Do you have a solid business concept in mind? Are you ready to launch your own online marketplace? But hold on a second, have you validated your marketplace company concept yet? Don’t be concerned. We’ve got your back!
Before you establish your own website or app, you must first validate your marketplace business idea. You must ensure that your concept is properly implemented, with the end result being a viable and legitimate marketplace. No matter how much money you spend into developing a profitable app, if it is not in the best interests of the users, all of your efforts will be for naught.
So here is the first step to learning about your idea, let’s take a dive into Online Marketplaces: 10 tips to guide your idea.
How to generate your online marketplace idea?
Solve A Problem
The fact that most online markets do not solve an issue is one of the key reasons for their failure. Most young businesses launch an online marketplace too soon and fail to expand their customer base. In Trinidad & Tobago only there are 34 online marketplaces all of which actually follow the same model.
Entrepreneurs have been influenced by the Sharing Economy to feel that sharing any asset would be a smart concept for a marketplace. The majority of them fail to consider whether the approach solves any issues. It’s critical that your marketplace addresses a market pain point or unmet need. It’s also critical in a marketplace business that the solution caters to both the vendors and the customers.
Is It Better To Go Big Or Small?
Another decision that entrepreneurs must make is whether to launch a horizontal or vertical marketplace. A horizontal marketplace, such as Yelp, brings together a variety of categories. A vertical marketplace like Airbnb focuses on tackling a specific problem: some people have spare rooms in their homes, whereas most guests require temporary lodging and a pleasant experience.
Entrepreneurs should aim for a vertical platform because they demand strong knowledge of a single sector or solution. Niche marketplaces have a competitive edge, but they require extensive market research because they involve causing behavioral changes. Marketplaces that are local copies of global players lack the novelty but still do good as the entrepreneurs have more knowledge about the local community than global players.
How to Validate your online marketplace idea?
Once you’ve decided on the problem to tackle and the technique to take, you’ll need to put your plan to the test. When you discuss an idea with a few individuals, it sounds fantastic, but the fate of a marketplace ultimately depends on whether the market is friendly to the idea.
1) Does your online marketplace provide a solution to an issue?
This is the first step in validating your marketplace concept, and it’s probably the only one you’ll have to keep asking yourself. It makes little sense to embark on the process of developing an online marketplace unless you have a need to solve. Many online marketplaces (about 40%) shut down during the first six months of operation because they were unable to handle any issues. There was no problem to solve in certain circumstances.
- Make a list of all your assumptions about the situation in order to acquire an honest answer to this question. Every single one of them.
- Ask a few folks, the more the merrier, whether they are dealing with a similar problem.
- Inquire about their current approach to the problem.
- Check online to see if your target market has any existing solutions.
If not, double-check that your solution addresses all of the problems. Also, if there is one, see if your solution adds any value to it.
2) Does the Online Marketplace Have a Market?
Before launching any product, you must determine whether or not there is a market for it. Calculating the total addressable market is an important metric (TAM). In basic terms, it is the total money you will earn if all of your product’s users in your target market use it. The smaller the TAM, the more niche your market is. It becomes easier to qualify your marketplace idea once you have the TAM.
Because a marketplace is a two-sided market, you must consider both groups of customers. If just one of them has a market, the marketplace is doomed to fail. Talking to people is one technique to find out if there is a market. Interviewing potential clients will help you figure out if your solution has a market.
3) Is it true that people are looking for solutions?
We often overlook the fact that people are looking for solutions in our entrepreneurial zeal. There may be an existing problem in your market, but it will never work out unless people believe it is causing enough inconvenience to warrant looking for solutions.
Search engine searches in your target market might help you figure out if individuals are looking for answers. Google and other search engines provide platforms for analyzing search queries. You can be guaranteed that there will be a demand for your marketplace if you have a complete list of users looking for solutions. Interviewing people is another option, which is more traditional.
4) Would People Be Willing To Pay For An Online Marketplace?
One of the final steps in the validation process is to determine whether or not people will pay for the online marketplace. The majority of individuals, particularly friends and family, believe that every concept is fantastic. However, if you ask them if they would pay for the solution, the majority will answer no. Only if you have a collection of clients who provide transactional value to the online marketplace will it be profitable.
5) The ‘Chicken & Egg’ problem (online marketplaces)
One of the most serious issues that online markets face is that both merchants and customers are influenced by one another. Customers will not visit the marketplace if there are no quality seller options, and quality sellers will not put their products and services on your marketplace if there are no customers. As a result, there is frequently a supply and demand imbalance in the marketplace. It’s challenging for a rising market to figure out how to solve this conundrum.
Aside from that, there are a few other problems that new online marketplaces encounter.
- Providing a positive client experience.
- Providing excellent customer service is a must.
- Creating and maintaining relationships with both suppliers and customers.
- Data about customers and sellers is kept safe.
How to validate your online marketplace Assumptions?
6. Market Research:
You must undertake complete market research before investing in any marketplace notion. This comprises researching possible competitors and their performance, as well as your target demographic and current market trends. The goal of this study is to determine the viability of your platform in today’s more difficult markets.
So, as you’re doing your market research, be sure to ask the following questions:
- Who do you want to reach out to?
- What is the present state of the market?
- Isn’t there already a marketplace for this?
- How is my concept superior to the competition’s?
- Why would customers and providers opt for a different provider?
- What happened to the other marketplaces that did not last or are not successful?
7.The Canvas of the Market
It’s time to write down your thoughts when you’ve completed your market research. The next phase is to develop a business model that considers both customers and providers’ value propositions, distribution channels, and income sources. If you divide your research insights into a fixed template that addresses the following: problem, solution, key metrics, distribution routes, customer segmentation, cost structure, and revenue streams, creating a marketplace canvas can be relatively simple. Remember that the concept will only work if you concentrate on both customers and providers at the same time.
This canvas will aid in the organization of your thoughts by providing an outline of what you intend to accomplish. Acting on a notion reduces the chance of failure and allows you to determine whether the concept is worth pursuing. Here are some of the questions to consider when you create the marketplace canvas for your marketplace concept.
- How effective have you been at resolving the issue?
- What is the consumer and provider value proposition?
- For customers and providers, how effective is the distribution channel?
- Is the cost structure feasible for both customers and providers?
8.Talk to your target market; obtain feedback from customers and vendors.
It’s critical to talk to your target audience and possible providers after you’ve created your marketplace canvas. When it comes to determining the viability of a business, their opinion on your platform is most important. To learn about shopper preferences, speak with someone in the same business or distribute an online questionnaire. This is crucial if you need to know how frequently and under what conditions they are willing to switch.
The interviews may also assist you in identifying some of the most recent market trends or crucial categories. This will eventually assist you in including the most relevant features that target the appropriate consumer base at the appropriate moment. Here are some examples of probable customer and provider queries. Remember that you can only pitch your idea to suppliers and customers after you’ve assessed how they react to current offerings.
Questions for prospective clients include:
- How do you assess the current state of the online marketplace?
- What types of brands/services would be most beneficial to you?
- Which e-commerce platform do you prefer?
- What distinguishes it from the competition?
9.Analysis, Benchmarking &.Risk Assessment
It is not a simple task to design a platform. While a marketplace canvas can help you determine whether or not to pursue your marketplace company concept, there are numerous additional canvases that can assist you in creating the right platform. A thorough examination of the following paintings will aid you in gaining a clear understanding of the market you are about to enter.
Ecosystem Canvas offers a broad perspective on the brand new environment and industries, assisting you in comprehending the new scenario.
Motivation Matrix: Several motivation factors are distilled into six core types: incentive, achievement, social, acceptance, fear, power, and growth. Any business takes actions triggered by several motivation factors that are distilled into six core types: incentive, achievement, social, acceptance, fear, power, and growth. Businesses forecast how a user will interact with the platform based on all of these incentive variables.
Minimum Viable Product (MVP): “A minimum viable product is a version of a new product that allows a team to gather the most amount of validated learning about customers with the least amount of effort.” — Ries, Eric
Using these frameworks to identify the platform’s benefits and drawbacks can be time-consuming, but it will pay off in the long term.
10.Create a minimum viable product (MVP) (Minimum Viable Product)
As the name implies, the goal is to provide a product with enough functionality to please early adopters. A subset of potential consumers is shown the app with essential functionality (and nothing more) and asked to test it. They then recommend enhancements for future development. Your assumptions will be validated by their reaction to the app’s performance. You may test your idea, design, features, user flow, and most crucially, the expectations of both users and vendors with an MVP.
An MVP can help you in the following ways:
- You may test, develop, and optimize your concept by visualizing it.
- Assists you in deciding on the best company model.
- It assists you in comprehending user and vendor requirements.
- Identifying the project’s shortcomings and flaws
Before you start developing anything, write down all of your assumptions about the problem, value proposition, business model, and distribution channels, and test them with consumer interviews and search data. Some of your initial assumptions are very likely to have been proven incorrect. On the other side, you now have access to previously unavailable knowledge, which provides you with new opportunities.
You should have a clear sense of your users’ true problems and viable solutions after going through this procedure. You should be much closer to finding a solution that fits the problem.
Or book a call with OCEY PHILLIPS to get all your marketplace needs solved.
