How To Successfully Move From An Online Store To A Marketplace Platform

Amit Basu is the Founder & CEO of Artisan Furniture, the world’s first artisan marketplace….

Amit Basu is the Founder & CEO of Artisan Furniture, the world’s first artisan marketplace.

Online marketplaces have evolved from generalist to specialist, and as a result, niche marketplaces are springing up across industries.

Within this move toward specialization, even though the majority of the marketplaces available offer end-customer services, such as Uber (transportation service), Airbnb (accommodation service) and Wayfair (home decor and furniture), they can also be dropshipping or wholesaling oriented. What is abundantly clear is that successful marketplaces tend to work on similar principles and use efficient, scalable and automated means to connect sellers with buyers.

Scaling A Business With A Marketplace

Many companies today have transactional websites—either those they have built in-house or through platforms such as Shopify, Squarespace and Wix. This can work well for smaller businesses or for those wanting to keep things simple.

However, once you have a thriving, growing e-commerce platform, there is always the temptation to wonder what the next step is and how you can grow. I ultimately believe that creating a marketplace is the way forward.

Amazon is, of course, the best-known example of a marketplace out there. It is enormous, highly sophisticated and has spawned numerous businesses on the back of its online store model, in particular third-party seller services. They, in turn, have created multimillion-dollar businesses that are now a target for aggregators like Thrasio and Benitago Group.

Eye-watering deals and valuations—sometimes achieved in a matter of months—are an enticing hook for entrepreneurs. It looks easy, but the reality is that these success stories are built on very hard graft, a lot of brainpower and a certain amount of luck.

The Benefits Of A Marketplace

What can online marketplaces deliver over and above what you already get from the e-commerce service you currently offer your customers?

Based on my own experience, I feel there are some compelling reasons to go down this route:

• It gives the artisans and sellers a direct, but centrally coordinated, link to the retailers who will ultimately sell their goods.

• Adding new product categories such as rugs, candles and other craft items creates a one-stop portal that buyers will return to again and again if it serves their needs well.

• A wider choice of products will bring new clients to the table and grow the overall pie.

• Transactions and deals can be tracked very accurately and the data used to assess what works and what doesn’t.

These are just some of the possible wins. However, getting to that point is not easy. You will need to roll up your sleeves, assess your current operating model and prepare for some heavy investment. The bigger retail players and/or suppliers can go to startups like Mirakl to help them out (like Kroger recently did), but for smaller companies, there is more leg work involved.

Software development is vital and possibly also merging your IT systems if you have more than one. Make sure to match up the specific product and service demands of retail buyers with the suppliers in that field.

A Successful Pairing

Processes in a marketplace are often not that different from a dating site. Both sides upload their requirements, product images and descriptions. Then algorithms search for a match. This results in a digital conversation where the site host acts as the intermediary, working to sync the buyer’s aspirations with a seller’s products and skill set. Terms tend to be predetermined and quite specific to ensure the process is efficient and to allow potential deals to proceed quickly.

Test phases are necessary to be certain you have a proof-of-concept and to remove any gremlins; in other words, you want to know what you’ve built works efficiently and won’t fail when you launch. In this respect, a soft launch might be better than a grand unveiling, as teething troubles are inevitable. But don’t be deterred; the prize will be worth it.

I have been through these stages myself in developing my own niche marketplace and while it is a daunting process—it took us 12-18 months to build a marketplace from scratch—it is also an exhilarating ride.

Marketplaces are always a complex beast. However, once executed successfully, I have found they can scale up quickly. My business’s marketplace operating system is built on four key parameters, which I think many other businesses can emulate:

• Underprivileged artisans or markets.

• A globally spread customer base.

• Available designers/buyers.

• Effective software developers.

The ability to scale is one of the most valuable factors. You can add infinitely more manufacturers and producers to the site, not unlike Walmart’s endless aisles, and automatically partner them up with buyers whose needs have been logged in the system.

This creates an ecosystem that benefits everyone and that engenders loyalty from both the buying and selling parties. In my particular case, it puts artisans front and center of what we do, which is an important goal for me personally.

Remember that if you are the first to set up a marketplace in your specific sector, and it also gains traction—either by word-of-mouth or your marketing efforts—your site will become the go-to for companies in that area of business. This is a huge plus when it comes to your industry reputation, your competitive edge and your bottom line.

Executed well, your brand—which is at the heart of it all—will shine. Just ask Jeff Bezos.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?