out bad users and improve with every interaction. Drivers on Uber are allowed to have no less than a three-star rating. As a result, riders don’t have to worry about having a bad experience.

Users expect that you’ve already removed poor service providers from the system. Implementing an actionable rating and review system will benefit you by giving you a better idea of who your users are. It can also help you stop abusive and fraudulent behavior by banning users.

Curated content. With all the choices available, customers have no time to question the content on your platform. As a curator, you should hire people who will find and feature the best content and downgrade or eliminate inappropriate content.

Airbnb lists shady apartments, but they’re very hard to find. Generally, Airbnb’s best listings are featured as a result of manual and algorithmic curation. That said, you should acquire a manual or editorial license to retain users. Consequently, you can make sure your users find what they’re looking for.

Focus on supply. You need to focus on supporting your suppliers — the sellers and service providers who place their offers on your platform. While many people are used to buying things and ordering services online, fewer people are used to shipping products or giving their accommodation for rent. It’s essential to create an easy and instructive experience for suppliers. For example, you can provide your suppliers with free shipping boxes or give them mannequins to display clothes on. With Lyft, drivers are given phone chargers and a playbook on how to be a courteous driver.

You can also set up forums or community spaces for your suppliers where they can discuss challenges and best practices. On Airbnb, hosts can talk about what works best for listings and how to be the best host.

Human touch. Users expect your software to be fast and flawless, but they expect humans to stand behind your brand. People like feeling cared for. To make sure that expectations are met, that buyers receive their orders, and that sellers get paid, companies should establish a customer service strategy. This strategy can rely on phone calls and personal communications. Homejoy, for instance, calls customers and gives them discounts if they report poor experiences.

Verification policy. Users will be twice as confident to make transactions if they’re familiar with your verification policy. You need to verify your providers and sellers to deliver services at a high level. Verification can be performed automatically, or admins can check the legitimacy of providers and sellers manually.

During sign-up, drivers who want to work for Uber need to upload a series of documents. These documents include a driver profile photo, driving license, vehicle insurance, vehicle permits, vehicle registration, and other documents.

To increase transparency and build trust in its global community, Airbnb announced Verified ID. Verified ID matches users’ online and offline IDs. Airbnb users can go to the verification page to confirm their existing online identity on Facebook or LinkedIn and provide their personal information or scan a photo ID. To verify their identity, online and offline names that a user provides must match.

In a nutshell, your platform should be a mediator and the main verification center to help users connect or better yet to give them more reasons to connect.

How to build a marketplace

Now that we’ve pinpointed which philosophy makes two sided marketplace platforms work, we’re going to tell you how to build a platform.

You can either build a marketplace from scratch or use existing solutions or open source marketplace platforms. Your choice will depend on your budget and requirements.

There are lots of platforms, including Magento, Sharetribe, Drupal, and Spree Commerce. Ready-made solutions can be a good start, but unique features require custom implementation. Not all of these Software as a Service (SaaS) platforms may be a good fit for your project, since some of them are created for ecommerce purposes rather than for dedicated marketplaces.

Sharetribe, for instance, is suitable for marketplace projects and charges based on the number of users on your site. With other solutions, such as Magento or Drupal, you’ll have to purchase marketplace extensions to manage content on your platform. You usually have to pay a SaaS marketplace vendor for hosting, support, and all sorts of updates.

Here at SteelKiwi, we build our projects from scratch. This allows us to create solutions with unique architectures and designs.

Build a marketplace from scratch or use a ready-made solution?

Building from scratch. If you have a unique idea, then you need a custom developed product. A custom product can give you lots of flexibility in terms of features, the user interface, and the user experience. You can choose any technology stack you want. Also, with a custom solution you won’t have to worry about the speed of your platform.

You’ll always have the chance to expand your functionality when building from scratch, as your solution will be scalable and easy to support. In addition, you can have unique tax logic as well as special promo types and bonuses for purchases and can easily integrate third-party services to meet your needs. But you’ll need to hire a developer to build a custom marketplace.

Using a ready-made solution. If you’re pressed for time and want to launch as soon as possible, then you can use a ready-made solution. You won’t need to spend time on wireframing, design, or testing. Ready-made solutions offer essential functionality as well as free support. In some cases, you can change the HTML layout of your site to give it a fresh feel. You’ll pay a fixed fee for hosting your platform, plus if you want small customizations you can always pay extra to implement those. Building a marketplace with a ready-made platform isn’t easy, though. If you don’t have programming skills, you will still need to hire a software developer.

Typical features for online P2P spaces

The advantage of a two sided marketplace platform is that it has invaluable features. When building peer to peer marketplace software, you are to offer users an essential set of functionality. This way you’ll allow your participants to navigate your platform easily.

Profile. A marketplace has two users roles: buyers and sellers. The user interface will be different for each user role.

Listings. Listings are services or products you offer on your platform. You need to implement this feature correctly as it works differently for vendors and consumers. As far as vendors go, they should be able to add, remove, revise, publish, and unpublish listings. Customers should be able to filter, search, and view those listings with detailed descriptions.

Bookings. The advantage of an online marketplace is that customers can book services right on the platform. Customers get to view booking details.

Payment. Customers should be able to pay via your online platform. Offer users various payment options such as credit card, debit card, and PayPal. There are many payment gateways you can use to accept payments. The most popular include Stripe, Omise, and Braintree.

Reviews and ratings. Your platform should provide users with the possibility to leave reviews and rate product or service providers. This allows consumers to make informed decisions when purchasing services or products. What’s more, leaving ratings and feedback creates a sense of trust and accountability. It will also help you with management, giving you a better insight into your user base.

Notifications. Since services and orders are important to consumers, your users will appreciate a notification system. Notifications allow users to stay informed about key events. For example, an app can inform users when their order is being processed by the seller or show that the order has been delivered.

Cost to build an online marketplace

Now that you know the essential tips for building a two-sided online marketplace, you might ask: How long does it take to build an online marketplace? There’s no one-size-fits-all number as each solution is unique.

We’ve built quite a few solutions for peer to peer ecommerce. We’ll take four marketplaces we’ve built to illustrate the approximate time frame so you can calculate the cost. Once you know the approximate number of hours required, you can multiply this number by the hourly rate of the developers you hire.

Snaapy, a space for on-demand services, took us almost two years to develop. This was quite a lengthy project with a big idea behind it. There were many user roles: product owner, business administrator, receptionist, service provider, and end user. We built Snaapy from scratch, offering our best full-stack development services. The SteelKiwi team created the backend and frontend of the project. We also developed native iOS and Android apps alongside the UX/UI. We found it most complex to implement the Knet payment gateway, which works only in Kuwait.

We’ve also built Eventio, a platform for the entertainment and event industry, from scratch. Eventio unites attendees, event planners, and vendors. It took us about 1,200 hours to build Eventio. We started with learning about the idea behind the project in order to understand the business logic. Then we created project requirements and provided the UX/UI, followed with development.

NexDep, an on-demand court reporting platform, took us about 500 hours. We needed to understand how to move the offline space our client operated in to the online one. It took us time to conduct lengthy interviews to translate our clients’ requirements into a technical document for our developers. We also built this project from scratch, giving it an official look and feel.

Another marketplace space we’ve built offers on-demand barber services. The main idea of Hello Barber is to let people get on-demand haircuts or trims wherever they want, whether at home or in a salon. This platform took as 800 hours to develop. Hello Barber is a US-based startup, so we had to work with four time zones. A user may be in one time zone but they need to adjust to a barber’s schedule in another. Working with different time zones made this project take a bit longer.

Looking for a marketplace software development company?

If you want to break into the sharing economy with your digital solution, you need to pay attention to the problem you’re trying to address with your product. It’s crucial to identify the problem your platform can solve so that it brings value to your consumers. In addition, you need to create a trustworthy online environment to foster safe user interactions. Building your marketplace platform from scratch will allow you to translate your idea into smart code, whereas using an open source marketplace platform can save you time and money.

We suggest looking through our portfolio to check out the projects we’ve mentioned in this article. Should you have any questions or need advice on how to build your own online marketplace, feel free to get in touch with us!


“The Building Blocks of Online P2P Marketplaces” was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.

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