How to Scale Your Online Marketplace App

October 22, 2018

Achieving success with a marketplace application requires your business to understand its target niche, customer preferences, and a smart scaling strategy. 

An online marketplace is a multi-sided platform that matches product or service providers with potential customers.

In contrast to e-commerce websites that serve only a single business, marketplaces unite a variety of different businesses using a singular platform.

If successful, a marketplace gains a decent client base and conversions and comes to a point when it needs to scale. 

In this article, we provide effective tips on how to grow an online marketplace and achieve scale for your business.

First Step: Gain Traction in A Target Niche

Traction is the rate at which a business model captures monetizable value from its users.

In the world of marketplaces, traction is when you have achieved a “network effect,” which is when your platform attracts both service providers and people who need these services.

To create this effect and grow your business, you need to find the activities your users do now and that can bring you revenue in the future.

To determine these sorts of activities, study your client’s behavior, talk to your potential customers, and analyze the way they interact with your marketplace. For example, ask them to test your product and tell you what prevents them from making a purchase or what functionality will improve their user experience.

Tips for gaining traction for your marketplace startup include:

  • Find your niche: It is better to concentrate on one niche first and prove yourself as an authority in that space. This technique allows you to face less competition right off the bat and practice your marketing on one customer segment.
  • Identify key traction metrics: Track action-oriented metrics to determine how much traction you have earned and its resulting value for your business. Examples of key metrics include monthly recurring revenue, total number of users and clients, user growth over time, and conversion rate.

Respond to Market Demand by Adding Offerings

Once you achieve demand for your product, add new opportunities for your platform users.

For example, the owners of Rover, a marketplace that connects dog owners with dog sitters, discovered that their users ask sitters for other services, such as dog boarding, drop-in visits, grooming, or doggy daycare.

In response, they added these services and gained traction by creating not just a marketplace, but an entire community for pet lovers.

Business Model Growth: Rover

In business terms, the founders of this marketplace identified the business model growth signal – a need of additional services – which resulted in an increase in traction metrics, the number of daily users.

Another example of gaining traction is Yuggler, a marketplace for kids activities that allows parents to find and book different activities for their kids and families.

Although their product was unique and received positive reviews from friends, family, and potential customers, they failed to garner downloads on the App Store.

It turned out that the users wanted to have a larger number of activities to choose from, without spending 10-15 minutes on finding them.

In response, Yuggler added activities to its marketplace with photos and detailed descriptions. By enriching their platform with more content, they started to build a community.

In just one year, they reached 10,000 registered users.

In this case, the activity that drove traction was the desire of users to quickly find classes for kids. By focusing their efforts on this, Yuggler has significantly grown their business.

Yuggler Business Model Growth

The business model growth signal for Yuggler was that parents wanted to quickly find activities for their kids. After they have added more content, the main traction metrics – the number of registered users and booked activities – increased.

How to Grow Your Marketplace After Gaining Traction

After you have proved your value proposition, shift your focus to scaling.

There are various approaches to scaling which differ according to your market. These include:

  • Introducing your product into new markets
  • Serving new customer segments
  • Expanding your services 
  • Introducing a new business model

Online Marketplace Scaling Model

The picture above describes the steps you should take to grow your marketplace. 

Here are the main tips on how you can do this.

1. Build Trust and Safety Among Your Users

As your product grows, you get more users. As a result, you have to increase the control over your audience quality.Specifically, you need to guarantee to your customers that your platform is safe and reliable.

Here is how you can build the trust among them:

Scan and Verify Your Users

Create standards for your marketplace members and follow them as your platform grows. For example, Rover approves only 20% of applicants. If you carefully verify the requests you receive, you will build a reliable and proven community around your product. Here are the main things you need to check:

  • Social network accounts
  • Background check (this is especially true for peer-to-peer marketplaces)
  • Email and phone number validation
  • ID verification

Encourage users to write reviews

Ask both buyers and service/product providers to rate their experiences. This helps users identify which partners traditionally have positive experiences. 

Include Information About Refunds and Returns

According to a UPS report, inconvenient returns policy deters 80% of shoppers. A good refund and return policy in the product marketplace gives your users more confidence in the legitimacy of your platform.

2. Promote Your Marketplace

There are many of effective ways to promote your marketplace: 

Word of Mouth

Word of mouth is an extremely effective technique for spreading knowledge about your product. It's not too costly, as mostly all it requires is your creativity. A great example of the effectiveness of word-of-mouth marketing is the food delivery marketplace Deliveroo. Every Friday, Deliveroo staff in Singapore put on kangaroo onesies to hand out different Deliveroo merchandise. This approach helped them create awareness for their brand.

Referral programs

Referral programs are widely used in popular online marketplaces such as Uber or Airbnb. Uber’s referrals program helped them grow and expand into 50+ countries in 3 years. Uber offers referral programs for drivers and riders. If the riders sign up for the first time, they get cash credits. If they refer a friend, both of them will get a referral reward.

Affiliate marketing

Affiliate marketing is a way to get commission by promoting a product or service of another company on your website. For example, Preply, an online marketplace that connects tutors and students, uses an affiliate program in which anyone who places its link on their website can get 20% of the revenue on students and 2% of the revenue on teachers. One advantage of affiliate marketing is that you don’t pay for it until it provides results. If this strategy is suitable for your business, it is definitely worth trying.

How to Build A Community For Your Marketplace

Growing and maintaining a dedicated community is one of the best ways to scale your online marketplace.

Here is how you can do it:

  • Interview community members and influencers: Clients appreciate useful interviews with influencers in your industry. For example, you can post stories about how people earn revenue using your marketplace or tips and case studies from your platform’s most active users.
  • Organize offline events: Events are a great way to gather people that share the same interests. They are good opportunities to share experiences and exchange best practices. For example, Airbnb organizes meetups for uniting people from different countries that use this service. The events are very diverse: from exchanging hosting tips to parties with community members.
  • Build strong partnerships: Partnerships are a win-win strategy for building a community and getting more customers. They can also help you to raise awareness about your brand in new markets.

Functionalities That Help Grow Your Marketplace

To make your online marketplace more effective and valuable, include useful features. This will help you to improve your user experience and provide users with the necessary tools to interact with your platform.

Third Party Integrations

To make your marketplace more advanced, you can add various third-party integrations. Here are some of the examples:

  • CRM (Salesforce, Hubspot, etc): Customer Relationship Management (CRM) tools store important information about your customers in one place. With the help of a CRM, you can nurture your leads, keep track of your sales, and manage the customer lifecycle together with your team.
  • Analytics visualization tools (Kissmetrics, Fullstory, etc): Analytics tools will help you to improve customer experience by capturing and analyzing user interactions on your website. For example, if you see that most of your users bounce after viewing a certain page on your website, that's a sign that you should improve its content to make it more relevant and engaging.
  • Advanced search system (Elasticsearch): By integrating an advanced search system into your online marketplace, you provide your users with real-time and flexible search within your platform.
  • Communication and messaging software (Slack, Rocketchat, etc): Messaging software simplifies communication on your marketplace and improves relationships between users.
  • Chatbots: By integrating a chatbot system into your marketplace, you can save users' time and increase conversions. Сhatbots address each user personally, answers questions, and leads them to the purchase stage.

Custom Quotes

Custom quotes allow service providers set their own prices. You can also give your users an opportunity to get custom quotes instantly.

For example, ServiceWhale allows users to get a quote for home improvement online without the need for onsite visits from contractors.

Such an approach promotes transparency and promptness.

Dashboards for Different Types of Users

Custom admin panels for providers and buyers give your users more control over the buying and selling process. Admin panels also store key customer information, such as their activity, revenue, and orders, in one place.

Listen To Users to Improve Your Marketplace App

The most important thing here is to listen to your users. User feedback helps you better provide your value proposition and grow your online marketplace.

Use these approaches to help you do it:

  • Focus on one niche
  • Start to scale after you have gained a traction in your niche
  • Build trust and safety among your users
  • Promote your product
  • Create a community
  • Enrich your product with new functionalities

About the Author

Helen Vdovychenko Headshot Helen is a content writer at Apiko, marketplace development company. Her passion is writing useful tips for both startups and established online marketplaces.

Need Help Finding an App Development Company?

SCHEDULE A FREE SHORTLIST CONSULTATION WITH A CLUTCH ANALYST

Based on your budget, timeline, and specifications we can help you build a shortlist of companies
that perfectly matches your project needs.

TELL US ABOUT YOUR PROJECT >