Marketplace Strategy 101: What Every Founder Needs to Know

So you have an excellent idea for a new marketplace and you’re ready to start planning a launch. But where do you even start?

Your first step is to create a marketplace strategy. This alone gives you an enormous leg up — companies that strategize actively grow 30% faster than companies that don’t. In this article, we delve into why and how to get started. 

Why you need a strategy before launching your marketplace 

Marketplaces are complicated beasts. Before embarking on this journey, take the time to think through your vision and purpose. From there, build out a coherent strategy that will get you through every step according to marketplace best practices. Without a plan, you risk mispricing your products from the get-go, wasting money on poor customer targeting, or encountering big logistical challenges. 

A well-thought-out marketplace strategy prepares you for the biggest pre-launch hurdles, including helping you define your target markets, build pricing models, decide on the most efficient marketing approaches, and understand how your service should differentiate itself from the competition.

6 Steps to create your marketplace strategy 

Your marketplace strategy should outline, at minimum, these 6 key components: your reason for launching a marketplace, your target audiences, your initial marketplace research, your analysis of the competition, your chosen business model, and your minimum viable product (MVP).

As you walk through this article, we recommend writing down your thoughts. This marketplace business canvas is a good place to start.

1. Define your marketplace “why”

The reason why you want to launch this specific marketplace is going to shape your entire approach. Your core objective influences how you design your platform, what partnerships you choose to make, how fast you want to scale, how you vet new sellers on your marketplace, and how you reach potential buyers.

Start by asking yourself what your vision for the marketplace is, what problems you want to solve, and what your endgame is for the new marketplace. You’ll be glad to have answers to these foundational questions clearly defined when you’re in the thick of launching your marketplace and beyond. They’ll help you stay true to your goals when unexpected challenges arise.

Take it from Ryan Moser, the former VP of Revenue at ThredUp, a recommerce marketplace that’s redistributed nearly 100 million unique garments to date. Moser credits many of the company’s achievements to how they’ve stayed true to their core mission: to inspire the world to think secondhand first. 

“I think without having a clear sense of purpose, it’s really hard,” Moser says. “Do you have talented people who are bought in? We have a ton of those people [on our team].”

2. Decide who your marketplace is for and how they’ll benefit

Buyers and sellers have unique needs and behaviors, and knowing your target audiences helps you tailor your platform’s features to address their specific pain points. 

For example, a marketplace that sells laboratory chemicals needs to feature safety information much more prominently than a marketplace that sells consumer electronics. Buyers expect to be able to find that information easily, and sellers must provide it in a consistent way. Other audiences might need to see videos of products or speak to experts to better understand product specifications.

If you’re targeting a wide range of buyers and sellers, decide which groups you want to target first. Buyers and sellers need to complement each other and as well as benefit from joining the marketplace. Think of it this way: if you want to launch a marketplace that sells all kinds of clothing, but you start by targeting buyers in Hawaii, you should prioritize sellers that stock warm-weather clothes first.

3. Get a pulse check on your marketplace idea 

All of your gut instincts about your really great marketplace idea might be right — or they might be wrong! Researching the market you plan on breaking into can both validate demand and uncover big risks and challenges to come. Doing this kind of research might be daunting, but you can’t build a coherent marketplace strategy without it. Be open to what you discover and flexible where necessary.

There are many ways of investigating your marketplace idea. Your method of choice will depend on your target audiences and whether similar platforms already exist. Classic research methods include: 

• Interviewing industry veterans 
• Sending surveys to potential buyers and sellers 
• Performing market demand analysis with tools like Google Trends and keyword searches 
• Reading industry reports from trusted sources

4. Assess the marketplace competition

A key component of your marketplace strategy is a detailed assessment of both direct and indirect competitors, including marketplaces and non-marketplaces. This is when you’re going to drill down on opportunities for differentiation, especially in areas where existing platforms fall short. 

During the information-gathering stage, look specifically at competitors’ pricing, their platforms’ user experience, and their value propositions. It’s important to develop a thorough understanding of market saturation levels and potential barriers to entry. Is the market over-crowded? Are there any untapped niches you can target to get out from under the competition?

🔵 Not sure where to start? Use the competitive analysis template 🔵

Don’t let the success of your competitors deter you during this stage. Understanding what’s working about their strategies will help you figure out how to disrupt the landscape without throwing away any valuable tactics.

5. Outline your business model

This might seem obvious, but before you launch a marketplace you need to understand how it will make money. This includes both the short and long term. Three of the most common marketplace business models rely on commissions, subscriptions, and listing/selling fees.

Commission 

In the commission model, the marketplace platform takes a percentage or fixed fee from each transaction between buyers and sellers. This might be charged to the buyer, the seller, or both. The commission model is a good option for marketplaces that see a lot of consistent and predictable activity, like Uber.

Subscription

Subscription marketplaces charge users a recurring fee, either to access the platform or receive premium features on top of free access. This can be monthly or annually. For example, a subscription to Amazon Prime gets you perks like free and quick shipping, access to exclusive deals, and more. The subscription model is a good fit for marketplaces with less predictable sales or with heavy vendor customization demands.

Listing fee

Marketplaces that charge listing fees require vendors to pay a fee for every product they list or sell on the marketplace. Etsy is an example of a marketplace that uses listing fees— charging $0.20 for every new listing on the platform. This is a good choice for marketplaces that need more upfront capital and have a lot of seller growth.

6. Start with an MVP

While it’s great to have a vision for what your dream marketplace looks like, you can’t start there. It’s a waste of your time and budget to wait to build the perfect marketplace before you launch. 

Instead, start with an MVP. This will help you get to market quickly and start testing your ideas. During this stage, you’ll fine-tune the key features of your platform and validate your business model using minimal resources. Once you’ve gathered feedback from early users, identified any issues, and pivoted where needed, you can start to scale. A successful marketplace is built based on real user data and needs, not assumptions!

Don’t be afraid to pivot your marketplace strategy

Keep in mind, your marketplace strategy will change over time, especially as you get feedback from different users. Knowing when to pivot away from ideas that aren’t working is extremely important.

That said, pivoting is seldom easy. Take it from Olivia Mihaljevic, founder of LIVD, a B2B marketplace for employee lifestyle benefits. LIVD found success in their niche, but they began as something very different: a B2C marketplace for beauty services.

In its early days, LIVD encountered insurmountable difficulties scaling their hands-on approach to customer interaction. Luckily, Mihaljevic realized these limitations and made the right call to switch to a more hands-off B2B marketplace.

“A lot of being a founder is trying things out, being okay with failing, and kind of reframing it,” she says. “What have I learned? How am I better off? What can I do quicker and better and faster?”

Olivia considers pivoting a necessary part of building a successful marketplace, especially in the early stages. “I don't think we would have got to that point had I not tested a bunch of things out, figured out what worked, figured out a lot of things didn't work, and then made choices as I had new information.”

Use a marketplace strategy template

You don’t need to start from scratch to build a solid marketplace strategy. Our marketplace strategy template includes all the foundational elements of your marketplace vision, including identifying your buyers and sellers, the problem you're trying to solve, your unique selling proposition, and your ideal launch timing.

When you work from a template, you distill the most complex aspects of your business ideas into clear building blocks that help you stay focused, rather than trying to remember all of these moving parts yourself.

Effective strategies lead to successful marketplaces

By creating a solid marketplace strategy before launching, you’re taking control of your business’s future. Your strategy defines your purpose, your target audiences, and your business model, and serves as a guiding document for all of your decisions on pricing, marketing, and differentiation. Though flexibility and knowing when to pivot away from things that aren’t working are important, building yourself a solid foundation makes launching your marketplace much more manageable.

That said, your marketplace strategy is only the beginning. There’s a lot more work you’ll need to do as you develop and launch your marketplace, like how to get funding and how to generate demand. But consider this the foundation on which everything else is built. The stronger it is, the more confident you can be in every other aspect of your business. 

Want to learn more about what it takes to launch a marketplace? Sign up for Marketplace Bootcamp (it’s free!)

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