Peer to peer marketplaces are cropping up everywhere. From taxis alternatives like Uber and Lyft to lodging like AirBnB and VRBO to more niche marketplaces like one for reselling sneakers: Goat, the past decade has seen a bonanza of marketplace startups. Looking at them today it’s easy to see their success and miss the fact that they too were once scrappy startups struggling to gain users a few at a time. Just what does it take to build a successful marketplace and can anyone do it?

When deciding to create a peer to peer marketplace there are three things you need to nail down before you can start. You need to find the right niche or sector that your marketplace will be focused on. You need to choose the right technology to build your marketplace with. And you need to know who your target users are likely to be so you can find them and invite them to use your marketplace.

Choosing The Right Niche

While all startup founders might aspire to build the next Amazon, even Amazon started small by focusing on a single niche: books. Choosing the right niche and scaling up from it works a lot better than trying to target a broad market from the start. There’s a great infographic shown below that highlights some of the different peer-to-peer marketplaces that have spawned from Craigslist. And the list is by no means complete, having grown significantly in recent years.

Image link: (https://techcrunch.com/2012/12/01/the-future-of-online-marketplaces/)

Craigslist was once the online marketplace for everything. For enterprising startup entrepreneurs, that presented an opportunity. Dozens of startups leveraged technology to create platforms focused on a single aspect of Craigslist where they felt they could provide users a better experience. Some failed, some succeeded, and many are still building their platform. Start small, pick something you know, and work from there.

Developing the Right Tech

What made so many startups think they could compete with incumbent marketplaces like eBay and Craigslist? It certainly wasn’t users, the established giants had them by the millions. Rather, they felt they could provide users a better experience by leveraging technology to create a better platform.

Just what makes some platforms better than others? Ease of use and trust. Think of all the times you’ve used a peer to peer marketplace whether it was to buy something online or hail a ride. Would you have used it if you didn’t trust the platform or it was difficult to figure out? Probably not, you would have gone with a more established, trustworthy, solution to your problem. Building trust and creating an easy to use platform are the core goals a startup should aim for when designing the technology behind their platform.

For most entrepreneurs thinking about starting a marketplace, the tech hurdle seems daunting. Good ideas for marketplaces are relatively easy to come up with, especially when it comes to a niche you know. However the know-how behind building a functional online platform is much more complex.

Building it yourself or hiring a developer to build your platform is always an option but it can be expensive and time consuming. For the less tech savvy founder there are a number of whitelabel marketplace solutions that make starting a marketplace easy. Companies like ShareTribe and Mirakl offer software that just about anyone can use. The beauty behind these solutions is they allow you to test your idea at relatively little cost. If it starts to catch on then you can always scale up as you see fit with a more custom solution tailored to your marketplace’s needs.

Finding the Right Users

Users are the heart of your marketplace, they provide the liquidity it needs to function. Liquidity is the expectation that a buyer or seller on your marketplace can find a counterparty to their offering or search. Achieve it and you’ve hit your first milestone. Congratulations, your marketplace is working.

For most marketplaces, the founder(s) and their team should be the first users. You can offer services, create product listings, and inject liquidity into your marketplace. As it grows this becomes a lot more difficult so finding quality early users is key. Niche or industry Facebook groups have proved vital in the birth of many marketplaces as they are a great place to find people extremely passionate about the marketplace’s focus. For example BoatEasy a marketplace that connects boat owners with local services for their boats like boat repair, started as a local Facebook group. As the number of users grew it became clear that a new, more customizable, platform was needed.

Build It and They Will Come…?

While this may sound logical, it can get you into trouble by running up expensive on an amazing tech stack that no one knows about. Marketplace platforms take a lot of hard work to build, beyond just the tech “infrastructure”. Building a technically awesome site means little if there are no users. As a founder you should know your niche and know what users on both sides of the transaction expect. Knowing how to attract buyers and knowing how to attract sellers may be two very different skill sets and as an early stage marketplace you need to solve for both. In the lingo of marketplace startups this is known as the “chicken or the egg” problem since it comes down to asking your team, which comes first buyers or sellers. The early years of a marketplace startup are tough. Building liquidity on your platform will take hard work and require early team members to fill many roles. With that said, marketplaces can be a very rewarding venture and the satisfaction that comes from seeing users have positive interactions on a platform you created is hard to beat.