Marketplace is a platform that connects sellers and buyers. Amazon, Mercado Livre, iFood, models of global success. This guide presents how marketplaces work and what to consider when creating or participating in one.
What is Marketplace
Definition
Online platform that facilitates transactions between multiple sellers and buyers.
E-commerce Difference
E-commerce: a company sells its products. Marketplace: multiple sellers on the same platform.
Value
Connects supply and demand. Earn from intermediation.
Types of Marketplace
B2C
Companies sell to consumers. Amazon, Mercado Livre.
B2B
Businesses for businesses. Alibaba.
C2C
Person to person. OLX, I got sick.
P2P Services
Services between people. Uber, Airbnb.
Vertical
Focused on specific category. iFood, Dafiti.
Horizontal
Multiple categories. Amazon.
How to Make Money
Commission
Percentage per transaction. More common.
Subscription
Monthly seller fee.
Listing
Pay to advertise products.
Ads
Advertising within the platform.
Services
Fulfillment, payments, etc.
Chicken and Egg Problem
The Challenge
It needs sellers to attract buyers and vice versa.
Strategies
- Subsidize one side
- Start with niche
- Be the first customer
- Partnerships
Network Effects
Concept
Most valuable platform with more participants.
Types
Direct (more users = more value) and indirect (more sellers = more buyers).
Defensibility
Network effects create moat.
Marketplace Economy
GMV
Gross Merchandise Volume. Total volume traded.
Take Rate
Percentage that marketplace captures.
Unit Economics
Cost to acquire vs value generated.
Liquidity
Supply meets demand quickly.
For Sellers
Customer Access
Existing base.
Infrastructure
Payments, logistics, marketing.
Competition
Other sellers in the same space.
Dependency
Subject to platform rules.
For Buyers
Variety
Multiple options in one place.
Trust
Platform mediates conflicts.
Convenience
Unified experience.
Comparison
Easy to compare offers.
Core Features
Catalog
List of products/services.
Search and Filters
Find what you need.
Checkout
Unified purchasing process.
Payment Split
Split between marketplace and seller.
Reviews
Reviews and ratings.
Messaging
Communication between parties.
Dispute Resolution
Problem solving.
Technology
Platforms
Sharetribe, Arcadier, custom build.
Payment Split
Stripe Connect, PagSeguro Split.
Catalog
Structure for multiple sellers.
###Search
Elasticsearch, Algolia.
Operation
Seller Onboarding
Attract and activate sellers.
Quality Control
Maintain catalog quality.
Customer Service
Buyer service.
Fraud Prevention
Protect both sides.
Marketplaces in Brazil
Generalists
Mercado Livre, Amazon Brazil.
Fashion
Dafiti, Zattini.
Food
iFood, Rappi.
Services
GetNinjas, 99.
Challenges
Quality
Maintain standard with multiple sellers.
Fraud
Bad-intentioned sellers or buyers.
Disintermediation
Parties transacting outside the platform.
Regulation
Responsibility for products/services.
Key Metrics
GMV
Total volume.
Take Rate
Marketplace margin.
Sellers Active
Active sellers.
Liquidity
Search conversion rate.
###NPS
Satisfaction on both sides.
Conclusion
Marketplaces are powerful models that create value by connecting supply and demand. They require solving the chicken-and-egg problem, building trust and operationalizing quality. The prize is network effects and scale.
##FAQs
1) How to start a marketplace from scratch? Start with niche. Solve chicken-and-egg by subsidizing one side.
2) What take rate is typical? 5-30% depending on the sector and services offered.
3) Do I need to build my own technology? Not necessarily. Ready-made platforms exist.
4) How to attract the first sellers? Go to them. Active onboarding, dedicated support.
5) Marketplace vs. creating your own e-commerce? Marketplace for multiple sellers. E-commerce for own sales.
Also read
- Multiseller Platform: How to Create a Marketplace
- Marketplaces in Brazil: Panorama and Opportunities
- Marketplaces in Brazil: what you can learn by validating with real examples
- Multi-vendor platform: frameworks for companies to decide before building
- WooCommerce vs Shopify: Comparison of E-commerce Platforms
- Digital marketplace: what it is and how to validate the idea in practice