online marketplace sample business plan

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How to write a business plan for your online marketplace project.

Starting an online marketplace project is a great idea because it provides a convenient platform for buyers and sellers to connect and conduct their transactions, and it eliminates the need for physical storefronts, reducing costs and expanding the potential customer base.

But, before that, you need a business plan.

A business plan is essential before starting a new project, such as an online marketplace. It helps to ensure that the project is viable and profitable, and provides a roadmap for success. It can also help to identify potential risks and how to minimise them.

In short, a good business plan will help make sure your online marketplace project is profitable .

What should be covered when creating a business plan for an online marketplace project? How do you organize the structure? What are the essential financial figures to include? What techniques can I use to simplify the task of writing a business plan?

This article is your one-stop solution to find answers for all these questions.

One last thing: starting your business plan from scratch is not required.

Feel free to download our editable business plan for an online marketplace project and adapt it to suit your business needs.

Developing a business plan for an online marketplace project

Should you consider writing a business plan for your online marketplace project.

Yes, you should consider writing a business plan for your online marketplace project.

Constructing a sound business plan will empower you to:

• learn about the online marketplace market
• stay updated on the industry's evolving trends
• discover what makes an online marketplace project solid and successful
• understand the key features and user experience that attract online shoppers
• find a great unique value proposition for your e-commerce platform
• study competitor distribution channels
• uncover unique strengths for your online marketplace project
• find a business model that make you breakeven
• formulate an airtight strategy to maximize business growth
• evaluate risks associated with operating an online marketplace, including data security, seller verification, and customer disputes

Our team has created a business plan for an online marketplace project that is designed to make it easier for you to achieve all the elements listed.

How to outline a business plan for an online marketplace project?

A business plan has a lot of information, content, numbers, and financial data. There should be a clear structure, so it does not look messy.

When we designed our business plan for an online marketplace project , we ensured it was organized correctly.

This plan is structured into 5 sections (Opportunity, Project, Market Research, Strategy and Finances).

1. Market Opportunity

The section that comes first is titled "Market Opportunity."

Discover important data and figures about the online marketplace project in this section, helping you navigate this competitive market and build a successful online platform for buying and selling goods.

The data here is always fresh; we update it biannually.

2. Project Presentation

The "Project" section is dedicated to your online marketplace project. Here, you can explain the types of products or services you plan to offer, the platform's features, seller and buyer benefits, user experience, security measures, and the unique value proposition that differentiates your online marketplace.

Remember to introduce yourself at the end of this section.

Discuss your vision for the online marketplace, your range of products or services, and how you plan to create a user-friendly and trusted platform for buyers and sellers. Highlight your commitment to quality and customer satisfaction, your secure payment system, and your dedication to facilitating seamless transactions and connections between buyers and sellers through your online marketplace project.

In our business plan, we've already prepared content for you. Customize it to fit your concept perfectly.

3. Market Research

Then, we reach the "Market Research" section.

In this section, you will find a market segmentation analysis for your online marketplace project.

It includes a study of other online marketplaces in the industry that will be competing with you. Your project's unique features and competitive advantages are also highlighted. A customized SWOT analysis is included.

4. Strategy

Within the "Strategy" section, a detailed plan spanning three years is outlined, specifying the necessary initiatives to make your online marketplace project highly profitable.

Additionally, there is a marketing strategy, a method to manage risks, and a completed Business Model Canvas provided in this section.

5. Finances

In summary, you'll find the "Finances" section, which displays the financial details and analysis of your project.

How to write an Executive Summary for an online marketplace project?

The Executive Summary gives a concise preview of the business plan of your online marketplace project.

Keep it brief, with a maximum of 2 pages. Focus on the important aspects.

When you give your business plan to an investor, this is the part they will read at the start. It needs to get their attention and make them want to read the rest of the plan.

In the Executive Summary of your online marketplace project, answer the following questions: what is your online marketplace project about? who is your target audience? are there any similar online marketplaces? what makes your project unique? how much funding do you require?

How to do the market analysis for an online marketplace project?

The market study of your online marketplace project helps you understand external factors such as customer demands for e-commerce platforms, competition within the online marketplace industry, and emerging trends in digital commerce.

By conducting an extensive market analysis, an online marketplace project can understand consumer needs, offer a user-friendly and secure online platform, optimize pricing strategies, and execute targeted marketing campaigns, ultimately leading to a larger user base, increased transactions, and a prominent position in the online marketplace industry.

Here is what you will find in the "Market Research" section of our business plan for an online marketplace project :

• interesting data points and market insights about online marketplaces, including marketplace growth, consumer trust, and the impact of seller ratings and reviews
• a list of potential market segments for an online marketplace project
• the competitive research
• the potential competitive advantages for an online marketplace project

The key points of the business plan for an online marketplace project

What's the business model of an online marketplace project, business model of an online marketplace project.

An online marketplace project's business model revolves around creating a platform where multiple vendors can sell their products or services to customers. Revenue is generated through commissions, transaction fees, listing fees, or advertising.

The business model focuses on attracting a diverse range of vendors, providing a user-friendly interface for buyers and sellers, implementing secure payment processing, ensuring effective logistics and fulfillment, and creating a trusted and vibrant online community.

Success depends on establishing a strong network of vendors and buyers, effective marketing, ensuring a seamless user experience, building trust, and continuously evolving the platform to meet customer and vendor needs.

Business model vs Business plan

Keep in mind the difference between "business plan" and "business model."

A business model is a framework that outlines how a company creates value, delivers products or services, and generates revenue.

In a business plan, you make use of the Business Model Canvas as an easy-to-understand tool to depict how your business operates.

And, of course, there is a Business Model Canvas (already completed) in our business plan for an online marketplace project .

How do you identify the market segments of an online marketplace project?

Market segmentation for your online marketplace project involves dividing your potential customers into different groups based on their product interests, shopping behaviors, and demographics.

These categories may include factors such as electronics, fashion, home goods, or customers seeking specific shopping features or seller types.

By segmenting your market, you can offer a specialized online marketplace and shopping experience that caters to each segment's specific requirements. For example, you might focus on electronics and provide a wide range of gadgets and tech accessories from various sellers, offer a fashion marketplace where customers can discover and shop from independent designers and brands, specialize in home goods and create a platform for unique and artisanal home decor products, or focus on specific shopping features or seller types such as auctions or local sellers to accommodate customers with specific shopping preferences or needs.

Market segmentation allows you to effectively target your marketing efforts, communicate the diversity and convenience of your online marketplace, and provide a user-friendly and engaging online shopping experience that meets the unique needs and preferences of each customer segment.

In the business plan for an online marketplace project , you will find a detailed market segmentation that helps you understand your audience and their preferences.

How to conduct a competitor analysis for an online marketplace project?

It's clear that you won't be the only online marketplace project in the industry. There are other platforms connecting buyers and sellers for various products and services.

It's important to analyze your competitors thoroughly as part of your business plan. This means listing their traits, strengths, and weaknesses.

Explore their weaknesses (such as inadequate seller verification processes, poor customer dispute resolution, or limited product variety).

Why should you focus on these elements? Well, these weaknesses can hinder the growth and user satisfaction of online marketplace projects. By addressing these aspects, you can ensure a secure and user-friendly platform, offer a wide range of products and services, and provide effective customer support, positioning your online marketplace project as a trusted destination for seamless online transactions and connections.

It's what we call competitive advantages—develop them to make your business exceptional.

Here are some examples of competitive advantages for an online marketplace project: diverse range of products or services, easy and intuitive platform usability, reliable seller ratings and reviews, secure payment options, efficient customer support, continuous platform improvements and updates.

How to draft a SWOT analysis for a platform?

A SWOT analysis can help identify potential opportunities and threats in an online marketplace project, allowing for the development of strategies to maximize strengths and minimize weaknesses.

As you can guess, there is indeed a completed and editable SWOT matrix in our business plan for an online marketplace project

The strengths for an online marketplace project

When we talk about the "S" in SWOT, we mean Strengths, which are the project's strong features.

For an online marketplace project, possible strengths include a wide selection of products, secure payment processing, easy-to-use website navigation, and fast delivery.

The weaknesses for an online marketplace project

When we talk about the "W," we're talking about Weaknesses, which are the areas or aspects of the project that need to be strengthened.

In the case of an online marketplace project, potential weaknesses could include a limited user base, poor customer support, and inadequate seller verification processes.

The opportunities for an online marketplace project

When we refer to the "O" in SWOT, we're referring to Opportunities, which are the external prospects or possibilities that can contribute to the project's growth.

In the case of an online marketplace project, potential opportunities could include providing an online platform for buying and selling goods, offering a marketplace for services, providing an online auction experience, and facilitating peer-to-peer transactions.

The threats for an online marketplace project

The "T" in SWOT denotes Threats, which are potential adverse circumstances or conditions originating from the external environment.

How to outline a marketing strategy for a platform?

A solid marketing strategy allows entrepreneurs to adapt to market changes and respond to customer needs effectively.

A platform can connect users with valuable resources and services by developing an effective marketing plan that highlights the platform's unique features, user benefits, and its ability to address specific needs or provide solutions.

Users won't join your platform without effective marketing; highlighting the unique features, user benefits, and opportunities for interaction is crucial.

Are you implementing effective marketing strategies for your platform? Consider offering exclusive content or features to attract users, running targeted advertising campaigns to reach your target audience, and utilizing social media platforms to engage with your user community and gather feedback.

Don't fret if you lack knowledge in marketing and communication – there's no need to worry.

How to build a 3-year financial plan for a platform?

A solid business plan must include financial data to provide an accurate assessment of the business's potential success.

When developing your business plan, you'll need to estimate the projected revenue for your online marketplace project.

Ensuring your business plan includes revenue projections with clear and solid assumptions is key to building trust and confidence with potential investors who will review it.

Our financial plan for an online marketplace project is easy to use and includes built-in checks to help you identify and correct any assumptions, ensuring you create reliable projections with confidence.

Without a doubt, you'll need to come up with a basic budget for starting your online marketplace project. Make certain to include all expenses without exception - you can find them all listed in our financial plan!

The break-even analysis is central in the financial plan as it will tell you whether your online marketplace project will become a profitable company or not.

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How to Write an Ecommerce Business Plan [Examples & Template]

Published: April 03, 2024

If you have a promising idea for an online e-commerce business , it’s important to create an e-commerce business plan to ensure your vision has enough stock to be profitable.

Having a business plan for your online store will help you define your target market, establish your monthly and quarterly sales goals, and increase the likelihood of long-term e-commerce success.

In this post, we’ll go over an online store business plan and how you can create one for your e-commerce startup. Let’s get started.

What is an e-commerce business plan?

An e-commerce business plan is a document that outlines your business and its goals, analyzes your industry and competitors, and identifies the resources needed to execute your plan. It also lists the e-commerce retailers you’ll use to distribute your products and the marketing strategies you’ll use to drive sales.

Whether a company operates as a startup or has years of operations and growth under its belt, an e-commerce business plan is essential for evaluating a business and determining areas of improvement.

An e-commerce business plan is essential, with increasing numbers of shoppers conducting business online. It's estimated this number has reached over 2 billion . An e-commerce business plan keeps you organized and is useful when seeking investors who need to understand your company.

So, let’s dive into some examples of e-commerce business plans and what goes into writing one using our free template .

Free Business Plan Template

The essential document for starting a business -- custom built for your needs.

• Outline your idea.
• Pitch to investors.
• Secure funding.
• Get to work!

You're all set!

Click this link to access this resource at any time.

E-commerce Business Plan Template

Don't forget to share this post!

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How to Make an Ecommerce Business Plan for Your Startup

Darren DeMatas

February 28, 2024

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In addition to receiving commissions generated through affiliate marketing, we are able to fund our independent research and reviews at no extra cost to our readers. Learn more.

So you’ve decided that you want to quit your day job and start your very own ecommerce empire. That’s great!

But before you become the next Jeff Bezos  (and definitely before you quit your job!), it’s worth spending some time thinking about a business plan. In this article, we’ll dive into the key elements of an ecommerce business plan, which is very different than writing traditional business plans.

Why You Should Create a Business Plan

We know that starting an ecommerce business is exciting, and it can be tempting to jump right in without constructing a business plan. READ: PLEASE DON’T DO THIS.

If you haven’t put your ideas, questions and concerns on paper, then you haven’t given your business model enough thought .

Taking the time to write a business plan might seem like a lot of work, but it can save you a lot of time and money in the long run by better preparing you for potential challenges and opportunities that you’ll face as a first-time entrepreneur. Think of it as a roadmap for your new business venture.

It’s exciting to start your own ecommerce business. However, you want to be well prepared and not jump into anything without having a solid, foolproof ecommerce business plan in place.

After all, you wouldn’t jump out of a plane without a parachute, so why start a business without a safety device in place? That safety device is your business plan.

The business plan is the brainstorming process that ensures your concept and goals are realistic.

This is more than just mental notes. True business plans take your ideas , questions, and concerns and put those in writing.

As you start creating your business plan, you’ll soon understand that it’s more than a single piece of paper with handwritten details on it. It’s a clearly constructed format of how your business will be created, how it will operate, and what you hope the future holds in terms of a successful ecommerce business.

When you write your business plan, be sure to have a target audience in mind. Are you going to look for investors or put a Kickstarter campaign into motion and use this as your descriptive platform? If so, make sure that your business plan contains everything the audience would want to know about your business (and more!). Many traditional funding solutions require a business plan in order to give you capital. However, there are alternative solutions, such as  Payability  that specialize in ecommerce and don’t require credit checks, a business plan, or any complicated paperwork. They can also get you approved in as little as 24 hours.

When your business plan is completed, you should have achieved the following goals:

• Knowledge:  A greater sense of knowledge of the business aspects.
• Resources:  The resources you’re going to need to make your business successful, such as partners, money, employees, etc.
• Road Map: Have clear set goals to take you from the very beginning of your business and onward.
• Viability: In other words, is your business possible? Will you have enough profit margins to keep the doors open long-term?

Now that you know why you should create a business plan, it’s time to move on to how you can create your business plan and get started putting your ecommerce business into motion.

How to Start an Ecommerce Business Plan

At the very beginning of the planning stages, it’s a good idea to develop a framework for your business model. This business model will continue to evolve as you create each section of your ecommerce business plan, so don’t strive for a perfect completed plan on the first try. You will be making tweaks to the plan of certain steps along the way.

There are many ways to sell products online and different business models  to pursue. Research and learn from successful ecommerce business examples in the market. The exact business model you follow will be one that makes the most sense with your resources, skills, and interests.

In order to create the best online business plan with your product in mind, you need to figure out the following things:

What are you selling?

The first step to creating an online business is to learn the absolute basics of what you can sell.

• Physical products: Clothing , shoes, home goods
• Digital products: Software as a Service products, ecourses, ebooks
• Services: Consulting services, home cleaning

Who are you selling to?

• Business-to-Business (B2B): You are selling to organizations, corporations, and non-profits rather than individual customers
• Business to Consumer (B2C): This means you are selling to individual consumers rather than businesses
• Marketplace: You are acting as a middleman by bringing businesses and (B2B or B2C) customers to one website.

How are you sourcing your product?

• Manufacture in-house: You make your product or service in-house
• Third-party manufacturer: You outsource the manufacturing of your product or service to a third-party manufacturer
• Dropship: You partner with a dropship manufacturer. Basically, this means that they make your product, package it and ship it directly to your customer while your company handles the entire customer relationship.
• Wholesale : You buy goods or services from other companies in bulk and re-sell those products on your online store

Additional References

• Entrepreneurship: Business & Marketing Plans
• Small Business and Entrepreneurship
• Entrepreneurship Resources
• Business Plan Resources

Executive Summary

The executive summary will be written according to your goals, and it’s recommended that this is done at the very end of your business plan completion. This will ensure that you include all of the important factors about your business and present your ideas in a concise and complete way.

Some of the features you’ll include in the executive summary include information showing that you’ve done your research, you have concrete sales forecasts, and the main details about your brand.

Business Model

When you’re figuring out your business model, you have to consider four different areas:

• Monetization strategy
• Product/industry
• Target market
• Sales channel

Monetization Strategy

The monetization strategy delves into the methods you are going to use to sell your products.

This strategy will look at different product monetization methods, including white label, private label , affiliate marketing, wholesale, dropshipping, and even selling ads.

Product/Industry

The product industry section is where you summarize your main niche.

For example, “Vegan Skincare Products.”

Target Market

In the target market section, you will write a sentence or so on who your target market, or ideal customer, is in the community.

If you’re selling vegan skincare products, your target customers might be women who embrace the vegan lifestyle and use natural skincare products in their daily beauty regimen.

Sales Channel

The sales channel refers to where you’re going to sell your products.

For example, you might be selling your products on your own website, and this should be entered in this section.

Business Overview

This next section covers your company overview.

This section of your business plan will cover various features of your company, including the following:

• Company type
• Domain name
• Value proposition
• Brand traits

The brand name section lists your business name or brand name.

This is an extremely important aspect of your business plan as it’s what will set the tone for everything that follows.

Pick a brand name that’s simple yet unique and is something that can be used in a wordplay manner, if desired, but not pun-worthy.

Company Type

The company is how your business operates. For example, you might label your business as an LLC , S-corporation, sole proprietor, or some other type of business organization.

The best way to determine how you should categorize your company is to speak to your accountant. There are various tax and legal aspects to forming your business in a certain way.

Speak with the professionals in the company and corporation formation field to determine how to label your company and which company type best benefits your business in a variety of ways.

Domain Name

This section is where you list your domain name.

Choose a domain name that is memorable and embraces the overall traits and features of your business.

And, when choosing a domain name, be sure to think of SEO aspects when doing so. You’ll find out just how much all of these things tie together and ensure a frequently-visited website is the end result.

Keep in mind that with ecommerce, the domain name is just as important as the brand name. Maybe even more so!

Value Proposition

A value proposition is a short, crisp statement that will gauge how clear your idea is. Write this section as if you had one minute to explain your business to a potential investor or customer and then practice it over and over again.

The value proposition can be used on your ecommerce store as your company description.

Here’s a good example: Say you’re looking to start a hiking company called Atlas Hiking Co. which sells premium performance hiking shirts. A possible company description could be the following:

Atlas Hiking Co. is a lifestyle hiking company that produces high-performance hiking shirts for outdoor lovers. Our proprietary SPF40 fabric is one of the lightest fabrics on the market, providing mountain lovers with maximum comfort, both from a breathability and sun-protection standpoint. Our product is made in the U.S.A. and a portion of our profits are donated to preserve national parks around the country.

Pay special attention to all the sensory words !

The mission statement in your business plan is the “why” of it all.

For example, why you started the business, why you are selling the products you are selling, etc., can all be added to this section of your business plan.

You can make this portion as simple or detailed as you like. Just make sure to properly and clearly explain your business mission.

The vision part of the business plan is your “how” in the grand scheme of things. It is the dream you have for your company and the path you’re going to take to realize that dream.

When you write the vision portion of the business plan, think long-term. What are you hoping to achieve, not just in the near future but for the long haul of the life of your business?

Look into the future and plan out where you see your business in 5, 10, even 20 years from now.

This will help you construct the rest of your business plan if you know where you want your business to head, now and in the future.

Brand Traits

The brand traits section is a short section in your company overview.

Basically, in the brand traits section you’re going to want to list three to five words that describe your brand.

Think of your brand personality and describe it using a few separate powerful words.

The personnel section lists all individuals, including yourself, who will be involved in the daily operations of your business. You can create a separate section for a full operations plan or add that later.

Some business owners choose to handle all duties on their own or with a partner, while others will hire individuals to fill the following roles:

• CEO (usually the business owner)
• Management team
• Customer service/logistics
• PR/Social media specialist
• SEO manager
• Advertising manager

Competitive Market Analysis

Here’s a fact you can bank on: there has never been a successful e-commerce entrepreneur that didn’t understand his/her target market cold.

That’s why this section is one of the most important in the entire business plan. It will force you to understand the industry in which you operate, the overall industry analysis and outlook, the existing competition, and your target customer demographic.

Market Segment

The market segment portion of the business plan will help you to put your ideas down on paper, make them more focused, and get your team together.

This area will include your niche selection, target market, and competitive analysis.

Niche Selection

The niche section  provides an overview of your niche, why you selected it, whether there’s a micro niche included, and the type of niche you’ve chosen.

The purpose of this section is to crystalize the ideas that you have and make sure they are understandable and viable.

The target market section covers an overview of your target market plus describes your market segments.

Ask yourself who your  target customer  is (population size, age, geography, education, ethnicity, income level) and consider whether consumers are comfortable with buying your product category online.

When listing the target market information, make sure to mention your target audience size as this is important for ensuring that your audience will be adequately covered.

Competitive Analysis

With the competitive analysis portion of your market analysis, you want to list your market leader and direct and indirect competitors.

After you mention who these entities are, you need to list the characteristics of each one, such as domain name, business model, monthly traffic, and pricing range.

However, before you even get started in writing this section, you need to spend several hours researching your target market.

Here are some of the most efficient ways to research a particular market:

Industry reports

Google is your best friend. Look for any recent industry reports on your market of choice. This will give you a good sense of how much growth the industry is experiencing, why this growth is happening, and what are the largest customer segments. In our example of Atlas Hiking Co., we should research the outdoor apparel market.

Let’s say that through our research of the outdoor apparel industry, we discovered that there was a huge boom in youth hiking apparel. Perhaps parents were increasingly concerned about their kids’ exposure to UV rays while hiking, so they began to spend more money on their kids. We could use this valuable information to guide our business strategy.

There’s only so much you can read online. Go to a nearby store that sells similar products to yours and interview the store representative. The store rep has interacted with hundreds of interested customers, which can lead to thousands of valuable insights! It’s amazing how these insights can translate into a meaningful business opportunity.

Here’s an example:

If I were going into Billy’s Outdoor Store to research the outdoor apparel market, I would probably ask Billy the following:

• What are your best-selling products?
• What are your worst-selling products?
• Find products similar to yours and ask the representative his/her favorite features on products similar to yours.
• How much are customers generally willing to spend on these types of products?
• Do customers make repeat orders of any of these products?
• Do you get a lot of customers that are looking to buy last-minute hiking gear before they go on a hike?

Competition

Create an Excel spreadsheet of all of your competitors. In your spreadsheet, you should have the following columns:

• Competitor Name
• Price point
• Product Description
• Key Features (e.g., fabric, waterproof, slim fit, etc.)

What is the competition missing? Is there a gap in the offering? Where you can add some additional value?

After conducting the competitor analysis, Atlas Hiking Co. might find that the competition’s hiking shirts offer very few features at a low price point, but no one offers a luxury hiking shirt with additional features at a higher price point.

This is just an example of the types of insights one can gain from market research which can drastically alter your business model.

Keyword Research

By using Google’s keyword planner  and trends pages, you can get a good sense of how in demand your product is and whether it’s trending upward or downward. Google is great for a general idea, just don’t bank on it.

Some other keyword tools you can use for keyword research include Ahrefs, JungleScout, and Viral Launch. Check out this list  for more ideas.

Trade shows

Are there nearby trade shows that you can go to? Again, creating connections with other people in your industry is a surefire shortcut to countless hours of reading on the internet. Trade shows are also a great opportunity to talk to competitors, meet manufacturers, and better understand where things are heading in your industry.

Once you finish researching the relevant industry, you should summarize your findings by answering the following questions:

General Industry

• How big is the overall industry?
• How big is the specific sub-industry in which you intend to operate?
• Where has most of the historic growth in the market come from?
• Why is this the right time to enter this market?
• What are the sub-segments that are poised for future growth (e.g., youth apparel)?
• How crowded is the product category with competition?
• How is your competition distributing its product (online, retail, wholesale, etc.)?
• What’s missing from the competition’s product offering?

Products and Offers

So we know we want to sell hiking shirts, but how do you research specific products?

But for some of us, we’re not quite sure what we should sell. To succeed in online retail, you need a product that is trending upwards in a growing niche.

Different types of products

Some of the different types of products include the following:

• Convenience products: Frequent purchase products, little effort on buying
• Shopping products: Less frequently purchased in between purchases, little more effort and planning, shop around
• Specialty products: Strong brand preference and loyalty, will buy no matter what the price

The various types of niches include the following:

• Hobby niches
• Lifestyle niches
• Problem niches
• Weird/embarrassing niches

Existing products

Come up with detailed specifications for each product or service you intend to sell. If it’s a hiking shirt we’re selling, we would want to have:

• Detailed sketches of the shirt
• Fabric weight, materials, type
• Key features (e.g., pre-shrunk, water-proof, SPF 40)

Future product pipeline

What are other products that you have in the pipeline? Perhaps once you’ve successfully sold hiking shirts, you’re able to leverage your manufacturing relationships to provide hiking socks and shorts. Include that information in this section.

The products and services section will cover the various selling categories of items.

These product offerings will include the following:

• Core product

Each product group will have its own purpose in your sales catalog. For example, tripwire is the product that brings customers to your ecommerce store or online marketplaces  while the core product is your main seller.

Knowing what products you’ll include within each section allows you to have a firm grasp on what your main product will be and how the other types of products will work alongside your main product.

This section will also cover the search volume and Amazon pricing range.

You’ll need to calculate your true costs. You have to make sure you don’t overestimate your margins.

To tabulate your total true costs, you need to write down the costs in the following areas:

• Target price
• Supplier cost of the product
• Total cost per unit
• Net profit per unit
• Profit margin per unit

Once you complete the pricing portion, you’ll have everything on one sheet and readily accessible whenever you need it.

Marketing Plan and Operations

So, now you’ve concluded that you have a great business idea, and it’s in a growing market. That’s fantastic – but how are you going to drive traffic to your ecommerce website and get customers to buy it ? And how much can you afford to spend on your product?

Marketing  is everything. It’s important that your marketing efforts match your business model.

If you have a website and no marketing, your site won’t have any visitors. With no visitors, you will make no sales. Then how do you grow and sell your ecommerce business (if that’s your long-term goal)? Even with the best possible products, nobody will buy them if they aren’t directed to them in some way.

In order to come up with a marketing strategy, you need to first know your customer inside out. You should be able to answer such questions as:

• How old is your customer?
• Where does your customer live?
• What is the population of your customer base?
• What is their education level?
• What is their income level?
• What are your customer’s pain points?

With so many channels to reach your customer, which one is best for you?

Once we know pretty much everything there is to know about our target customer, we can shift focus to our marketing strategy. You want to choose marketing strategies that equal positive conversion rates. What channels should you use to grab the attention of your customer demographic? Some of the key marketing channels include:

Paid Marketing

• Pay-per-click – this online marketing typically involves using Google Shopping campaigns  and managing a product data feed.
• Affiliate sales networks – Allowing other blogs and websites to sell your product for a cut of the revenue. List the different affiliate sale networks that you plan to promote through.
• Facebook ads ⎯ Ads posted on Facebook to draw in buyers through social media means.
• Influencer marketing ⎯ Hiring industry influencers to get the word out about your product through their social media platforms and contacts.

Organic Marketing

• Social media (Facebook, Instagram , Pinterest, etc.): What is your strategy for social media, and where will you dedicate your attention?
• Search Engine Optimization : Create and promote awesome content so people find your product organically through search.
• Content marketing: Figure out how you’ll use content marketing in your business. Consider various article topics that will persuade your target audience to buy your products.
• Blogger networks: could be organic or paid through affiliate sale programs.
• Key bloggers: Develop a list of the key bloggers in your product category. For Atlas Hiking Co., this might be an influencer that blogs about the best hiking trails in America.

Finding the optimal mix of these advertising tools depends 100% on your customer segment as well as your product type. For example, a SaaS product targeting millennials will require an entirely different marketing strategy than an e-commerce physical product targeting baby boomers. Perhaps that should be a post on its own for another day!

How much should you spend to acquire a customer?

In order to understand this, we need first to discuss a concept known as customer lifetime value or LTV. In essence, this is a formula that helps you better understand how much an average customer will spend over time.

Here’s  a good read on how to calculate LTV.

It’s important to remember that for new businesses, you don’t have a lot of data on customer purchase habits so it’s a good idea to be more conservative with your assumptions in calculating LTV.

Let’s say, for Atlas Hiking Co., I determine that the average LTV per customer is $300. This means that over time, the average customer will spend $300. Let’s say, on average, if I receive $300 in revenue, $100 of that will translate to gross profit before I factor in my marketing costs (basically, I’m just subtracting the cost of making the shirts).

Knowing that my gross profit is $100 per shirt is a critical piece of information because it tells me that I can spend up to $100 in marketing to acquire a customer and still be profitable!

Some of the marketing options include social media marketing and content marketing.

Think about your business model and then line up your marketing budget. Your marketing budget may include the following items:

• Sales/branded content
• SEO/blog content
• Facebook/Instagram ads
• Influencer marketing
• Marketing tools
• Niche advertising

Choosing The Right Technology

With so much technology and SaaS products out there, it’s important to understand the various moving parts and diagram how they all integrate with one another.

Some of the different elements include:

• Shopping Cart Platforms  – e.g., Shopify , BigCommerce , WooCommerce , or any open-source platform
• Hosting – Nexcess , BigScoots , Kinsta , WPX
• Payment Processo r – e.g., Stripe, Paypal
• Fulfillment Center – e.g., Amazon, ShipBob
• Apps – e.g., Zipify, BuildWooFunnels, Gelato
• Accounting & Taxes  – e.g., Quicken, Xero
• Marketing Automation – e.g., Klaviyo , Mailchimp
• Marketing Tools – e.g.  Buzzstream, Ahrefs
• Customer Loyalty Programs  – e.g., Antavo, Smile

Come up with a detailed list of the different products and services you need to run your business as well as the monthly and per-transaction cost of each of them. This will be important in understanding the impact of these services on your margins.

Matching your business model to your technology is essential, too. Certain website platforms are better suited for specific sales models.

Email marketing is another type of technology that should be carefully considered and matched up correctly with your business model.

Keep in mind that it takes, on average, 6-7 interactions with a brand before someone makes a purchase, so you need to keep using technology to get them back to your website.

As you explore the technology options and find out ways to draw potential customers in and keep them happy while they’re there, here are some key points to keep in mind:

• What you say about yourself and your products with your website content
• How you respond to questions on live chat and email support
• How to make use of chatbots
• How you connect on social media
• The information you send through email marketing
• What bloggers and influencers say about your brand
• How existing customers review your company
• How you advertise
• How you establish loyalty beyond sales

After you figure out your technology methods, you have to come up with a technology budget.

The business plan must also include the operations side of things. Determine who will be your manufacturer, secondary manufacturer, and shipping and fulfillment  provider.

When looking at supply chain costs and options, ShipBob  is an ecommerce fulfillment provider you can consider.

Financial Plan

When figuring out your financial plan, evaluating and pinpointing your startup costs  is essential.

The focus of the financial plan is how long it will take for you to make your money back. You also need to figure out if you need a business loan .

Traffic and conversion rates will help you determine how long it will be until you start making money back.

You’ll also want to use an income statement to detail financial information.

This section is used for financial projections, such as forecasting sales, expenses, and net income of the business. Ideally, you’ll want to create a monthly Excel balance sheet showing the following:

• Projected revenue:  First, come up with your projected number of units sold and then come up with your projected revenue (Projected Revenue = # of Units Sold * Average Sales Price).
• Fixed expenses:   these are expenses that are fixed no matter how much you sell. Typically, these relate to monthly SaaS subscriptions, employee salaries, or rent.
• Variable expenses  – these expenses change in direct proportion to how much you sell. Common examples include the cost of goods sold and credit card payment processing fees.

This helps business owners better understand what they need to achieve to hit their profit goals. In reality, projections are usually always off the mark, but it’s good to give yourself some measurable goals to strive for.

This section should aim to answer the following questions about your product offering:

• How much product do you need to sell per year to meet your income goals for the business?
• What are the margins on your product? If you sell one hiking shirt for $50, how much do you make after paying your supplier, employees, and marketing costs?
• What is the lifetime value of a customer?
• How much can you spend to acquire customers? If you conservatively project that the average customer will spend $300 over time on your shirts, then you can afford to spend an amount less than $300 to acquire that customer using the paid marketing channels described previously.
• Do you have any big capital expenditures early on that would require you to need to bring in investors?
• Can you improve gross margins by making bigger orders from your suppliers?

There are various acquisition channels that will help your traffic to convert including:

Your revenue plan will contain a 12-month revenue forecast plan to help you map out each month of earnings.

There are different business earning models you can go through to determine how much you can make with your business.

You want to calculate how much traffic costs. This all depends on the methods you use to gain traffic to your site.

As you determine what your profit might be with your ecommerce business  or ecommerce businesses, there are certain math formulas to use:

• The profit equation
• Break-even analysis
• Units needed to achieve the profit target

You should also consider how you will use fintech companies in your ecommerce business.

What are the key elements of an ecommerce business plan?

The main components of an eCommerce business plan include the executive summary, company description, market analysis, organization and management structure, product line or service, marketing and sales strategy, financial projections, and funding request, if applicable.

How do I create a budget for my ecommerce business?

Start by estimating your initial startup costs and ongoing expenses. Consider costs like website development, inventory, marketing, shipping, taxes, and any necessary licenses or permits. It’s also important to factor in a contingency plan for unexpected costs.

How do I find the right product to sell?

Research is fundamental. Look at market trends, customer needs, and competitor products. Use tools like Google Trends or social media platforms to understand what customers are currently interested in. Always consider your passion and knowledge about the product too, as this can drive your business forward.

How can I differentiate my product from competitors?

Differentiation can come from unique product features, superior customer service, better pricing, or a compelling brand story. Understand what your competitors offer and how you can do it differently or better.

Wrapping Up Your Business Plan

Careful planning is crucial to get your e-commerce business from the planning phase to the launch phase and to ensure its successful future.

Going through the exercise of writing a business plan will cement your own understanding of your business and your market. It will also position you to take advantage of lucrative opportunities while mitigating harmful threats to your business down the line.

Your turn! Have you written a business plan for your online store? Do you have anything to add? Tell us about it in the comments below!

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How To Create A Marketplace Business Plan In 11 Steps: Full Guide

• November 17, 2023
• Fundraising

Both in the B2C and B2B industry, marketplaces have reshaped how we purchase online. They are flourishing in all verticals today, from large-scale consumer markets to B2B niche sectors. Whether you are raising capital or applying for a grant, you will need a solid business plan for your marketplace startup.

Whilst every marketplace is unique, we strongly recommend to follow in your business plan a clear structure vetted by dozens of high-profile VC firms globally. Having a powerful and clear business plan will maximise your chances of raising capital from potential investors.

In this article we walk you through the 11 sections you must have in your Marketplace business plan. Let’s dive in!

Note: If you are looking for a pitch deck instead, read our guide here . Although business plans and pitch decks are similar, they are also very different in their format. If you aren’t sure what is best for you, we recommend to read our article on the key differences between business plans and pitch decks .

Marketplace Business Plan: The Template

If you are creating a business plan for your marketplace startup, we recommend you follow the following structure:

• Executive Summary
• The Problem
• The Solution
• Market Opportunity
• Competitive Landscape
• Business Model
• Intellectual Property
• Marketing Strategy
• Financial Plan

1. Executive Summary

The executive summary is the introduction of your business plan. This is a section you should spend a lot of time on as it’s the first impression investors will have when looking at your business plan.

The executive summary should fit in 2 pages maximum . Make it to the point, concise, and make sure to answer the following questions:

• What is the problem you want to solve?
• What is your solution?
• Who are the co-founders behind the project?
• Do you have early traction?
• What are you asking for (capital from investors, government grant application, etc.)?

2. The Problem

This is the “why” of your business. Explain in this section what is the problem you are trying to solve.

The greatest businesses are solving big problems, yet they aren’t necessarily obvious . For instance, your marketplace might be in a niche B2B market and digitalising a legacy industry (health supplies for private clinics for instance). As such, you are solving an important problem for private clinics: the lack of product information, choice and unfavourable bargaining power from large suppliers.

Ideally you would list the 2/3 friction points you aim to fix. For instance, digitalisation usually fixes multiple problems at once: it is fast, seamless and accessible (vs. slow, prone to errors and non-readily available / accessible solutions).

Expert-built financial model templates for tech startups

3. The Solution

Your startup builds and commercialises a product and/or a service which solves the problem explained earlier.

This section should not explain in detail your product nor how it works. Instead, it should focus on the benefits for your customers .

Ideally, you should compare the pain points explained on section 2 (the Problem) to the benefits your solution brings to your customers. That way,  it is crystal clear to investors your solution really adds value to potential customers .

Following our marketplace example above, the benefits could be:

• Availability of products and comparability: clinics can choose exactly the product they are looking for, easily comparing features vs. alternatives
• Price competition ensuring best price-quality ratio

4. Market Opportunity

Here, you need to clearly identify 2 very important metrics:

• Market size :  how big is your market?
• Market growth:  how fast does your market grow?

If you are operating in a niche market, chances are that you will face some challenges: the information might not be publicly available. In any case, you should be able to make a high-level estimation of your market.  Read our article on market sizing and how to estimate TAM, SAM and SOM for your startup .

When looking for these metrics, you have multiple sources of information: public reports, specialised press, etc. Even public companies publish press releases and annual reports including some of their proprietary market estimates so be sure to look there too.

5. Competitive Landscape

How fragmented is your market.

Are there 3 big players sharing 90% market share or thousands of small players? Here, refer to public market reports and your own understanding of the competitive landscape.

A few questions you could ask yourself, among others:

• Who are your competitors?
• Are they local, regional, national or global?
• Are there any marketplace already in your industry or suppliers only?
• What’s the bargaining power of suppliers vs. buyers?

Where do you position yourself vs. competition?

Is your solution a game changer other competitors don’t have (yet)? Do you have competitors with similar products/services?

Ideally, you would create a small table with, for each type of competitors (e.g. wholesalers, marketplaces, direct suppliers, etc.) the main characteristics they share or not. For instance, do they all a global presence? Do they cover all the products you offer? Are they selling multiple brands / suppliers products? What is their relative price positioning (expensive vs. accessible)?

6. Business Model

This section is very important. Now that we have clearly identified the problem you are solving and the benefits of your solution, let’s have a closer look at your product.

This is where you clearly explain 2 key things:

Which products/services do you offer?

Marketplaces typically act as intermediary between sellers and buyers for specific products and/or services. Unfortunately, the global marketplaces like Amazon are exception to the rule here.

Here you will need to explain clearly what is your product offering : what services/products are you focusing on? Ideally, you would show a breakdown in terms of orders or revenues (pie chart for instance). Indeed, using our health supplies B2B marketplace example above, you might only focus on disposable health supplies (and not heavy medical equipments) for instance.

Another key information to add here is the average order value: what is the average value of the products? Are products transacting on your marketplace $50 piece second-hand clothing or $20,000 specialised industry rental machinery?

Pricing model

Marketplace are generating revenues from a number of sources, usually there are 3 main sources:

• Commission revenue : the main source of marketplaces. Marketplaces generate commissions revenues from 2 sources: either percentage of order value (for instance 10% of all transactions’ value) or a fixed fee instead (for instance $20 per transaction)

Note: the sum of commission revenues as a percentage of total transaction value (gross merchandise value) is usually referred to as “rake” or “take rate”. For a refresher on the 10 most important marketplace metrics, read our article here .

• Subscription revenue : you offer a tiered system, freemium or not (free plan) users need to pay for (monthly or annual billing cycle). You can charge either sellers or buyers (or both) for accessing the marketplace
• Additional revenues: marketplaces can sell add-on services such as promotion & content (e.g. promoted ads), white-label products, marketing and branding services, etc.

7. Intellectual Property

This section is optional: only include it if you already have a MVP. If so, you have a strong argument for product-driven investors which will give a lot of credit to your tech.

Be careful not to go into too many specifics though: investors aren’t always engineer by training. Do not put things like the programming language you have chosen (e.g. React, Python) or the database provider (PostgreSQL, MongoDB).

Instead, include things such as:

• whether you have a white-labelled solution or a proprietary back-end / database
• how many full time front/back-end engineers you have
• how much you invested already in your tech

8. Marketing Strategy

This section explains  how you acquire sellers and buyers respectively .

Depending on the type of customers you have, acquisition will likely be different. For instance, large suppliers (sellers) are usually acquired via outbound acquisition (Sales representatives). Instead, consumers (buyers) are acquired purely through traffic (paid or organic).

The different sources of acquisitions for marketplaces are:

• Paid marketing : any paid digital marketing campaigns (pay-per-click or per-impressions), whether it is search to your landing page (e.g. Google Ads), social media (e.g. Facebook Ads) or referrals. Paid marketing is mostly used to acquire sellers and buyers. As explained above, whilst buyers can be acquired exclusively through paid marketing or organic growth (see below), sellers can also require sales team effort (see below)
• Organic growth : you acquire sellers and buyers without paying for it. Organic growth is typically driven by investment in content (SEO, social media)
• Outbound acquisition : you acquire sellers (or rarely buyers) thanks to your sales team who contact potential customers via phone, emailing or in-person sales efforts. This is especially true for marketplaces who connect a few large suppliers to potential buyers.

Once you have clearly explained your acquisition strategy and what tools you are using (e.g. Google Ads for paid search, social media and content for organic growth), ideally you can show, among others:

• Your average  Customer Acquisition Cost
• Conversion rates and its components (add-to-cart rate, cart abandonment rate)
• Your monthly paid ads budget
• The number of followers you have on social media
• Your newsletter count

Note: for a refresher on the 10 most important marketplace metrics, read our article  here .

The roadmap tells investors where you are going and how is product going to evolve in the future. You can either keep it high-level (e.g. your long-term strategy) or more detailed (e.g. the pipeline of the near-future product features).

Investors do not just invest in your product as it is today. For example, you might only have developed a MVP with limited features for  early-adopters  while your product could be tweaked and serve a much larger customer base in the future.

Also, you might be broadening the type of products you offer in the future. Or you might introduce premium services such as a subscription, or premium listing fees. All of these additional features are very important to add in your investment deck.

Note: if you choose to include your product pipeline, keep it very simple. Your marketplace business plan isn’t your product manager’s presentation to engineers.  Instead of features, focus on the additional benefits and customer segments you might target  as such.

In this section you should focus on the people behind the company. Unlike in the executive summary, the team section of your business plan should not be limited to the cofounding or management team.

Instead, you should explain the current organisational structure of your company, the different teams, who they report to and their relative size.

For the people, keep it short. Keep biography to a minimum and only to key people (cofounders and management team). As rule of thumb, 5 lines per team member are enough, 10 a maximum.

When it comes to biographies, only include what is relevant: name, position, years of experience and/or previous companies is more than enough.

What about advisors?

Do you have angel investors with significant experience who advise you on strategy? Do you have a PhD who acts as advisor to your marketplace startup (on regulation and market access matters for instance)?

Any advisor should also be included here, with the same level of detail as for the management team.

Demonstrating in your business plan that not only team members but also experts are advising and/or sitting on your board is a strong selling point.

Note: add a clickable link to the respective Linkedin profiles so investors can refer to a more exhaustive resume for your team members (if relevant)

11. Financial Plan

Along with your product and the team, this section is very important. Unfortunately, many startups overlook the importance of financial projections in their Marketplace business plan.

Think about your audience: investors (venture capital firms or angel investors) are financially literate individuals . As such, they invest in your business to generate returns. Logically, they care a lot about your financials and more especially,  the expected financial performance of your business .

Do not expect investors to make up their own plan for your startup if you haven’t. As CEO, founder or entrepreneur alike,  you should have a clear idea of where you are going .

As rule of thumb, the more advanced your startup is, the more granularity you should include here. Pre-seed startups might keep it short (2/3 pages maximum) yet we recommend seed and Series A+ startups to include 4/5 pages at least instead.

Common marketplace metrics you should include in your financial plan slide are:

• Gross Merchandise Value (GMV)
• Average Order Value (AOV)
• Seller / Buyer Ratio
• Repeat Orders Rate
• Customer Acquisition Cost (CAC)
• Customer Lifetime Value (CLV or LTV)

For a complete list of the 10 most important metrics for marketplace businesses, refer to our article  here .

Marketplace Financial Model Template

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How to Create an Online Marketplace Business Plan

How do you write an online marketplace business plan? Here’s all you need to know about writing a business plan for your online marketplace.

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How do you create an online marketplace business plan?

Look no further. Today, you get the exact steps to create your own online marketplace business plan. 

Want to learn more? Read on!

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What is an online marketplace?

First things first: 

What is an online marketplace? A marketplace business is a platform where vendors and buyers meet and exchange value (usually, money). These can be e-commerce, rental, or service marketplaces in either the business-to-business (B2B) or business-to-consumer (B2C) niches. 

Marketplaces are growing fast. In fact, 47% of global online purchases happen via online marketplaces. And B2C marketplaces are estimated to reach $3.5 billion in sales in 2024.

Are online marketplaces profitable? 

Just like any business, online marketplaces can be profitable. For instance, if you compare online marketplaces to e-commerce or service businesses, the online marketplace business model can be far more profitable. 

E-commerce businesses require an inventory. Shipping and returns often eat up a big chunk of profits. Service businesses require high labor costs (unless you’re doing all the work yourself). 

Online marketplaces, on the other hand, take time to build up but once you have traction, you have far fewer costs than most other business models. 

What is an example of an online marketplace? 

You likely know most of the bigger marketplaces: Amazon, Airbnb, Etsy, eBay, Uber, and Alibaba, to name a few marketplace examples . As marketplaces are growing, other big names are likely to pop up in most niches. 

Now you know what a marketplace business is. But how do you start one? 

The first step? A business plan. 

How to create an online marketplace business plan 

Next, let’s look at how to create an online marketplace business plan.  

A business plan will help you gain clarity on the business you’re about to start. And most importantly, you get an understanding of your target market and competition. After all, 20% of small businesses fail in their first years, but with sufficient preparation, you don’t need to be one of them. 

Here’s what a basic online marketplace business plan template looks like: 

Introduction

• Executive Summary
• Company Description
• Product/Service Description 
• Value Proposition
• Market Analysis 

Business Model 

• Sales Strategy 
• Growth Plan
• Management & Staffing
• Financial Summary 

Executive summary

An executive summary is a summary of your business plan. This is a short text snippet and includes a high-level overview of your business concept, marketplace, business goals, market, customers, value propositions, the scope of business, and online marketplace business model . 

Company description

A company description gives a brief overview of what your business is. It includes a description of your business structure, industry, what you’re selling, your long-term plan and short-term goals, as well as your team. 

Marketplace description

Explain your pricing strategy and model, if your business is ready for the market, and if there are any intellectual property considerations you need to take into account. (Likely, there aren’t.)

Value proposition

Market analysis

In this section, you present your target audience and why they want to buy from you. 

Target market

Your target market, your customers, are the focus of your business. Remember that as a marketplace business owner, you need to understand both your sellers and your buyers. 

Find out things like where they live, their age, education, income, and interests.

But also understand their psychographics such as what problem it is that they want to solve, why they can’t solve it today, and what measurable outcome they want to achieve. 

In this section, you present the size of your target market and its trends and trajectories. You get this information from news outlets, governmental statistics offices, and academic research. 

SWOT analysis

A SWOT analysis analyzes the strengths (what makes you unique), weaknesses compared to your competitors, opportunities (possibilities in your industry), and threats to your business. 

Competition

What does your competition look like? If it’s intense, you won’t see as high profits as if there is less competition. And if it’s easy to start a business in your industry, there will be more competitors. 

Your value proposition helps you understand how your business will stand out. For instance, do you offer lower prices? Do you have a unique business idea? Or do you focus on a very specific niche? 

Ask yourself who your customers are and how you’re different from the competition.

Business model

In this section, you list the workflows you need for making your business work. This includes logistics, suppliers, and inventory, as well as a contingency plan if something goes wrong. 

However, as an online platform business, you don’t really need to think too much about your operations, as that part is handled by the sellers who sign up for your marketplace. 

Marketing  

How are you going to grow your business? You need to be specific about where your audience hangs out online and how you can reach them. Also, don’t try to do it all at once -- focus on one or two strategies and expand to other strategies when you have some traction. 

Your marketing strategy needs to focus on:

• Your marketplace pricing (if you use commissions, the percentage cut you get from every transaction) 
• Your promotion strategy 
• How your marketplace is different from other marketplaces 

Sales strategy

This section covers all the steps of your sales cycle. For instance: 

Facebook ad → user signs up → buys from a vendor 

However, note that your sales cycle also covers your vendors signing up. In a way, you’re selling to two different groups of people. 

Growth plan

How will you grow your marketplace business? Make this a specific and realistic plan and explain the exact steps you’ll take to grow your business. 

Management & staffing

Explain what the management of your business will look like. Likely, you won’t have a team when you’re just starting out. But define at what point you’ll start hiring so that you’re prepared for when that happens. 

Financial summary

Your financial plan is a summary of your income statement, cash-flow statement, and balance sheet. Here’s what they mean: 

Income statement

What are your revenue and expenses? This is a profit-loss calculation that you can base on estimates if you don’t have any sales at this point.  

Balance sheet

This is a list of your business assets; what you own and what you owe. 

Cash-flow statement 

This statement also takes into account when revenues are collected and expenses paid. With more money coming in than going out, you have a positive cash-flow statement. 

How do you start an online marketplace? 

Finally, how do you build your online marketplace ?

First, you need to set up your marketplace website. 

You can either use a marketplace website builder or develop your own website. The cost of building a marketplace business from scratch is typically quite high (as is the case for most web development projects). A simple marketplace can cost $20,000 or more. 

That’s why marketplace website builders are a great option. These typically come with drag-and-drop, no-code tools that make it easy to set up a website even if you don’t have a technical background. 

Our own tool helps you get started fast, just like we help all of our other customers.

Of course, building your website is just step one. Step two is to grow it. For that, we have plenty of resources to help you get started: 

• The Marketplace Payment Solutions That Work Great Right Now
• How to build an online community 
• Online Marketplace Strategy: How to Win with Your Marketplace 
• Key Marketplace Metrics: How to Measure Growth 
• A Marketplace Marketing Strategy That Works Great 

Over to you!

There you have it! Now you know how to create an online marketplace business plan. 

While a business plan can help you get clarity, don’t spend too much time writing it. After all, your focus should be on starting your online marketplace.

Want to take the first step and build your marketplace website?

Try Kreezalid for free (no credit card required). 

After 5 years helping companies to develop their online marketplace, I saw success stories as well as failures. Today I share my experience and my clients feedbacks through useful resources that will allow you to focus on what really matters for the success of your online marketplace. Because believe me, the secret isn't in the code ...

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How to build your marketplace business plan

The creation of a marketplace is a commercial opportunity which requires significant investment by operators. Even if a marketplace shares similarities with an e-commerce site, there are fundamental differences to be taken into account when developing the business plan, more specifically in terms of overheads and revenues. In this context, the development of a realistic business plan is crucial to validating your profitability and understanding how to generate cash flows and create long-term value.

With more than 10 years’ experience in marketplace operation, Octopia provides its expertise, advice and guidance in the development of your marketplace business plan.

If you would like to know more about the key steps to developing your marketplace business plan, keep reading!

Step 1: Forecast your GMV

The first step in the business plan is to define a potential GMV 1 , using various methods. We generally recommend you forecast your GMV estimations over 5 years.

Method 1: ‘Top-down’

The first method to assess your potential GMV is the ‘top-down’ approach. You can assess the size of the market you operate in and allocate yourself a market share (target or real). You can also define the share of your e-commerce turnover which should come from your future marketplace.

Method 2: ‘Bottom-up by offer’

The second method used to assess your potential GMV is the ‘bottom-up’ approach. Starting with a number of products (target or real), estimate an average GMV for each product and add together to obtain your total GMV.

Method 3: Marketing

It is also possible to estimate your Marketplace GMV using your marketing investments and traffic. You can define a marketing budget and the annual traffic derived from this budget. By applying an average conversion rate 2 which is relevant to your sector, you can deduct a number of orders and potential GMV based on the average shopping cart.

Generally speaking, the more comprehensive the marketplace offer, the more your customers will see you as a one-stop shop, which will increase your traffic and conversions and thus your GMV. In order to offer your end customers a rich selection, you need to recruit a sufficient number of sellers, one of the keys to marketplace success.

Octopia recommends you combine several methods to assess your potential GMV, which will enable you to compare the coherence between models. It is also important to compare as much as possible the results of your methods with your current business results (if in existence) or the market benchmark (average cart, number of orders, conversion rate, traffic and marketing budget, etc.).

The next step of the business plan is to define marketplace turnover.

Step 2: Calculate your turnover

The net turnover corresponds to marketplace revenues after deduction of cancellations and product returns.

Marketplace operators have several revenue sources:

• Commission rates: This is the main source of marketplace revenue. The operator fixes a commission rate which will be levied for every sale made by a third-party seller. This rate generally varies between 5% and 25% per sale.

When launching your marketplace, Octopia recommends you fix a commission rate somewhat lower than the market to attract as many sellers as possible

• Subscription: This is the amount paid on a monthly or annual basis by sellers to access the marketplace. Subscription fees are at the total discretion of the marketplace operator.

As with commission, subscription may serve as a means to enter a market. On launching your marketplace, you can choose to reduce this subscription or provide it for free to attract sellers and provide a comprehensive offer to satisfy your customers. The subscription can thus be added gradually as the marketplace matures to become a considerable portion of your revenues.

• Monetization 3   : This is the cost paid by sellers to the operator in exchange for financial services, credit lines, administrative services or visibility. This monetization varies between 0.1% and 2% of GMV. There is a direct link therefore between the number of sellers and turnover: the more sellers there are, the more monetization the operator can generate.

Monetization is a set of additional services provided at a later stage, when the marketplace is more mature.

Revenues thus depend on the number of sellers and the GMV, and have a direct impact on turnover.

Elements to deduct:

Once you have defined a gross turnover, you must deduct certain indicators in order to obtain your net turnover:

• Cancellation rates: When the end customer decides to cancel their order before receiving the product. This rate is calculated as a percentage of the GMV and is defined on the basis of market studies.
• Product return rate: When the end customer receives the product and returns it to the marketplace. This rate varies according to the market, business sector and country.

Deduct these ratios from your revenue to obtain your net turnover. The business plan is not complete until you have deducted overheads from this turnover.

Step 3: Identify your costs and investments

There are two main overheads to marketplace operation:.

• Marketing: Investing in marketing when launching the marketplace is crucial to enhancing your visibility. This cost varies from one marketplace to another, you can allocate a dedicated budget or a percentage of the GMV.

Octopia emphasizes the importance of calculating the marketing ROI to fine-tune your marketing strategy, i.e., how much every Euro invested will contribute to GMV.

• Payroll: In addition to the standard payroll of an e-commerce site, launching your marketplace will imply the integration of new skill sets, particularly those linked to seller management. The two key tasks are sourcing and account management. Sourcing consists in identifying, contacting and onboarding sellers to your marketplace. Account management is the organization, management and retaining of your sellers to ensure their performance and avoid c hurn 4 . Octopia estimates that one person can source between 20 and 30 sellers per year and a second person can oversee account management for 20 to 35 sellers per year.

If you would like to benefit from our advice to on how to identify the right sellers for your needs, read our dedicated article

Additional overheads to marketplace operation:

• PSP (cash-in / cash-out): This is the payment service provider, which is mandatory to carry out financial transactions on the marketplace. PSPs generally bill a fixed rate per order and a variable cost according to your GMV.
• Customer relations: This is the cost of managing customer relations and after-sales service, etc. The marketplace operator plays an intermediary role between the sellers and the end customer. The operator must arbitrate in the event of a dispute and implement tools to enable seller-customer dialog. These after-sales overheads represent €0.30 to €0.60 on average per order.
• IT running costs: These correspond to the hosting and licensing of the marketplace platform. The marketplace operator pays a one-off ‘set-up’ cost to launch the marketplace, followed by running costs corresponding to an annual subscription.

Launching a marketplace thus implies substantial costs, mainly related to seller management tasks. In addition to a base of 15,000 international sellers ready to join your marketplace, Octopia also offers to outsource your sourcing and account management, and thus their related costs.

Step 4: Analyze the bottom-line impact

Now that the top line and related costs have been assessed and aligned, it is time to examine the impacts on the bottom line. In other words, the analysis of the time to value of the project, the return on investment and the generation of cash flow. By working with Octopia, you can benefit from proactive result-based advice and thus ensure faster, more sustainable growth.

In conclusion, developing a business plan is a complex task which requires solid sources of information. Numerous marketplaces launched in the last 10 years have failed. While the marketplace model implies fewer fixed costs than a standard e-commerce model, the challenge lies in reaching an adequate critical mass to attract a sufficient number of qualitative sellers providing a wide and relevant range which will attract and satisfy more customers.

Octopia guides you through the development of your marketplace business plan. As a specialist in marketplace management for more than 10 years, Octopia has expert knowledge of the key factors for a prosperous marketplace.

• GMV : Growth Merchandise Value represents the total value of goods sold by sellers for a given period on the marketplace, before deducting taxes and commissions.
• Conversion or transformation rate: The percentage of online visitors who reach a certain objective, such as making a purchase.
• Monetization: The type of remuneration which transforms an audience into revenue, by providing sellers with enhanced visibility of their offers.
• Churn or attrition rate: In the context of the marketplace, this is the percentage of sellers leaving the marketplace definitively, either deliberately or due to their suspension by the marketplace.
• EBITDA : earnings before interest, taxes, depreciation, and amortization,

The Beginner’s Guide to Starting an Online Marketplace Business

As the founder of MultiMerch, I've seen my share of online marketplaces start with a promising idea, fail to generate traction and close down shortly after.

The reasons are all over the place – no market need, unsustainable business model, poor software choices, lack of marketing, you name it.

In this guide, you'll learn how to start a marketplace business – from doing market research and choosing the right business model to mastering operations, selecting software and building, launching and growing your marketplace platform.

But first...

In 2017, customers have spent $1.47 TRILLION on online marketplaces . That's nearly half of all global online sales.

It's a lot of money spent!

There's a great chance you have bought, booked or sold stuff via a marketplace platform this month without giving it a second thought.

That's because they span all industries – from large traditional online malls like Amazon and AliExpress to booking and rental platforms like Airbnb or Eventbrite, from service marketplaces like Upwork and Taskrabbit to digital software and asset marketplaces, gaming and music platforms and everything in-between.

Why are marketplaces so popular?

The main reason is the network effect that's baked into the marketplace model that brings together the two sides of a transaction (it's also why they're called two-sided marketplaces).

The network effect is what allows you to grow a scalable business with multiple different revenue streams without having the downside of managing your own inventory and logistics.

This makes marketplaces inherently different from the traditional online stores.

Growing a traditional ecommerce business in a sustainable manner requires you to be in the "Goldilocks zone" where your free cash flow, operating expenses and inventory sync up. Otherwise, you can end up growing yourself out of business .

You'll have a different set of challenges as a marketplace owner, but growing too quickly won't usually be your primary problem.

For example, if you have an ecommerce business selling guitars online, you can grow more rapidly by switching to a marketplace model and allowing others to sell their guitar accessories on your platform. You have just expanded your business without having to hire a bunch of extra employees or buy tons of new inventory.

Another benefit of a marketplace business compared to a regular ecommerce business is the loyalty and sense of community baked into the platform thanks to the underlying network effects.

Often, the community will self-organize and create its own ecosystem around your marketplace – think of the hundreds of unofficial Amazon seller forums, Uber drivers groups and Aliexpress buyer forums.

To sum it up, starting a marketplace is a great way to tap into the network effects and start a thriving ecommerce ecosystem or rapidly expand your operations without requiring a ton of extra capital, workforce and inventory.

Whether you're creating a marketplace website from scratch or switching from regular ecommerce to marketplace commerce, there's no way around doing your market research.

According to CBInsights, "no market need" is the #1 reason startups fail (42% of all cases examined).

Starting an online marketplace without clearly understanding the target market and the needs of your users is a great way to learn a painful lesson, but not a great way to start a business.

This is where market research comes in.

To build a viable marketplace business, you need a clear understanding of the market, your users, their needs and the solution they're looking for.

Assess the market

You need to understand what you're getting yourself into before getting yourself into it.

What does the industry look like?

Assess the market size and volume to better understand if the business model you have in mind makes sense. It may sound easier to get into a smaller market, but if you want to charge selling fees and there's not enough transaction volume, you'll need a different business model.

Are there clearly defined niches in your target market? The better you understand the market segments, the more likely you'll be to choose the most attractive niche.

Today's big marketplace businesses have grown from small niches:

• Amazon was initially a small online bookstore
• Etsy grew from a community forum for crafters
• Eventbrite was focusing on the tech community first

No matter what industry you're in, you will have the competition – either direct or indirect. Find out who your competitors are and how long they have been around.

Researching the competition lets you gain insights into the marketing strategies and the business models common in your target market – as well as the strengths and weaknesses you can exploit.

Pay attention to market trends – is the market going up or down, growing or shrinking?

If you can spot big changes or trends like technology breakthroughs, regulation or the change in customer behavior, you can use them for your advantage.

Identify your users

You aren't building your marketplace for yourself – you're building it for the users. If you don't know who your users are, you can't solve their problems efficiently.

"Focus on identifying your target customers (including creating personas and looking at the market opportunity), then undertake a competitor analysis, and create a list of potential users (both supply and demand). Then, survey or interview these potential customers and look for the 'Blue Ocean' opportunity."

Start with the simple questions:

• who are your target users and what are their main goals and challenges?
• where do they buy, why do they buy and who do they buy from?
• what are their motivations and what influences them?

At this stage, you can create a few simple buyer personas to better understand your audience.

Since you're building a two-sided marketplace, you'll have at least two distinct user groups:

Your buyers and sellers come with their own set of goals, challenges and motivations.

Make sure you understand both sides.

Understand the needs and solutions

Now when you understand the market and the users it's time to dig into their needs and the solutions that can solve their problems.

Here, you want to figure out the biggest pain points your target users have and how they alleviate them.

Do your target customers shop online? If so, where do they do it, how do they do it and why do they do it? Are they satisfied with their shopping experience? What could be better?

What about your sellers? By now you should have an idea about who will sell their items on your marketplace – go ahead and talk to them! Ask them how they sell their products right now, what other platforms they use and what they're happy and unhappy about. How can you make their experience better?

Asking these questions will help you better understand your user needs and the strengths and weaknesses of your competitors – and build a better solution as a result.

What you want to take away from your market research is a clear understanding of your target market and the audience you want to serve.

Doing it will allow you to select a suitable niche for your marketplace platform, design a solution that solves the problems of your users, draw up a business model that makes sense and prepare a marketing strategy that will make your new platform stand out from the competition.

We've already learned that most startups fail trying to build stuff no one needs.

Do you know the failure reason #2?

Ran out of cash.

That's right – building a valuable product that people need isn't enough. You need a way to make it profitable – and keep it profitable in the long run.

Fun facts ahead. Amazon had its first quarterly profit in Q4 2001 , more than 6 years after it was founded. It took Etsy 5 years to start turning a profit in 2010 . eBay, on the other hand, has (apparently) been profitable from the start thanks to monetization via listing and selling fees.

My point is – no matter your industry and background, it's a good idea to design a viable business model BEFORE starting your online marketplace, not when you're already going full steam ahead.

Now, the exact way your marketplace will make money depends on a lot of things. However, here are a few marketplace business models for you to consider.

Sign up fees

A sign up fee is a flat payment you charge your sellers to sign up (well, duh!) on your marketplace platform.

The great thing about sign up fees is that you can charge them even before you have a thriving marketplace – as long as you can sell your vision to new sellers.

Sign up fees are also pretty straight-forward to collect as you can use any regular payment gateway or even request payments manually (e.g. via PayPal, bank transfer or in person).

The main drawback is – sign up fees don't scale and once you've gotten the seller on your platform you'll need other monetization ways.

To grow a marketplace, you need to be in the middle of the transaction. As you grow your audience, inventory and volume, so will your business. If you don't do this, you don't have a sustainable marketplace – and will struggle to grow the platform.

You will also need a solid proof that your platform is worth it to charge sellers a sign up fee upfront.

Because of scalability reasons, you'll rarely see the big marketplace players use sign up fees for monetization purposes. However, you can also charge a sign up fee to weed out the less serious sellers.

For example, it costs $25 to sign up as a Google Play vendor – and Google clearly doesn't make a killing off Play Store sign up fees.

Subscriptions

Subscription is king – I don't have to tell you that. The global sharing economy is powered by subscription-based businesses generating recurring revenues.

Gartner predicts that by 2020 , all new software industry entrants and 80% of historical vendors will offer subscription-based business models.

Charging your sellers a specific amount on a regular basis is a great way to generate recurring revenues that will keep your marketplace going.

Here's the #1 rule of subscriptions – make sure your sellers get more value out of your platform than it costs them to stay subscribed.

They won't mind paying $19.99 a month if they generate $199.99 a month in profit.

Subscriptions are more difficult from a technical perspective. You will also need a payment gateway like Stripe that supports subscription payments (you can do manual invoices while you're an MVP, but good luck scaling this approach).

It's worth it, though. Combine the idea with multiple different tiers that let sellers unlock more features (like advanced selling tools) or lower their selling fees and you've got yourself a steady recurring revenue stream.

For example, Amazon offers two plans – an Individual plan with an extra $0.99 per item selling fee and a Professional selling plan at $39.99/month for larger sellers.

Listing or insertion fees

You can collect a listing fee from yours sellers when they list their items for sale on your platform.

Listing fees can be flat or variable amounts based on the price of the product, the category the product is inserted into and other parameters.

Just like with subscriptions, sellers will usually be fine with a small insertion fee to list their item as long as they can generate a profit in return.

And just like sign up fees, listing fees are relatively easy to collect – but they are much more scalable.

To reduce friction, consider deferring the charge to after the product has been sold instead of doing it at publication.

For example, Etsy charges a $0.20 insertion fee, but collects the listing fee for multiple quantities of the item only after it's been sold.

Selling fees

Selling fees are everywhere – and for a reason. It's a great monetization strategy.

You'll charge your sellers a selling fee each time they receive and process a new order on your platform. The more orders your marketplace receives – the more revenue you get in sales fees.

Sounds great, doesn't it?

The drawback is, selling fees are far more difficult to implement than other types of fees.

For one, you need a payment gateway that can split buyer payments so you can get your fee at the time of sale (unless you want to collect sales fees manually, which you probably don't – for various reasons, including legal).

And you need a steady stream of new orders coming in to generate enough revenue from small sales fees. When you're just starting out, it can be a problem.

It does scale really well, though.

If your platform gets enough traction and you can collect selling fees automatically, you've got yourself a good business going.

You'll find examples of selling fees on most popular marketplaces today:

• Amazon charges per-item category-based selling fees
• Etsy has a 5% "transaction fee"
• Envato chargers sellers 12.5% to 55% on sales
• Airbnb charges hosts a "service fee" of 3%+

More business models and monetization examples

These are just the most common marketplace business models – you can do more than that, including:

• collect payment processing fees
• promote featured stores and sponsored products
• manage your own ad system

I covered these and other monetization strategies in my other blog post:  10 Marketplace Business Models To Generate Revenue

Creating an online marketplace website is one thing. Successfully managing a marketplace business is something completely different.

Even a regular ecommerce business gets complex at times due to the amount of stuff you have to deal with on a regular basis.

Marketplace operations can get more difficult than that due to the nature of two-sided platforms.

Here are the challenges you will be tackling as a marketplace owner on a day-to-day basis:

Managing sellers

Sellers are the cornerstone of your marketplace so you will be dealing with them a lot.

This includes everything from acquiring new sellers and helping them get started to keeping existing sellers happy and successful.

First, you will need to convince your sellers to join your platform . Hopefully, you've outlined your unique value proposition during your market research and planning.

Now, you'll need to create a set of landing pages that explain how your marketplace works and why it makes sense for sellers to join you.

Here's how Amazon explains the process on its seller landing page :

Next, you will need a streamlined signup process . Decide who can apply and what information you need from them, then design your registration flow with this in mind.

Will you allow anyone to sign up or are you accepting vetted sellers only? Make sure you have a way to review the applications if you want to keep freeloaders out.

If you're collecting sign up fees or subscriptions, you'll need to make sure you can either build payment processing into the registration flow or have a way to collect the fees manually through direct communication with the sellers.

And while you're at it, you'll also need to decide how much control your sellers will have over their stores, what their stores should look like and how customers will discover them.

Now, once the new seller signs up you'll want to make it as easy as possible for them to get their product catalog into your platform.

Managing products

As a marketplace owner, you won't usually have to deal with your own inventory. However, you'll still need processes in place to manage products sold by your sellers.

There are two distinct ways to organize your product catalog:

• on marketplaces like Etsy or eBay every product belongs to exactly one seller
• on platforms like Amazon a single product can be sold by multiple individual sellers

The way you organize the catalog will affect your software selection, the layout of your marketplace pages and how your sellers publish and manage their products.

Now, you want to make it really easy for new sellers to get started on your platform. You can do it by either offering them a way to import their existing products in bulk or providing them with an onboarding service where you do it for them.

If most of your sellers are existing ecommerce business owners, it's a good idea to offer them a way to import their catalogs from other platforms they already sell on, like Amazon or Shopify.

To make it easier for your sellers to list items for sale, optimize your product listing forms by removing the unnecessary details. If you plan to carry different product categories, keep in mind that different products may require different sets of fields .

As you grow, you may need a product moderation system or a set of content to ensure the quality of your listings and keep scammers off your platform.

Payment processing

Marketplace payment processing is always more complex compared to processing payments in a regular online store.

First, you will need specialized marketplace payment gateways to allow customers to purchase from multiple sellers at once and split payments at checkout.

More payment solutions are offering support for marketplace payments today, but the implementation can be tricky.

Second, you will be processing different types of payments .

Just a few examples of payments on a typical marketplace platform:

• order payments from customers to sellers
• subscription and fee payments from the sellers to your platform
• payouts from your platform to the sellers

Different payment flows have different implementation requirements.

So, make sure you know what payment gateways you'll use and how exactly you'll use them.

If you can't find a suitable gateway and make it work with your marketplace software, you're in trouble.

Finally, keep in mind that you may be responsible for payment taxation, invoicing and reporting as a marketplace platform owner. These requirements will depend on your region and your industry.

We will take a closer look at payment processing in the next chapter.

Logistics and shipping configuration

You don't have to deal with the inventory yourself, but your sellers do – and your platform has to support it.

The first question to ask is whether you want your sellers to ship items or you want to do it yourself (like Amazon FBA).

If you ship yourself, the logistics will be more complex as you'll need to get the inventory from your sellers, then store and dispatch it to the buyer. In this case, estimating shipping costs and times and tracking the item at every stage will be more difficult.

If you make sellers responsible for shipping, they'll need a convenient way of managing delivery rules and communicating them to customers. You can use flat rate, price- or weight-based rules or custom per-product shipping rules, but make sure your sellers can specify different shipping rules to different locations via different carriers easily.

Whatever shipping flow you use, there are more questions to ask yourself:

• how will you handle tracking numbers?
• do you need third party tools like shipping APIs?
• how will you set and enforce shipping SLAs across the marketplace?

Shipping cost and speed  affects marketplace conversions , so getting this part right is crucial.

Order management

Getting customers to buy from your platform is the first step. Actually making sure your sellers deliver is the next step.

The sooner the seller knows they've received a new order, the sooner they can dispatch it and keep the customer happy and willing to purchase again. So, your platform will need to notify sellers of new orders and make it easy for them to view, manage and process the orders.

And if you allow customers to buy from multiple sellers at once, you want to make it clear to everyone how different products within the same order are dispatched.

To keep the customer informed about the status of the order at all times, you can offer your sellers a way to share the tracking number with the customer.

Finally, delays and issues will inevitably arise – have a plan in place to handle them.

At the very least, you want to provide a communication channel between the customer and the seller so they can find a solution.

As you grow, you may want to create your own protection programs for buyers and sellers, like eBay's Money Back Guarantee or Airbnb's Host Protection Insurance .

If you don't do this, you risk getting entangled in disputes, refund requests and lawsuits yourself.

Marketing and content management

Your platform will get some traction thanks to the network effects, but you still need to actively promote it – especially in the early stages.

Where do you start?

The obvious first question is how will you get new sellers and customers to join you and stay with you when you're just starting out. We'll look at this later in this guide.

Then, once you get going, you'll need to figure out how to keep your marketplace growing in the long run. You'll do it through search engine optimization, organic and paid marketing campaigns and other business development initiatives.

Why SEO? Because over 50% of trackable traffic on average still comes from organic search.

To minimize the amount of work you yourself have to invest in optimizing your marketplace for search engines, make sure the software you use is built with SEO in mind. This means search engine friendly, optimized and shareable seller stores, product listings and other marketplace pages.

Most regular sellers won't be bothered optimizing every listing for search engines so you have to make it a no-brainer for them – or end up with poorly optimized platform.

Now, there's more user-generated content on a typical marketplace platform than just products. You'll have product reviews, user questions and answers, featured seller stores, blogs and more – and that's great for you, the platform owner!

Make it easy for your users to create great content on your platform, encourage it and feature it prominently.

However, you will also need systems in place to prevent low-quality UGC:

"Content moderation plays a key role in everything – from user acquisition and conversion to retention. Studies we've carried out have shown that as many as 75% of users will not return to a site where they encountered a scam and 80% of users wouldn't convert if a listing had a poor description.

Low quality content also plays a negative role when you're trying to rank. Google doesn't like duplicate content and will penalize sites with too many identical pieces. It's a good idea remove duplicate listings, stock images and other content pieces users may upload that already exist on your site – both for SEO purposes and to improve the search experience for your users.

In general, you need to vet all UGC to ensure it is relevant, high quality and appropriate. The content users post to your marketplace make up your inventory and act as a store front. Much like you don't want rotten apples on display in a fruit stand, you don't want low quality content featured on your site."

Organic marketing is great in the long run, but don't forget about paid acquisition. The more content gets created every day, the more value you'll get out of paid marketing campaigns. Make sure you have a paid promotion strategy for your marketplace in place to attract new users and create brand awareness.

Seller and customer relationship management

Now, attracting new users is not enough – you need to keep them happy, loyal and using your marketplace on a regular basis.

You will be communicating with your users and helping them answer questions and solve problems daily, so have a plan for that in place.

Some of the challenges you'll be tackling:

• onboarding new sellers and answering their questions
• providing technical support and enforcing the rules
• answering order-related questions
• mediating disputes between the seller and the buyer

To reduce your own involvement, allow customers to ask sellers questions about products and communicate with them before and after the order. The more communication options you offer, the more likely the issues will be resolved without requiring your attention.

Some of our clients want a way to filter customer-seller conversations to make sure they don't try to bring the transaction offsite. Instead of worrying about it, I suggest focusing on providing the best possible experience to both parties on your platform so that going around isn't worth it.

Mass communication is important, too. You'll want to be able to notify your sellers about policy changes and new features available to them or tell your customers you're running a marketplace-wide discount campaign this month.

And don't forget post-transaction communication. Allow and encourage it to ensure repeat purchases, collect reviews and build trust between your platform, your buyers and your sellers.

This will help you turn your marketplace from a purely transactional platform into a sustainable business customers enjoy dealing with.

Let me tell you this one thing first:

The easiest way to waste time, budget and effort when building an online marketplace is to create features your users don't need.

I've seen a lot of marketplace projects that have spent way too long in the development stage to either never launch or to find out the users need a completely different set of features a week after launch.

I've also seen marketplace platforms launch in a matter of weeks with only the basic functionality in place – and evolve as they grow. This has usually worked much better in the long run.

My advice to marketplace entrepreneurs is to start with the essentials and launch an MVP early, then improve the platform as the business grows and the requirements get more clear.

And I'm not the only one saying this – here's one of our implementation partners:

"The best approach is to start with a limited feature set and only build the main features your platform needs. After you have enough to make the platform work, launch it. If it gains traction with the users, you'll start to see the early benefits and will have more time and freedom to develop additional features and make your platform even better."

Now, what are the essential marketplace features exactly?

While some of this will depend on your industry, I like to group the functionality into three big categories – features for sellers, buyers and the platform itself:

Essential seller features

Your sellers want to sell their items and get paid. This means listing, selling and dispatching products efficiently.

To make it easy for your sellers to get started on your platform, focus on streamlining the onboarding process. The simpler the onboarding, the more likely new sellers will be to join you.

A great onboarding process includes clear seller terms and helpful landing pages, straightforward seller signup and an easy way to import and manage their product catalog.

What kinds of products will your marketplace carry? Optimize product management features for this particular product type – don't make your sellers do more work than absolutely needed to get the product published.

Next, your marketplace should make it dead simple for your sellers to receive and process orders. Notifications are a must to make sure orders don't go unnoticed.

To make selling and marketing easier, offer your sellers at least the basic sales and marketing tools – such as discount code management and product promotions.

Finally, make sure your sellers can freely communicate with you and the buyers. Public product questions and a private messaging system will be a good start.

Essential buyer features

What's your goal when shopping on Amazon? To find, purchase and receive the products you're looking for quickly and easily.

So, make it really easy for your buyers to search for products and browse categories. What makes it easy? A search bar that works (quite a low bar), faceted product filters and information-rich product pages are all a good start.

Simple checkout is the next step. The easier placing an order is on your platform, the more likely the buyer is to go through. A modern checkout process is a must – ideally one that makes it possible to purchase from multiple sellers with a single payment.

You want to offer payment methods that make sense for your users. Stripe is great and all, but it's useless if the shoppers in your region prefer to use cash on delivery. You should've answered this question during your market research as it will usually depend on your region and industry. In most cases, you will need a split payment gateway and/or a manual processor like cash on delivery.

Now, order management is as important to the buyer as it is to the seller. Make it simple for your buyers to view and track their orders, as well as get notified when the status changes.

Communication is crucial, too. Allow your customers to ask sellers pre-sales questions, get in touch with them if they have order-related questions and leave feedback. This will ensure your platform provides a great buyer experience and helps retention.

Essential marketplace platform features

The aim of your platform is to connect buyers with sellers – and generate revenue to keep your business going. So, you will need the right tools to support your marketplace operations and your business model.

In addition to everything I've outlined above, you will need a way to monitor, manage and moderate everything that happens on your platform.

Helping sellers set up and maintain their stores, approving and updating individual products, looking up and managing orders – all this will be part of your daily routine as a marketplace operator.

You also will want to customize the look and feel of the marketplace without digging into code. This will make it easier for you to make seasonal changes, introduce new products and categories, run marketplace-wide promotions and feature your best sellers and products.

Payment processing, of course – I mentioned this above. Depending on your business model, you may need to process not only buyer to seller payments, but also collect seller fees, do manual payouts to your vendors and handle other types of payments.

"When it comes to payment gateways and payment providers you have to make sure your platform has options. Its important to not be locked down to one specific method because you will never know what you need as you scale. So when picking a platform, make sure options are an option."

The same goes for shipping and logistics. Your platform needs to offer sellers a way to manage shipping methods and make it clear to buyers where they ship to and what are the costs.

This doesn't necessarily mean you need a direct integration with third party shipping services and APIs – automation can come later. But at the very least your sellers need a way to specify their own delivery costs manually.

Advanced marketplace features

These are just the essentials to get your marketplace up and running.

There's much more you can offer your users down the road:

• reporting tools
• advanced selling and marketing features
• integrations with third party ecommerce services
• your own mobile apps and more

All of this is definitely possible (but not essential). I covered these and other marketplace features in a separate blog post: What features exactly does your marketplace platform need?

It's not a sustainable business if your marketplace platform can't process payments safely, securely and reliably.

The global digital commerce volume has exceeded $3 trillion in 2017 and is expected to more than double by 2022, according to McKinsey.

Your marketplace is part of the global payment ecosystem, but there are a few unique challenges marketplace businesses deal with compared to regular ecommerce businesses when it comes to payment processing.

You already know the different payment types you'll be processing as a marketplace platform owner:

• payments from customers (customers purchasing products)
• payments from sellers (signup, listing, subscription fees, promotions)
• payments to sellers (payouts)
• other payments (third party advertisers)

Customer payment processing is arguably the biggest challenge for marketplace owners as it involves three different parties – the buyer, the seller and the platform.

There are three ways your marketplace can process order payments from your customers to your sellers:

Direct payments

With direct buyer to seller payments, your platform is not involved in the transaction at all.

Direct payments require the least amount of involvement by your platform, but have a few major drawbacks.

Since your platform doesn't own the transaction, you have limited options of collecting transaction fees and handling returns and refunds.

Additionally, direct payments will prevent your customers from purchasing products from multiple different sellers at once and will require them to go through the checkout process for every individual vendor.

They are also less safe for all parties involved and make it easier for untrustworthy buyers and sellers to exploit your platform for their own gain.

Aggregated payments

With aggregated payments, your platform aggregates buyers' funds to later redistribute them between sellers via payouts.

Aggregated payments make single checkout possible and allow you to own the transaction, but place an extra burden of tracking your sellers' finances and making regular payouts on your platform.

And with the payment industry becoming increasingly more regulated , payment aggregation as a marketplace payment flow will only be getting more complex.

Split or parallel payments

All this gives rise to parallel (or marketplace) payment processing, where customer's payment is instantly split at checkout and distributed between all sellers and your platform by the payment processor.

This eliminates all of the issues of direct and aggregated payments, while also shifting the liability and the compliance burden from your business to the payment processing company.

The biggest remaining problems of parallel payment processing are implementation complexity and the lack of marketplace processor availability.

It's getting better, though. A decade ago, PayPal Adaptive has been one of the only few marketplace payment solutions with support for split payments. Today, there are dozens of payment processors that support marketplace payments around the world, the most popular ones being Stripe Connect, PayPal for Marketplaces, Adyen Marketpay and Mangopay.

How do you choose a marketplace payment solution?

Selecting the right payment solution for your marketplace is crucial.

A few different factors to consider are the features you need, the availability of the payment provider in your region and, of course, the costs.

Here are a few helpful tips from Paybase, another popular marketplace payment solution:

"When choosing your payments provider, it's important to think about exactly what your business needs and what your priorities are. Each provider varies in what it can offer. Some offer a plug-in solution that is very easy to integrate but will struggle to handle anything that requires a certain degree of flexibility. Others can offer greater scope, but may involve you as a business having to build out your product/service further.

What's most important is to not underestimate the level of flexibility you will need. Think about what you'll need in the future and whether each given payments provider will enable you to do that.

Additionally, it is important to consider the level of financial crime prevention that the provider offers, as the last thing your business needs is high levels of financial crime on your platform due to an inadequate alerting system."

So, make sure to ask yourself these questions before getting to work building your marketplace:

• What types of payments will I be dealing with as a marketplace platform owner?
• What payment solutions are available in my region that meet my requirements?
• What will payment processing cost me and how do I factor this into my business model?

The last question is as important as the first two.

While you don't want to end up with no payment processing at all, you also don't want to rely on a business model that charges your sellers a 5% selling fee only to realize it costs you as much in payment processing fees.

At this point, you have a valid business model and an operations plan and know which payment gateway you'll use and what features your marketplace platform needs.

Now is the time to select the software that will power your marketplace platform – no sooner than that!

I like to group marketplace platform software into 3 different groups – cloud or hosted platforms, standalone solutions and multi vendor CMS extensions.

Note that I don't mention building a marketplace website from scratch here. It's definitely possible, but not really viable for small to medium sized businesses in most cases due to the complexity involved.

Cloud or hosted marketplace solutions

If you're a new marketplace entrepreneur, going with a popular marketplace SaaS is usually the first thing to consider.

Cloud marketplace solutions are the easiest to get started with and require little to no technical knowledge.

In most cases, they also offer free trials so you can spend a while playing with the platform to make sure the solution fits your requirements.

Here are the few popular marketplace SaaS solutions you can look into:

• Marketplacer

The main drawback of cloud marketplace platforms is the limited customization possibility you'll get. If it doesn't suit you out of the box you won't be able to modify it since you don't have any code access.

If you're looking for something more customizable, standalone marketplace software is a better alternative.

Self hosted standalone marketplace software

These are software solutions designed specifically for marketplace commerce, not just regular ecommerce.

Standalone marketplace software gives you much more customization and modification possibilities since you have complete access to the source code and own it outright.

In most cases, you will also host the platform yourself and will be able to control the whole marketplace experience from start to finish.

Some of the popular standalone marketplace solutions are:

• MultiMerch Standalone
• CS-Cart Multivendor
• X-Cart Multivendor

The drawback? You will need at least some technical skill to build a marketplace platform using self hosted software. No matter how user-friendly, software is software – and has to be hosted, maintained and updated on a regular basis.

We always recommend having a developer on your team or working with an agency when working with self hosted software to make your life easier.

Multi vendor CMS extensions

Finally, you can take a regular CMS like WordPress, Magento or OpenCart and slap a multi vendor extension on top of it.

Sounds like a plan?

You might expect this to give you all of the benefits of free and open source CMS while also powering your marketplace. In reality, it rarely works out like this.

Content management systems are designed for regular websites or standard ecommerce. Two-sided marketplaces are inherently different and converting a regular CMS into a marketplace platform is a complex, time-consuming and error-prone process.

If you do decide to give it a try, here are some of the possible software combinations you can use:

• WordPress + WooCommerce + Dokan, WC Marketplace, WCFM, WC Vendors or YITH
• OpenCart + MultiMerch, PurpleTree or Waabay
• PrestaShop + KnowBand or Advanced Marketplace
• Magento + NextBits, CreativeMinds, Webkul or Apptha

In this case, you absolutely want to have a developer on your team who has experience working both with the underlying system and with two-sided marketplaces. I guarantee you will have much more technical work to do than with either SaaS or Standalone marketplace software.

We've been offering the MultiMerch multi vendor extension for OpenCart for years and overcoming the limitations of the CMS itself and the compatibility issues with third party themes and plugins has been a constant struggle. You will deal the same problems with any CMS.

How do you choose the right marketplace software?

The possibilities are endless, right?

When selecting your new marketplace software, I suggest first figuring out what kind you want to go with – cloud, standalone or CMS.

Here are my rules of thumb for picking one of the 3 solution groups:

• Start with a cloud/SaaS marketplace platform if you want to launch your marketplace as soon as possible and don't have the technical knowledge.
• Go with standalone marketplace software if you want the biggest bang for your buck and want to own your platform outright.
• Try multi vendor CMS extensions if you're already using the underlying system (e.g. running a Magento store) or are willing to invest heavily in custom development and have a team capable of doing it.

Now, here are the factors to consider when picking the software solution:

Start with the type of the marketplace you're building. Are you selling products, services or bookings? Software designed for products won't be a great fit for a service marketplace and vice versa.

Know the features your platform needs. Make sure the solution fits your business requirements – not just in terms of the basics, but also payment processing, logistics and other crucial features. And if it doesn't offer the feature you need, can your team modify it to support this?

Take a good look at user experience and reliability. This is often overlooked by new marketplace owners, but it's as important as everything else. Make sure the solution not only provides the features you need, but also offers a great user experience. If your marketplace feels clunky to use, the rest doesn't matter – your users will jump ship as soon as there's a better alternative.

Get to know the team behind the solution. Who are the people in charge and what can you expect in terms of technical support and code quality? Growing a marketplace business will take you a lot of time and effort – so you want to make sure you get all the support and software updates you need over the years. Can you treat the company as your partner , not just a software provider?

Finally, there's your budget. In my experience, budget shouldn't be a top priority when selecting marketplace software. You will spend thousands of hours building your marketplace over the years – saving a few hundred bucks on software that powers your entire business isn't worth it.

For a more detailed overview of marketplace software solutions available out there, check out my other blog post:  Online Marketplace Software: The Complete List

You'd think software is all it takes to start a marketplace platform.

Nope. You will (generally) need a great team to help you pull it off.

These are just some of the crucial skills you'll need to run an online marketplace business:

Development and design skills

No matter what software you use, you will need at least some technical skill to set up, configure, customize and maintain your marketplace platform.

Here's how much technical skill you will need with different kinds of marketplace software:

• cloud platforms will require almost no development experience
• self hosted marketplace platforms will quite at least some technical skill
• multi vendor CMS extensions will require A WHOLE LOT of custom development

Do you have to be a developer to build a marketplace website? No, but having a developer at hand will make your life immensely easier.

When it comes to design, things aren't as difficult.

A modern, responsive platform is a must in 2019, but fortunately most marketplace solutions will offer you ready-made templates you can use instead of designing everything from scratch.

Still, at the very least you will need some design skills and tools to customize your platform and create appealing marketing materials.

In the long run, investing in a UX designer will allow your marketplace to stand out in terms of user experience and aid your acquisition, retention and conversion.

Marketing and sales skills

Neither customers nor sellers will join your new marketplace by themselves.

You will need to actively promote your new marketplace platform to get the business off the ground.

That's where sales and marketing comes in.

First, you will need to find the first sellers and customers and convince them to join you to get your marketplace going. Then, you will need to generate brand awareness to gain traction and grow your new platform.

At the very least, this means mastering the basics of user acquisition and growth , including:

• organic and paid acquisition
• social media and community management
• email marketing
• partnerships and promotions

As a side note, copywriting is another great marketing skill to have. You will need to be persuasive on your website and in your advertising to convince people to join you. Additionally, you may also need copywriting skills to help your sellers create product descriptions that sell.

In reality, this means learning whatever you need to do to keep your business alive and growing.

Operations skills

By now, you've seen what it takes to run a marketplace on a day-to-day basis – we covered this in the operations section earlier.

Stuff like:

• managing sellers and keeping them happy
• monitoring users, products and orders
• resolving customer support questions and technical issues
• managing payments, doing the paperwork, managing your team....

As a marketplace founder, you will be dealing with the operations yourself from the start.

While you can delegate most of design and development and some marketing to others, you are the one responsible for actually running your marketplace. So, the operations are up to you.

That's a lot of skills you need to run a marketplace! How do you manage it?

There are a few ways:

Doing it yourself

Unless you have an existing team, DIY will be the most obvious approach – especially when you're just starting out.

This approach works best with fully hosted and managed marketplace solutions. If you run your marketplace in the cloud, you have most of your technical and design requirements covered – and can focus on marketing and operations.

If you go DIY, make sure you have the time and the grit to handle everything it takes to run a marketplace. It's a lot of work, so use whatever help you can get – from tools and services to mentorship and consulting.

Hiring individual freelancers

Hiring a freelancer is a great way to complement your own skill set without a huge investment and a long-term commitment.

The great thing about freelancers is there are all kinds of them. You'll find people for long term collaboration and one-time gigs, experts and interns, teams and individuals.

When you need a specific thing done quickly without having to learn the skill yourself, hiring a freelancer is the way to go.

And they're scalable. Business going well? Hire more freelancers. Caught in a downturn? Scale back.

Look for freelancers on:

• large freelance websites like Upwork and Fiverr
• smaller niche platforms like CloudPeeps
• groups and communities on Slack, Facebook and LinkedIn.

The drawback with freelancers is you need to very clearly understand and define your requirements – or risk wasting a lot of time and money. The bigger the project you want to delegate, the more detailed specification you need.

Working with an agency

If you have a little more budget, consider working with software development and marketing agencies to offload a whole chunk of work at once.

Going with an agency will let you focus on your marketplace operations without having to spend that extra time managing individual freelancers.

Hiring a software agency will cover all of your technical requirements and a marketing agency can handle most of your marketing initiatives.

The drawbacks of working with an agency are higher upfront and ongoing costs and a bigger commitment. Switching agencies is more difficult than swapping freelancers if you realize you're not a good fit for each other or have to scale your budget back.

Finding a trusted agency is a challenge. To make life easier for our clients, we have a list of vetted MultiMerch implementation partners who can take up any custom marketplace project and get it done – on time and under budget.

Hiring full time employees

Hiring is hard. You probably won't start hiring full time staff right away, but will get to it eventually as your business grows.

The good thing about employees: they are part of your team and will provide consistency, which is especially important for customer-facing roles and operations. Not only you can expect them to devote 40+ hours a week to the business, they'll also become ingrained in your company culture and future success.

The drawbacks are the cost, the effort required to manage your staff and the trade-off in flexibility. Full time staff is hard to scale and the recruitment process can be real tricky and very time consuming, especially for technical roles.

If you have a limited budget, it's a good idea to hire a few generalist employees such as a versatile marketer or a business developer, then add expert freelancers or agencies to the mix for specific tasks and projects.

What to look for when hiring people?

You're running a marketplace business – so, look for experience with two-sided platforms and marketplace commerce when hiring.

This applies to freelancers, employees and agencies alike. The more experience they have working with businesses and platforms similar to yours, the more useful they'll be to your project.

Generic hires might sound more affordable, but will usually perform worse than people who specialize in marketplaces.

And make sure people you work with really believe in your idea and aren't there just for the money.

Now you have everything ready to start building your marketplace website. How do you actually get from purchasing software to launching your marketplace?

In my experience, getting a marketplace platform ready can take anywhere from a day (for hosted SaaS platforms) to a few months and longer for custom builds.

Here are some things you can do to make the process easier:

Create a specification

The more complex the project, the more difficult the implementation. Marketplace platforms are as complex as ecommerce gets.

To avoid disaster (e.g. going broke too soon due to cost and time overruns), prepare at least a rough functional specification that outlines your project goals, requirements and the implementation timeline.

The more technical work your project needs, the more detailed you want your specification to be. If you plan to work with freelance developers or agencies, having a detailed specification in place may save you months of wasted effort in the long run.

Keep yourself and everyone involved accountable by splitting the project into milestones and tracking progress regularly.

Don't forget to define your MVP and your launch prerequisites in the specification. This includes the features you absolutely need for launch and an approximate deployment and launch dates.

The more specific your timeline, the better. "We need the initial MVP ready and deployed on staging by June 1, do a soft launch with early users by July 1 and launch for everyone on September 1" is more helpful than "We would like to go live with our marketplace in the next 6 to 12 months."

Make sure everyone involved in your project clearly understands the requirements and the timeline – and adheres to it.

Master project management

You will need at least basic project management skills to get your marketplace from idea to launch successfully.

This doesn't mean you have to be a project manager, but understanding the basic principles will help you stay on top of things.

If you work with an agency, you will usually have a project manager available to you to keep you informed. If you work with freelancers, you will be your own project manager.

Always consult your technical specification and your timeline when making changes to the project and discuss changes with all parties involved.

Understand that changing one milestone affects the whole timeline down the road.

Do have a backup plan for when things don't go as you expect – because they will. The more people are involved in your project, the more likely it is that something will go wrong, from freelancers going unresponsive to complex features taking longer to implement than planned.

Follow the best development practices

Adhering to good development and operations practices will save your team time and ensure the project gets delivered.

You don't have to assemble the top development team, but do pay attention to the basics – use tests, version control and issue tracking extensively throughout the development process.

Use different server instances for development, staging, and production and don't roll out new software updates directly on top of your live marketplace without testing. It's easier not to break things than it is to fix them later.

Keep fresh, automatic backups at all times – and a way to restore them. If something goes wrong (it will), you want to get the operations back up as quickly as possible.

A good principle to follow when building your platform is KISS. Keep it simple stupid when designing, implementing and deploying your marketplace software.

Know when to launch

Finally, understand that marketplaces take a while to get right. Rome wasn't built in a day, neither was Amazon. However, you will need real users and real feedback to keep iterating and improving your new marketplace.

Two common mistakes I see among new marketplace owners are launching too soon and not launching soon enough , the latter arguably being the worse one.

So, make sure you start testing with the real users early and use the feedback to iron out all of the early glitches by the time your marketplace is ready for the official grand opening.

It's not enough to create a marketplace website – launching it successfully is as crucial.

How do you launch your marketplace?

A good idea is to launch the new marketplace in two phases – soft and hard launch.

Start planning your launch early

The sooner you begin planning your launch, the more time you'll have to talk to people, gather feedback and improve your product and messaging.

Prepare a launch plan by defining your launch timeline, your marketing messaging and the primary channels you'll use. Different industries, regions and marketplace types will require different launch strategies – try and pick the most suitable one.

So, start building anticipation for your marketplace among your target customers and sellers while it's still in development.

If you've done your market research (and by this point, you definitely have), you already know who your users are. Now, go and talk to them – directly, on social media and via ads.

Start gathering a mailing list way before the initial launch – this will let you gauge interest and provide you with a user base of early adopters to reach out to first.

By the time you have your MVP ready for testing, you should have a set of users who know about you and are willing to take part in your project.

Roll out a limited beta version first

No matter how detailed your specification and well-designed your solution, you will run into all kinds of issues at first – from software glitches to usability problems to missing or lacking features.

That's why it's a great idea to do a limited release before your grand opening to test things out and make sure everything works just as expected.

Don't wait too long to introduce your solution to your early beta users – do a soft launch when you have your MVP ready, possibly even sooner.

Use your mailing list and talk to users directly to line up a few of the most devoted sellers, then help them get their stores set up on your platform and see how well it works for them.

When your beta marketplace doesn't have look like a ghost town with tumbleweeds, invite a few early customers and see how they like it.

Gather feedback, iterate and improve

Now, gather as much feedback as you can – in any way you can.

Talk to your early customers and sellers and write down everything they have to say about their experience.

If possible, arrange meetings in person or record and transcribe interviews with your users.

Most importantly, listen, don't talk. This will give you a whole lot of improvement ideas you can use to make your platform even better.

Then, iterate and improve – spend as much time as you need to improve your MVP based on your soft launch feedback.

And one more thing – don't just use your early adopters as test subjects, but try to establish real relationships and build trust with them. This trust will help you promote and grow your marketplace in the early stages of your business.

Launch your improved platform

By now, people are aware of your new marketplace website – it's time to make it officially public.

Run a final set of tests beforehand to make sure everything is working just as expected. Have your team ready for launch – things tend to break down when you least expect them to.

Whatever your marketplace type, try and make an event out of your launch. Go out to where your target users are and bring your launch to them through a webinar, a Q&A session or an AmA post.

Finally, keep the momentum going – your launch isn't the end, it's just the beginning.

Hopefully you've launched your new marketplace successfully and new people are starting to use it. Now, it's time to focus on user growth and retention.

Growing a marketplace is somewhat different from regular ecommerce businesses , but they do have many things in common.

Online marketplaces are two-sided, which means you need to focus on growing both your seller and your customer base.

Growing your supply side will be your primary goal in the early days of your new marketplace business, so it's critical to build your pipeline of new sellers and ensure they stick around.

Getting your first sellers

Ever visited an online store that has exactly 50 empty categories, 4 dusty products and a single blog post from months ago?

That's not what you want your marketplace to look like when new customers and sellers start coming in.

So, finding new sellers will be your first priority in the early stages of your marketplace business, both while you're preparing for launch and immediately after launch.

You have two main ways of getting new sellers on board – talking to them and inviting them personally and raising awareness via paid advertisement.

Since you've done your market research and picked a niche, you know who your sellers are and where they are – it's time to reach out to them!

Get in touch with every single seller who might be interested in your marketplace because you will get rejected:

"I had a really hard time convincing vendors to join Adderah. They told me my platform will never take off. They told me I'll just waste their time because my platform is new and nobody would use it. I've been told that people in Qatif don't like to shop online anyways. So I got rejected A LOT."

Don't spam, but try establishing a relationship and offering value instead.

For example, offer them feedback about their products and a free onboarding service to get them started on your platform. You can also offer your first sellers a way to sell their products for free so they can test your platform and get excited about it. Don't focus on fees – you'll start applying them later.

Paid advertising through Facebook, Instagram or Google Ads is another great option to get first sellers on board. It works even if you haven't launched your platform yet – you can run ads against a landing page that explains your project and invites sellers to join.

Make sure to keep your ads hyper-targeted to your niche when doing paid ads – if you're building a local marketplace, run ads to sellers within your city.

Finally, combine regular ads with remarketing and personal outreach to make your system of getting new sellers more efficient.

Generating brand awareness and growing the customer base

Now when you have sellers and a decent product catalog, it's time to start attracting customers. This part is similar to growing a regular ecommerce business, but you have a few extra opportunities as a marketplace owner.

Just like with the sellers, social media and paid ads will be your primary channels of attracting new customer traffic.

Set up shop on Instagram or Facebook. While organic social media reach is going down, it's still an important channel for ecommerce brands to use.

Now, set aside a small budget for paid advertising and test a few different channels to see which work best. Instagram is a great channel for highly visual ads. If you're running a handmade marketplace with unique products – show them off!

Additionally, keep search engine optimization in mind – SEO will be your growth driver in the long run. You're a wise marketplace owner and have picked a SEO-friendly platform software, right? If so, your categories, product pages and seller stores should start ranking shortly after launch and bringing new traffic in.

Don't forget your mailing list – use it when introducing new sellers, products and features. Invite new customers and sellers to sign up for your newsletter and keep the list healthy and growing.

Make sure you have a way to measure your efforts – use a free tool like Google Analytics or something more fancy like Ahrefs to judge the performance of your marketing initiatives.

Focusing on retention by keeping your users happy

After you've successfully launched your marketplace and have new user acquisition processes in place, it's time to focus on retention .

Why spend effort and budget to acquire new users only to have them never return to your website the next day?

So, you will need to make sure your sellers and customers are happy with the platform and willing to keep using it.

Keep gathering feedback and improving your marketplace. Identify the most active users and schedule personal interviews with them in exchange for a discount code or other offers. Fix issues as soon as they arise.

To make your marketplace easier to use, create a knowledge base for your buyers and sellers that answers the most commonly asked questions. You can also create a guide or a set of tutorials for your sellers that will help them be more successful selling on your platform.

Feature and promote your best sellers by creating case studies and success stories together with them. For example, Etsy's content team does a great job at promoting the stories of their users on their blog:

This will keep them happy and bring new customers in while also helping your SEO efforts.

When you have time, learn more about advanced analytics and conversion rate optimization to make your improvement efforts driven by real data.

Don't forget to keep your marketplace software up to date to make sure your marketplace is secure and efficient at all times.

Experimenting with strategic partnerships and competitive advantages

You'll need more than just a regular growth and marketing strategy to beat your existing competition, especially if you're a newcomer to the market.

Think strategically and try offering new, unexpected benefits to your users that your competition doesn't even think about. Do it by constantly experimenting and improving your value proposition through new tools, services, content and strategic partnerships.

If you've just started a new marketplace for handmade items, consider partnering with a local photography business to offer professional photography services to your sellers to make their creations stand out.

Talk to local and regional magazines and trade shows specific to your industry to get the word about your marketplace out.

Partner with adjacent businesses to create additional value for your sellers and your customers and make it an easy decision for them to join and stay with you.

No matter what you do – never stop learning, experimenting and getting better.

Over to you now

Hopefully, this guide has made the idea of starting your own marketplace business a little less scary.

Now, I'd like to hear what you think of all this:

If you run a successful online marketplace today, how did you get to it?

Those of you who are just starting out – what stage are you at and how does it feel?

And if you offer services to marketplace entrepreneurs, I'd like to hear from you as well!

In any case, let me know what you think in the comments below.

Martin Boss

I'm the founder of MultiMerch and a marketplace ecommerce enthusiast.

You really saved my day by simplifying the whole process and making it less scary. I'm building a Marketplace for services (freelance). I'm a web developer but aside from that, I'm struggling with marketing strategies and and unique value propositions. I have implemented all the features you mentioned but still feeling like it's not enough. I'm also in budget so I'm building it myself. A few advice could still go a long way. Thanks for the powerful post.

Whats up Comr! I noticed your comment and I'm curious of the features you implemented for your business. Were there any software or features that you purchased for your business? If so, which ones, and what were the prices?

Fantastic article with great, tangible advice! Thanks for sharing your knowledge with us

Try this brand new USA marketplace, Marketplace.Bargains we need new vendors, we combine a similar marketplace like Amazon & Ebay auctions together & our fee's are half their cost! We give you a free online store, 6 month FREE trial and you make your own store policies and can link back to your own online store! Register As A Vendor Here! Its just one more sales channel for your products but your products wont get lost in the ocean of products in big marketplaces and you keep more of your income for your business! Stay healthy everyone!

Wow! thanks a lot for sharing such useful content! Please, check our guide on how to create online marketplace

Thanks for sharing such a great post. Also, one can check out online marketplace called Mindful Market USA. One of the trusted platform for value-based shopping.

One should layout the ultimate goal and research the industry before launching a new marketplace. Thanks for amazing tips!

Comments are closed.

Sharpen your marketplace skills with our marketplace toolkit.

The complete guide to starting an online marketplace in 2022

You’ve been thinking about starting your own online marketplace? 

Well then, you’ve come to the right place! In our guide to starting an online marketplace, we’ll answer all of the questions you may have before you start.

First, we’ll talk about the starting steps. You’ll learn more about researching your industry and your users, planning your marketplace operations, and choosing the right monetization strategy. 

It may get more complex than starting a simple eCommerce business, but it can be even more rewarding. 

Before we get down to business, a small note here. If you’d like some professional help, feel free to reach out to us! We’re experts in building successful online marketplaces  and one of the few Pimcore Gold partners that operate on the highest level.   

And now to not keep you waiting any longer – let’s dive in!

Why should you start your own online marketplace? 

First of all, if you’re not familiar with online marketplaces, here's a short definition.

In short, the online marketplace is an eCommerce platform where sellers offer their products for sale, while buyers can purchase products from multiple different sellers.

The marketplace handles all the payments and can generate its own revenue by collecting fees.

It’s a bit different than a traditional eCommerce store. Usually, the customer can purchase products directly from the store, while on the marketplace the customer can choose from many different sellers.

Hence the name – online marketplace.

Great examples of online marketplaces are Amazon and eBay. You’ve definitely bought something from those 2 platforms and you can already see how those marketplaces work.

So, we’re here to teach you how to create your own! It’s an exciting journey indeed.

Now, why would you start your own online marketplace? Just in 2019, $1.97 trillion was spent  globally on the top 100 online marketplaces. 

Online marketplaces are evolving and the amount of money spent is rapidly increasing over the years. Just 2 years before, in 2017, $1.47 trillion was spent on online marketplaces. 

Meaning that in only 2 years, customers have spent half a trillion dollars more! Now’s the time to jump in! 

Now, what are some concrete reasons to get into the online marketplace business? 

One of the biggest reasons is the network effect . It’s incorporated into online marketplaces and it brings together both sides of a transaction. Both between the customer and the platform and between the platform and the sellers.

In short, the network effect is a phenomenon that as the user base grows, so does the value of the product. 

This makes it possible to scale much faster while having several different revenue streams without the need to manage your own inventory and logistics (if you choose not to, of course). 

It’s safe to say that starting your online marketplace is much different than starting an eCommerce business . And yet, it has some similarities.

Let’s say you have an eCommerce business and you’re selling fitness accessories. Switching to the online marketplace business model will allow you to grow your business much faster. 

You could build a huge community around your online marketplace and allow other vendors to sell their own products. With new vendors, there will be new buyers. 

Also, these new vendors will also put some effort into bringing in new customers and building a community. After all, their goal is to increase their profits as much as it gets. 

And the best thing is – you won’t need to expand your inventory and invest in new warehouses. Of course, you could (as Amazon does), but you’re still far away from that decision.

And here we are – we’ve come to the first step you’ll need to take in order to get your online marketplace up and running. Market research.

Conduct thorough market research

Similar to researching the market when starting your eCommerce business , you’ll need to identify your users’ needs, their problems, and the solutions to their problems. 

You’ll want to have a clear picture of the industry you’re entering and its competitors. There is no way around this. 

Research the industry

When you’re trying to settle down in an industry, you’ll want to know about it as much as you can. After all, you’re trying to influence it. 

Now, you need to know its size, its growth rate, and the latest trends in the industry . We’re keen on recommending the following sources when researching an industry: 

• MarketResearch.com
• Pew Research Center

These sources are highly authoritative, and the chance is that you’ve already encountered them while researching ways to start an online marketplace.

So, give them a visit and start researching your industry as soon as possible.

Also, by researching the industry you’re trying to validate your business model. The size of an industry may be an important factor for you.

When you’re charging selling fees, for instance, it will be a lot harder to operate in a smaller market – even though it’s easier to enter it. 

Next, you’ll want to know if there are some clearly defined niches in your market. It’s always a good idea to choose the most attractive niche you find in the market. But first, validate your business model! 

To not get you discouraged, remember – Amazon, Etsy, and Eventbrite all started from small niches! 

Today, Amazon is the largest online marketplace in the world, but it started way back in the 90s as a small online bookstore. The potential of your business is immeasurable. 

Identify your competitors

Whatever industry you are trying to enter, you’ll have competition – either direct or indirect. 

Without knowing your competitors, you’ll be fighting an uphill battle. 

So, here are some questions to help you with your research:

• What niche is your competition in? 
• How does their website look?
• What features do they have? 
• How are they handling inventory and shipping? 
• How do they describe their offerings?
• What kind of fees are they charging?
• How much effort are they putting into their marketing?
• How are they communicating with their community?
• What kind of guidelines do they set for their new sellers?

These are just some of the starter questions you’ll want to find an answer to. More will come as you continue with your research.

A good practice is to identify your competitors’ strengths and weaknesses and find some gaps which they didn’t cover.

List it all down in a spreadsheet, as it will be much easier to have a clear overview of your competitors.

Also, be sure to identify the market leader . Take a look at their business and try to figure out how they became the market leader. What separates them from the rest of the competition? 

Next, you’ll need to identify your users. 

Identify your buyers and sellers

Without knowing who your users are – you’ll be working on your online marketplace without a clear roadmap.

So, here are some simple questions that’ll help you get started. 

• What are your buyers’ and sellers’ main goals and main challenges? 
• Where are they buying, why are they buying and what seller do they buy from?
• What motivates and influences them?

With the help of these questions, it’ll be much easier to create a few buyer personas and better understand your target audience’s needs.

Also, here’s a checklist on what kind of actions could you undertake to identify your buyer personas.

When you’ve identified your target audience, you’ll need to figure out what are their needs and what solutions can solve their problems.

You’ll want to find out more about your buyers and their shopping habits. 

You could ask yourself the following questions:

• Are they shopping offline? 
• Where are they shopping? 
• Are they satisfied with their shopping experience?
• What else would they like to experience?

Also, when researching your potential sellers, you’ll want to get in contact with them directly . Ask them about their product offerings, how they plan to sell their products and what other platforms are they using to sell their products. 

Find out how can you improve their experience as sellers and work towards that.

In the end, you’ll most certainly have a better understanding of your users. This will give you more insight into the market itself and make it a bit easier to plan the whole online marketplace business plan.

And now that you’ve researched your target market completely, it’s time to choose the business model for your online marketplace.

Choose the right business model for your online marketplace

Before launching your online marketplace, you’ll want to design a viable business model. Regardless of what industry you’re entering – this is necessary. 

Here, you’ll want to decide how you’re going to monetize your online marketplace and what kind of revenue streams are you going to secure.

Here are some business models you may want to consider (including mostly different kinds of fees).

Charging sign up fees

By definition, a sign-up fee is a payment you charge your sellers to sign up to your online marketplace. 

The good thing about this business model is that you can charge your sellers with sign-up fees before your online marketplace starts booming. As long as your idea is viable and concrete, you can sell it to your sellers and make them a part of your great journey.

The problem with sign-up fees is that they can’t scale . Also, you can’t charge the same seller twice for signing up. So, you’ll need some other sources of revenue.

Subscriptions

Subscriptions may prove to be the best business model nowadays. 

The world economy currently is thriving thanks to these subscription-based businesses.

For example, you could charge your sellers a certain amount regularly in order to generate revenue. It will keep your business running and the more sellers you have – the more revenue is secured each month.

Following, here’s a snapshot from Amazon Marketplace. They charge their professional sellers monthly for $39.99 while, also charging them additional selling fees.

And if you go with a subscription business model, make sure your sellers get much more value than they’re paying for. 

A fee of $50/month won’t mean much to them if they have an opportunity to earn 10 times the fee on a monthly basis.

Establishing subscriptions may be a bit difficult from a technical point of view . When dealing with subscriptions, you’ll want to have a payment gateway that supports subscription payments too. 

But all in all, it’s worth it. 

Charging listing fees

Besides sign-up fees and subscription plans, you could charge your sellers listing fees every time they list a new product.

The fee could be fixed or it can vary depending on the price of the product or its category.

Same as listing fees, they’re easy to collect. Still, they are much more scalable . For example, you could collect listing fees every time the product has been sold.

This makes it extremely scalable. 

Charging selling fees

Selling fees are somewhat similar to listing fees but more scalable. 

Every time your sellers receive and process an order, you’ll charge them a selling fee. Meaning, the more orders come through your online marketplace, the more revenue you can collect in selling fees.

A downside of selling fees is that they’re a bit more complex to implement, technically speaking.

Here you’ll need to have a payment gateway that can split the buyer payments so you can get your fee every time the sale has been made. 

And to keep your online marketplace running, you’ll need to have more and more sales coming in. When you’re just starting out, this could be a challenge.

Nevertheless, it’s a great way to monetize your online marketplace. 

If you’ve secured enough traffic to your online marketplace and the sales are steadily increasing, you’ll find yourself in a great situation. 

Many online marketplaces charge selling fees to secure their revenue. For instance, here you can see that Etsy charges a 5% transaction fee and a $0.2 listing fee. 

The more value your seller can provide to the buyers, you’ll have more revenue coming in.

These are some basic ways to monetize your online marketplace. There are a few more monetization strategies and be sure to explore them before starting your own business.

After choosing the right business model, it’s time to start planning the technicalities of your online marketplace. Or so to say, start planning the operations in your online marketplace.

Planning the operations in your online marketplace

Managing your online marketplace can certainly get a bit complicated. 

There is a large number of operations you’ll need to take care of and we’ll go through them in this section. 

The main reason for this is that online marketplaces are two-sided businesses. You’re facing both the sellers and buyers. That means that you’ll need to take care of both of them and interact with them daily.

Let’s see how we can help you with this.

How to manage your sellers

Sellers are the main part of your marketplace and you’ll want to make sure that everything is in order regarding their operations.

You’ll want to be constantly acquiring new sellers and helping them while maintaining your relationship with the current sellers and bringing some value to them consistently. 

First of all, your sellers will need a reason to join your platform. 

That’s where the market research part jumps in. If you’ve done your research properly, you’ll know their strengths and weaknesses, their needs and wants.

After getting to know your sellers, create a set of landing pages just for them. Here, you’ll need to explain how your online marketplace works and why would it be great for them to join you.

Check out how Amazon creates its landing pages for its sellers . They’ve been doing a great job, considering the huge amount of sellers on their platform.

Here’s a video on how Amazon Marketplace works for B2B businesses. On their Youtube channel they’ve covered many topics regarding their business and marketplace in general, so feel free to check them out.

After you’ve set your landing pages, you’ll need to create a signup process. Here, you’ll decide who is eligible for selling on your platform and what kind of information you need from them.

Also, be sure to review every application you get , so there are no false registrations. 

You’ll want to decide here just how much control will the sellers have over their stores. How much can they customize it and how can they execute their operations on the platform. What else will they do except for listing the products?

And a really important thing to remember here – you need to make it easy for them to upload their products. A too complicated process may just turn them away from your platform.

After you’ve successfully created a small community of sellers on your online marketplace, you’ll be dealing with a new challenge here – managing the products.

How to manage the products

In many cases, you won’t have to deal with your own products and your own inventory. 

And still, you’ll need to take care of your sellers’ products, meaning you’ll have to manage their sold products. 

To help you manage the products in your marketplace and keep your operations up and running, you may want to implement a product information system in your platform.

PIM systems will help you manage all of the products without all of the countless spreadsheets.

But, to make it clear from the beginning, there are 2 ways to manage your products and organize them.

• Every product belongs to exactly one seller (like eBay)
• Every product can be sold by multiple sellers (like Amazon)

This is an important decision, as it will have an impact on the selection of the software, the layout of your online marketplace, and the way your sellers manage their products.

So, you’ll want to make it as easy for sellers as possible to start selling on your online marketplace. You could offer them, for example, to import all of their products in bulk.

If they’re already running an eCommerce business, make sure to offer them a way to import their products from their website to your online marketplace. 

How to process the payments

Processing payments for an online marketplace is a bit more difficult than processing payments for an eCommerce store.

You’ll need to allow your customers to purchase from several different sellers at once and split payments at checkout.

Here you’ll be collecting selling fees from every seller, depending on the product they’re selling.

To make sure this process works seamlessly, you’ll need to have a specialized marketplace payment gateway. 

As you’ve already noticed, there are a few different types of payments and every payment has different requirements regarding implementation. 

So, choosing the right payment gateway platform is a task of the greatest importance for your online marketplace. 

In case you’re still searching for more info on payment gateways, check out this great video down below!

Keep in mind that you may need to take care of taxation, invoicing, and reporting as the owner of the marketplace. 

Processing payments can get a bit complex when it comes to online marketplaces, and that’s one of the reasons why it would be good to find a reliable solution partner.

Next, you’ll want to know how to manage the logistics around your online marketplace. Let’s see what that’s all about. 

How to handle shipping and logistics

Even though you’re not handling the inventory yourself, your sellers are. 

That’s why you’ll need to make sure your online marketplace supports it. 

You’ll need to define whether you’ll ship the products yourself and you’re going to leave that matter to your sellers. 

Amazon is a great example of an online marketplace that handles the shipping through its Amazon FBA program. Check it out, it may serve you as an inspiration for this decision.

But it’s safe to say that if you’re handling the logistics yourself, it will get more complicated. 

You’ll need to get the inventory from your sellers, store it in a warehouse and they ship it to their buyers. And for every different buyer, you’ll need to calculate the shipping expenses.

Considering all of this, we can say that Amazon is the number one online marketplace for a very good reason. 

And in the other case, if your sellers are the ones responsible for shipping their products, you’ll want to make it easier for them. They will need a convenient way of managing the delivery of their products.

To make it more simple, you can use a flat rate, price-based, or even weight-based rules for shipping costs. 

Keep in mind that every seller can specify different shipping rules to different locations. It largely depends on their choice of transport partners. 

In any case, there are some important questions you should ask yourself, regardless of how you’re going to handle the logistics.

• Are you going to need some 3rd party tools? 
• How are you going to track your shipments and handle the tracking numbers?
• How can you establish a standard SLA across your whole online marketplace?

When you’ve got this part of marketplace operations set, next you’ll need to make sure there are people constantly selling and buying on your marketplace.

And the number needs to be increasing. 

How to handle marketing operations

Thanks to the network effect, your online marketplace will get enough traffic in order for you to enjoy a constant stream of revenue.

But still, you’ll need to make your online marketplace as visible as it gets. Especially in the early stages when you’re just starting out.

So, first, you need to find out how you can attract new sellers and buyers and make sure they stick with you. 

Once you launch your online marketplace, you’ll want to think about how your online marketplace can keep growing. 

You’ll achieve that through both organic and paid marketing campaigns. 

Here are some common marketing channels you’ll want to get familiar with.

You’ll want to pay full attention to search engine optimization. Your online marketplace needs to be visible on the internet and putting in extra SEO efforts will make it worthwhile .

Many sellers on your marketplace won’t optimize their every listing for search engines, so make sure you make it as easy as it gets for them. 

Otherwise, your online marketplace can be poorly optimized for search engines, and it won’t have any positive impact on your revenue.

You could even turn to voice search optimization and optimize your product listing for voice search! 

The next thing you’ll want to do is make it easy for both your buyers and sellers to create content on your marketplace. 

Your online marketplace could feature content such as product reviews, questions and answers, blogs, user-made collections and so on. 

Also, you’ll want to avoid any low-quality content. Content moderation steps in to help you with this.

Not to mention you could get penalized by Google for having duplicate content.

All in all, you’ll need to overview all of the content created on your platform and make sure it’s relevant and high-quality. 

Even though organic marketing channels will bring you great profits in the long run, you’ll want to use paid marketing tactics.

By using them, you’ll be able to improve your brand awareness and attract new buyers and sellers. How you’re going to use paid marketing channels depends mostly on your research.

And the final part of your online marketplace operations refers to managing relationships between your buyers and sellers. 

How to manage buyer/seller relationships

Attracting both buyers and sellers is just the beginning.

You’ll want to make sure they are happy with your online marketplace and they’re loyal to your platform. 

You’ll be interacting with them on a daily basis, helping them with their challenges, and answering their questions. 

So, it would be really good if you’re prepared for these situations.

Every day, you’ll be bombarded with questions from your users, and to be honest – you’ll want to avoid being completely involved.

There will be questions regarding technical support, order-related questions, and even some disputes between your buyers and sellers.

To make it easier for you, you’ll want to ensure that your buyers can communicate directly with your sellers . Allow them to solve their disputes without you being involved, as the marketplace owner. 

Provide your users with a range of communication options. Offering them more options to communicate will lower the chance of you getting directly involved.

Also, it’s important to ensure you can notify all of your sellers about some new changes in the marketplace.

For example, if you’re publishing some new features to your online marketplace, you’d want to notify all of your sellers of the new opportunities you’ve just created.

Online marketplace features may differ from some traditional eCommerce website features , but you’ll see some similarities. 

In essence, you’ll want to create a community around your online marketplace and turn it into a living organism. 

It will grow and develop continuously, thanks to both your buyers and sellers. Sellers will most likely encourage you to bring some new changes to your marketplace that are going to positively affect their sales. 

So, be sure to listen carefully! 

Now, we move on to the 2nd part of this entire guide. We’ll talk about some essential features, payment solutions, different types of marketplace software, and finally – assembling a winning team!

Identify the essential features for your online marketplace

First of all, when launching your online marketplace, you won’t need all the features that pop in your mind right away.

The best way of building a successful marketplace is to start with a set of basic features and build upon them as the business evolves.

The whole idea here is to launch fast and add new features according to insights gathered from your data .

Now, there are 3 different sets of features we’ll talk about. To get a grasp on what we’ll talk about and how we’re going to build our features, here’s a short overview.

• Sellers want to sell products. This means we’ll have to enable them to list their products, sell their products, and dispatch them efficiently.
• Buyers want to buy products. This means we’ll need to enable them to search and buy the products as quickly as possible.
• The platform connects buyers with sellers and generates revenue doing it. This means we’ll need to establish a specific set of tools to support this. 

Now, let’s start first with seller features. 

Online marketplace features for sellers

Our goal here is to make sellers’ lives easier. To get this done, first, we need to make it easy for them to get started on your platform. 

Quick and easy onboarding

The simpler the whole onboarding process, the higher the possibility of new sellers flocking into your online marketplace.

Here, we need to make sure that the signup and onboarding process are as straightforward as it gets. 

Product management

First, you’ll need to have in mind that your vendors probably aren’t selling their products only on your platform. 

They could have their own eCommerce websites, or they could already be selling their products on some other marketplaces. 

So, you’ll want to make it easy for them to list their products. 

When listing a product, a good product information management practice is to create simple product listing forms, all while having a convenient way for them to create different product variations and disbanding all of the non-crucial fields.

Another good practice here is to enable your sellers to import their products from third-party platforms such as Amazon Marketplace, Shopify, and so on. It could make the whole process a lot easier.

Convenient order processing

To minimize the amount of work your sellers need to do in order to process their orders, you’ll want to offer them a way of managing and processing all of their orders as efficiently as possible.

Every time your sellers receive an order, it would be great to instantly notify them while allowing them to mark those orders and print slips. 

Along with that, a good practice is to offer a way of specifying the tracking numbers. Your buyers will appreciate it. 

Listing promotion

Your sellers are here on your platform with one purpose – to sell their products! 

So, it’s a good idea to enable them to increase their sales by promoting their products. Here, you could enable them to create and distribute their own coupon codes and even take part in discount campaigns. Moreover, you could even help them improve their sales through personalization and personalized experiences.

Quick sidenote: We’ve put in a huge amount of effort into Pimcore, a digital experience platform, that offers all of that and much more. Above, we’ve linked an article where you’ll be able to see what can you do with Pimcore’s personalization engine. Check it out! 

Your end goal, by launching an online marketplace, is to connect buyers and sellers in a lucrative manner. This is one of the ways you can achieve it. 

Communication tools

In our previous article, we’ve mentioned how important it is to enable buyers to communicate directly with sellers. 

So, it’s a good idea to offer your sellers a way to receive and answer buyers’ questions, and also to receive reviews on their product listings.

Online marketplace features for buyers

Imagine yourself in a situation where you’re browsing some online marketplace. 

You’re looking to find a product, purchase it, and receive it, quickly and easily. 

So, our mission here is to make this whole process as easy as possible for your buyers.

Powerful search options

If your buyers can’t find what they’re looking for on your online marketplace, they’ll go somewhere else.

To bring the number of buyers exiting your marketplace to a minimum, a powerful search is a prerequisite. 

According to research conducted by Baymard Institute , buyers are searching for products in many different ways.

This type of insights can give you an idea of how your product search options may work.

Convenient checkout process

When designing a checkout process for your online marketplace, you’ll want to know more about your buyers.

Some questions you could ask yourself to clarify this a bit are: 

Make your checkout process as straightforward as possible and make sure you’re offering the payment and delivery options your buyers are already expecting to see.

Reliable order and tracking processes

If by any chance your buyers make an order your seller can’t complete, you’ll find yourself in a trouble and lose a customer. 

You’ll want to avoid that and make sure your sellers are reliable. Enable your buyers to track their orders and notify them about every status change of their orders. 

That way, your buyers will know what’s happening with their orders whenever they decide to check. 

Communication with sellers

Whenever a problem arises, you’ll want it to be dealt with as soon as possible. 

If your buyers can communicate with sellers even before they make an order, there’s a higher chance that they’ll purchase something on your online marketplace.

Online marketplace platform features

The goal of your online marketplace is to generate revenue by connecting buyers with sellers. 

So, to make this happen you’ll need the right set of tools and features to support your online marketplace. 

Let’s take a look at some features your online marketplace should have. 

Suitable payment gateways

Payment gateways are essential to every website doing business in eCommerce, and online marketplaces are no exception.

You’ll need to make sure your online marketplace supports all the needed payment gateways.

Operation management tools

When running an online marketplace, you’ll want to stay up to date with all new activities happening on your platform. 

To make sure you have control over your marketplace, you’ll want to consider features such as notifications, alerts, activity overviews, and tools for moderating catalogs.

Marketing tools

No platform ever became successful by staying hidden on the internet. 

You’ll want to spread the word about your online marketplace and make sure you have a steady flow of users coming to your platform.

Besides paid marketing activities such as social media ads and Google ads, your marketplace will be much more visible if you decide to build it from the ground up having marketing in mind.

You’ll want to lay the groundwork for search engine optimization, making sure all of your pages are optimized for Google primarily. 

Besides that, social media integration may play a huge role in marketing your online marketplace. 

Also, the UX and UI design of your marketplace are of high importance. It can either make or break your online presence. Having that in mind, make sure you have a team of experienced designers dedicated to improving your platform.

Advanced analytics

When running an online marketplace, you’ll surely want to have a set of standard analytics tools.

Moreover, you’ll want to make sure your vendors also have those analytics tools available on your platform. 

Still, when it comes to advanced analytics tools, developing one for your platform may prove to be a long and costly battle. 

So, it would be great to offer an integration with some advanced analytics tools such as Google Analytics. Your vendors will highly appreciate it.

Besides these essential features and tools we’ve named here, there are many more that would be nice to have. When launching your platform, consider launching it with a standard set of tools and features and build more upon feedback. 

All in all, these features are certainly similar to classic eCommerce website features (some are exactly the same, it’s still eCommerce, right?), and yet there are many more novelties.

Choosing the payment solution for your online marketplace

To make sure your online marketplace business is sustainable, you’ll need to enable secure and reliable payment processing. 

When compared with traditional eCommerce, there are a few differences when it comes to payment processing. 

There are several different types of payments you’ll be processing on your online platform: 

• Payments from buyers
• Payments from sellers
• Payments to sellers
• Payments to third parties

You can already see why solving the payment processing issue is going to be challenging. 

To make sure that order payments are processed correctly, you may want to consider the following 3 ways of payment processing:

Direct payment

With this kind of payment processing, payments from your buyers will go directly to your sellers, meaning your platform will not be involved in this transaction. 

If your platform doesn’t get involved in the transaction, some issues may arise.

You’ll have fewer opportunities to charge your transaction fees or to handle refunds. 

Moreover, your customers will experience a major issue on your platform. They won’t be able to buy products from different sellers in one session and they’ll need to go through separate checkouts. 

In essence, direct payments aren’t a great option when choosing a payment solution for your online marketplace. 

Aggregated payment

With this type of payment processing, your platform will collect all of the buyers’ payments and later redistribute it to your sellers.

This allows for a single checkout and handling refunds and returns, but you’ll need to put in extra effort to track your sellers’ finances. 

This may prove as a challenge for your platform, so give it some thought before choosing a payment solution.

Split payment

When it comes to split payments, all of your buyers’ payments are split at checkout and distributed among your sellers. 

And while it happens, you’ll be able to charge all of the fees and handle the transactions successfully. 

Split payments solve the issues that appeared with the previous 2 types of payment processing. 

One of the biggest challenges here is the complexity of implementing this kind of solution in your online marketplace. 

Over the years, the situation has improved and now there are many payment processors that can handle split payments.

Some of these are Stripe Connect, Mangopay, and PayPal for Marketplaces.

How to choose a payment solution? 

Choosing the right payment solution for your online marketplace is of the utmost importance. 

There are a few factors that will impact your decision, the most obvious one being the cost of the solution.

So, to make this decision a bit easier, ask yourself the following questions: 

Try to find the right ratio between selling fees and payment processing fees, or you may end up with no profit at all after the payment has been processed.

Find the best online marketplace software solution 

We’ve come to an important part of creating your online marketplace business.

After you’ve created the whole plan of operations, made the decision on the features and payment solution, it’s time to choose a software solution for your online marketplace. 

There are many different options to choose from.

So, here are some tips on choosing the right one.

Consider what type of online marketplace are you building

Are you going to sell products, services or you’re going in the direction of online bookings? 

Platform designed for online bookings may not work out well if you’re going to sell physical products.

Take into account the features you’ll need

You’ll want your online marketplace software to be able to support the features you decided to use. 

Does it support the payment solution you chose previously? Can you implement the features you decided on already? How’s it going to handle logistics and shipping? 

How good is its user experience?

This may get overlooked, but it’s extremely important. UX can make or break your online marketplace. 

If it feels difficult to use and it isn’t as intuitive as you’d want, it probably isn’t the solution you’re looking for. The users will want the best user experience they can get their hands on and you need to make sure it all happens on your platform.

Who are the people building your software solution?

You’ll want to know who are the people working on your project and what kind of results can you expect from them.

An online marketplace often requires years of continuous support and updates, and you’ll want a reliable solution provided here.

When you find the right solution provider, the chance is you’ll be treating them more as a partner than just a solution provider. They’ll be heavily involved in your business and you’ll be able to turn to them regarding any issue on your platform.

Make sure to do your research when choosing a solution provider. Check their Clutch reviews , their previous projects , and their company culture . That will provide answers to many of your questions.

How big is your budget?

It’s safe to say, the budget isn’t a great priority when choosing a software solution.

Paying a few hundred dollars more today for a better solution can save you thousands of dollars in the long run.

Going with the cheaper solution usually isn’t worth it when it comes to the online marketplace business.

But still, defining a budget from the start is a good way to go.

Assemble a great and reliable team

When running an online marketplace, you’ll need to have a great team that’ll help you make it work. 

Here are some essential roles your online marketplace is going to need.

Designers and developers

Regardless of the software solution you choose, you’ll need to have some technical skills to pull it off. 

You don’t need to be a developer or a designer, but you’ll surely want to have them on your team. It’ll make your life much easier. 

Investing in both designers and developers can be extremely profitable in the long run, so have that in mind.

Marketers and salespeople

To get the most out of your online marketplace (and to get the business started), you’ll need to promote your online marketplace continuously.

That’s where sales and marketing come in incredibly useful.

Your marketers and salespeople will take care of finding both buyers and sellers for your online marketplace. 

It’s safe to say that you’re also going to do both sales and marketing, ensuring your business is on the right track. 

You may want to acquire some new skills such as:

• Email marketing
• Copywriting
• Social media marketing
• Community management

These are some basic skills when it comes to promoting your business and over time, you’ll most likely master them.

But don’t hesitate to invest in your team. Running an online marketplace is rarely a one-man job and if you’re aiming to go big – then it sure isn’t. 

Online marketplace administrators

Running an online marketplace on an everyday basis is an exhausting task. 

You’ll need to manage your sellers while keeping them happy, monitor everyday activities, resolve customer complaints, manage your team, do the paperwork, manage the payments, and so much more.

When just starting out, you may be the person that’s going to do almost everything, but you’ll surely want to delegate some of your work.

Consider hiring either full-time employees or agencies to help you out. 

Each of them has its own pros and cons.

Recruitment and hiring is a long and thorough process, so be sure to put great effort into it. 

It’ll most certainly pay off in the long run. 

And now - onto the final part of this entire guide. You’ll learn more about actually building the platform, launching the online marketplace, and finally – implementing growth strategies. 

Building the online marketplace

Now is the time to actually build the online marketplace. 

If you’ve followed all of the steps from this article, we’ve got everything you need to start building the platform.

This process can take some time, and to make this process faster and easier, there are some things you’ll want to get done first.

Now, let’s get down to specifics.

Create a specification for your platform

We can all agree that online marketplaces tend to get complex. As far as eCommerce goes, online marketplaces are the most complex.

So, to avoid the troubles of running out of time and money and prepare yourself.

You’ll want to prepare some rough specifications that will contain more information about the project itself – its goals, requirements, and some kind of timeline.

A good rule of thumb is – the more work needs to be done, the more details you’ll want to have in your specifications. 

To have a better overview of the implementation process, be sure to split the whole project into small steps. Set several milestones and keep track of it on a regular basis. 

And when you’re defining the specifications, you’ll want to include your defined MVP in there. 

In short, MVP stands for  – minimum viable product . 

We can define the minimum viable product as the version of a product with just enough features to satisfy first customers and provide you with needed feedback for further development.

So, we want to launch fast! 

To launch the online marketplace fast, you’ll need to include some features that you need to have in your MVP, and an approximate launch date.

The more specific you get, the better. 

After you’ve defined the specifications, there are more things you’ll want to master to build an online marketplace. 

Obtain basic project management skills

To turn your idea into reality, you’ll want to have some basic project management skills at your disposal. 

You don’t necessarily need to be a project manager, but you’ll want to know your way around. 

If you’re working with an agency (such as us), you’ll have a project manager assigned to your project who’ll keep track of everything needed to finish the project successfully.

If you still decide to do it on your own, brace yourself for some unexpected situations. 

Always have a backup plan for your project in case something goes wrong – and the chances are that something unexpected will happen during the project implementation. 

For instance, if you’re dealing with freelancers, they could go unresponsive and leave you for quite some time without any proper answer.

Or some estimate on a specific feature may turn out wrong and you realize it’s going to take much longer to implement everything you planned.

Launch at the right time

There are two mistakes you can make – launch too soon or launch too late. 

Launching the online marketplace too late is the one mistake you’ll most definitely want to avoid. 

So, as soon as your essential features are all set and you see the launch date drawing near, prepare for early user feedback and continuous testing.

It will take a while until you hit the right spot with your online marketplace, but you know the saying – Rome wasn’t built in a day! 

And now comes the most exciting part of this whole process – launching the online marketplace! 

Launching the online marketplace

Now, creating a website isn’t even remotely enough. 

There are a few things to consider when launching the online marketplace.

First, be sure to launch the marketplace in 2 phases – soft launch and hard launch.

But before you’ve done that, you’ll want to set some plans.

Plan out your launch

The sooner you start planning, the better. 

This means that you’ll have more time to spread the word about your upcoming launch and ensure a list of early users.

Your launch plan will consist of a launch timeline, your marketing efforts and messaging, and a list of all of the communication channels you’re going to use. 

This largely depends on what country you’re launching in and what market you’re entering. 

So, while your website is still under construction, build some excitement in your target market and ensure that you have a number of buyers and sellers right after you launch the online marketplace. 

By building excitement, we mean using marketing strategies to reach out to your target users. You could use paid ads, or even reach out to them on social media. 

When talking about acquiring sellers, be sure to get in touch with them directly. 

By the time you’re doing a soft launch, you’ll need to already have some users who are willing to use your platform, either for selling or buying. 

It’s time for a soft launch!

In the beginning, you’ll face many challenges such as numerous bugs and usability issues.

That’s why you don’t yet want your online marketplace to go public. 

It’s a good idea to do a soft launch with your early users as soon as your MVP is ready.

If you’ve planned out everything right, you’ll already have a mailing list of potential users. 

First, reach out to your new sellers and help them set up their stores on the marketplace. 

Once you’ve done this, it’s time to get the ball rolling. Invite all of your potential buyers to check out the platform and see how they’re doing. 

Test everything and shiny up your online marketplace

After your users have settled in your online marketplace, you’ll want to gather as much feedback as possible. 

Contact the users directly and ask them a few questions about their experience on the platform. 

Now’s the time to listen. Every bit of feedback is crucial and you’ll see what your users want to experience on your platform – and you’ll see what they don’t want to. 

After the initial feedback from your soft launch, take your time to improve your online marketplace as much as possible. 

An important note to make – make sure to create real relationships with your users. In the early days of your online marketplace, those loyal users will be your best promoters. 

Once you’ve polished your online marketplace – it’s time to go public! 

It’s time for a hard launch! 

Before you go public, be sure to test everything once again. 

If everything seems to work great, here you are – at the most exciting part of your online marketplace journey.

Get your whole team ready for the launch. Some unexpected issues might happen when you want it the least.

Try to make your launch an event. Get people talking about it, bring them in through webinars, Q&As, and various different activities. You’ll want your users to be excited to be one of the first ones on the platform. 

And after everything starts going and users start flowing in, you’ve hit another milestone – the journey is far from over. 

Go big with your online marketplace

Now’s the time to grow your online marketplace. 

You’ll need the new users flowing in and the current users to keep using your platform.

Growing an online marketplace will be a bit different than growing a traditional eCommerce business. 

Here, you’ll need to focus on both buyers and sellers, while the traditional eCommerce business tends to focus on buyers only. 

As soon as you launch the online marketplace, you’ll want to have as many sellers as possible – and you’ll want them to keep doing business on your platform.

Finding the first sellers for your online marketplace

You surely don’t want your buyers to visit your marketplace and find out there are 30 empty categories and just a few products in the marketplace altogether.

To make sure this doesn’t happen, you’ll want to have a number of sellers as soon as possible. 

Thanks to your thorough market research, you know exactly who your sellers are and where you can find them. 

Contact each seller that may be interested in offering their products on your online marketplace. The more sellers you have from the start, the better.

And be prepared to get rejected quite a few times.

But a great number of sellers will agree to join you. Try building real relationships with them from the start and offer them something of value.

Make sure their onboarding process is free and that they don’t need to pay any fees when just starting out. 

Fees will surely come along the way, but first, make sure that your sellers have a great experience doing business on your platform and that they’re here to stay.

Focus on bringing in more buyers

When your sellers get settled and they’ve already set up their stores, it’s time to invite more buyers. 

Now, this part will work the same as it does in the traditional eCommerce business. And still, you’ll have more categories, products, and features to offer your buyers that you couldn’t possibly offer them handling it all by yourself.

Just take Amazon for example. You can find almost anything there. There are so many sellers that you can always see new groups of Amazon seller groups popping up and discussing the best strategies.

Paid advertising and social media channels are the way to go when focusing on acquiring more buyers.

As with anything you’ve done by now, you’ll need to test each channel you’re going to use to find out which channels work best for you. 

And while you’ve been building your online marketplace, you made sure it’s optimized for the search engines. The platform you picked is SEO-friendly and you’re focused on winning in the long run. 

After your sellers start flocking in and setting up their stores, your website’s SEO ranking will start growing and attracting more new users, both buyers and sellers.

After some time, there’s potential for your online marketplace to even become self-sustainable in terms of user growth. 

To make it clear – you’ll want to analyze how your marketing campaigns are doing and how does your website analytics look like. 

Using tools such as SEMrush and Google Analytics is going to be crucial for identifying some bottlenecks in your marketing campaigns. 

Keep the users happy – focus on retention

Once the users are flowing in, you’ll want to keep them on your platform.

When acquiring new users, there’s always a risk of them leaving your online marketplace and never coming back. 

So, make sure that your users are happy with your platform and that they’ll keep using it.

And you’ll still want to gather feedback continuously to improve your eCommerce features (or even add some new ones). 

To make your platform easy-to-use, create an FAQ page. And make it pretty detailed because – online marketplaces tend to get a bit complex, right?

Also, you definitely want your sellers to be successful. So, create a guide for them that will help them sell more of their products. 

The more product your sellers can sell, the more fees you can charge. It’s a win-win situation! 

If some of your sellers tend to stand out with their successful store on your platform – why not feature them? 

Create a case study of their business or cover their success story in your blog section. This will certainly make them happy, while also boosting your SEO ranking.

As time goes, try to get a hold on conversion rate optimization and advanced analytics. This will help ensure your online marketplace is doing a good job of converting more users. 

And if it isn’t – you’ll know exactly what you need to do to make it happen.

P.S. Always keep your software up to date! You want your platform to be highly-secure at all times.

Experiment with new features and partnerships

If you’re new to the market and you’re aiming to beat your competitors, think about relying on some new and experimental strategies. 

To beat your competitors, you’ll certainly need more than a regular growth strategy.

Try offering some new and unexpected features and benefits to your users by bringing in some new tools, services and partnerships. 

Check out your competitors and find out what kind of tools and features they aren’t still using.

You could partner up with local businesses, reach out to industry-specific magazines and engage in trade shows.

Whatever your strategy may be, always keep experimenting with new features and – test, test, test! 

This was a really long ride! 

We’ve come to the end of our online marketplace series! 

If starting and running an online marketplace seems less scary for you than before, our goal is complete! 🙂 

You've got all the information on where to look when starting and building an online marketplace - but if there's more you'd like to know, be sure to check our blog more often!

And if you’re in need of service in online marketplace development , we’re here to help. 

We’ve been building successful online businesses for more than 8 years and we’ve got tons of hands-on knowledge and experience behind us. 

If you’re ready to start your online marketplace, reach out to us – we’d like to hear more about your idea!

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The 6 marketplace business models – and how to choose the right one

Compare marketplace business models and find the revenue strategy that brings you the biggest growth boost.

Published on Dec 29, 2015

Last updated on Mar 15, 2024

This chapter of our How to create a marketplace guide introduces marketplace business models and helps you choose the right one. Also available as a podcast!

Airbnb, Etsy, Craigslist, and Uber are successful examples of the marketplace model. They bring supply and demand together and facilitate their transactions.

But how do these successful marketplaces monetize? To build a sustainable and successful marketplace, you need to find a business model that will finance its operations. If you are running a non-profit or a hobby project, funding the development and maintenance of the site can be done through donations or from your own pocket. However, in most cases, funding eventually needs to come from the community you are serving—the users of your site.

One of the most common reasons why startups fail is that they pick a business model that does not scale . In this article, I'll look at six different marketplace business models and help you choose the best, most scalable one for your marketplace idea.

If you're interested in reading more about the benefits of the marketplace model as a business, check out this article on planning your marketplace .

Embedded content not shown due to cookie preferences. See Step Two: Choose a revenue model for your marketplace on YouTube or adjust your preferences .

This video is the second step in our ten-step marketplace course. Watch the full video course on building a marketplace !

The 6 marketplace business models

There are six different marketplace business models that most online marketplaces use:

• Membership/subscription fee
• Listing fee
• Featured listings and ads

Let's look at each of them to find out which is the best revenue stream for you.

1. Commission: The classic marketplace model

The most popular revenue model for modern marketplaces is to charge a commission from each transaction. When a customer pays a provider, the platform facilitates the payment and charges either a percentage or a flat fee.

The biggest benefit of this marketplace business model is that providers are not charged anything before they get some value from the marketplace. This is really attractive to the providers. At the same time, from the marketplace's point of view, this commission is usually the most lucrative: you get a piece of all the value that passes through your platform. The best-known marketplace platforms—like Airbnb , Etsy , eBay , Fiverr , TaskRabbit , and Uber —all use commissions as their main revenue stream.

The biggest challenge in getting commissions to work is to provide enough value for both the customer and the provider. If your users do not get enough value from your platform, they will find a way to go around your payment system , and you will not get paid. How do you provide this value? We dive into the question of how to discourage users from going around your payment system in chapter 4 of this guide.

Another challenge with commissions is pricing. How big should the commission be? Should it be the same for all users? Should I charge the customer, the provider, or both? Should I first have a lower commission to get people to join my platform and raise it later? Chapter 5 helps you decide your marketplace pricing : how much commission or other fees you can charge your marketplace users.

My recommendation is to use commission as your main revenue stream whenever feasible. I anticipate more and more marketplaces adopting this revenue model in the future.

There are, however, scenarios in which it is not feasible for the platform to facilitate payment transactions. In these cases, commission does not work. Examples include:

• When the size of the typical transaction is huge. With car or real estate sales, for instance, it's difficult for the marketplace to justify the commission.
• The marketplace has lots of different types of offerings. It becomes impossible to design a transaction process that provides value for all of those cases. Traditional classified ads are a good example of this.
• The invoicing process is too complex for the marketplace to facilitate. This is common in business-to-business (B2B) and some business-to-consumer (B2C) marketplaces.
• Money is not exchanged at all on the platform. For instance, if the marketplace is about dating, finding people to hire, bartering, or sharing something for free, there's no monetary transaction involved and thus no way to charge a commission.

In these cases, you need a different type of marketplace business model.

2. Membership fee or subscription fee: Monetize engaged marketplace users

A membership fee (sometimes called a subscription fee) is a marketplace business model where either some or all of a marketplace's users are charged a recurring fee to access the marketplace. With this revenue strategy, the typical value proposition for providers is that the platform helps them find new customers. For customers, it helps them save costs or find unique experiences. The membership fee is a good choice if the value you provide is high and a typical user will engage in several transactions, but facilitating payments is challenging or impossible.

Typical examples of consumer-to-consumer (C2C) marketplaces with membership fees are home-swapping sites ( Love Home Swap , Home Exchange ) and dating sites ( OkCupid , Match.com ). Oftentimes, these sites vet all the subscribers to guarantee quality matches and create a sense of exclusivity that justifies the fee.

In the B2C market, membership is common in recruiting. For instance, LinkedIn and StackOverflow charge companies a subscription fee to get access to their talent pools. Studiotime , an "Airbnb for record studios", is an example of another niche where membership fees work as the main business model. With B2C companies, the platform is typically free for customers but requires a paid subscription for providers.

A membership fee can also be a good initial revenue stream for B2C marketplaces that eventually want to charge a commission but don't yet have the tools in place to facilitate transactions in their particular niche. Venuu , an "Airbnb for event spaces", started with memberships to get revenue upfront, even before launching their site. Later on, when they had validated their business plan and had the resources to build an invoicing system, they moved to the commission model—a revenue model that was much more lucrative for them.

The challenge with the membership fee model is that it makes the " chicken and egg problem "—how to find providers without customers and how to find customers without providers—even worse. You need to have enough users on your platform to make it valuable for both providers and customers, and a mandatory payment discourages users from signing up. One way to get around this is by offering heavy discounts for early adopters or even lifting the fee completely to build the initial user base.

3. Listing fee: The classifieds marketplace model

Some marketplaces charge a fee from providers when they post new listings. This marketplace business model is typically used when providers get value based on the number of listings they have on the site, and the potential value per listing is big.

This revenue model is quite common with classified ads. The value proposition of the website is really simple: it aggregates a massive volume of listings to a single online destination and guarantees lots of visibility for those listings. Classified ad platforms typically don't even try to facilitate the transaction.

Perhaps the most well-known example in this category is Craigslist . It is a collection of local sites where people can post listings about anything they want, whether it's about selling goods, services, jobs, finding an apartment, dating, or something else. Generally, posting a new listing to Craigslist is free—this is how they managed to reach critical user mass—but in certain categories (namely, job and apartment listings in some cities), they charge a fee for each listing.

It can sometimes be useful to use several business models on the same site. For instance, Etsy is an example of a B2C marketplace that uses commissions but also charges a fee to post new listings. Etsy's reasoning for this is likely that its liquidity (the probability of a certain item being sold) varies a lot. While there are some hugely popular items on Etsy, most items probably never get a single sale because Etsy's total volume of listings is massive. By using both commission and the listing fees, Etsy gets revenue from both popular and not-so-popular items.

A listing fee is better than a membership fee in cases where providers don't want a continuous subscription and only want to sell certain items. This is the case with Mascus , a B2B classifieds site for expensive machinery.

The challenge with listing fees is that it doesn't guarantee value for providers, and thus the fee cannot be too high. This results in the platform being able to capture only a relatively small portion of the value going through the site. A sustainable business model that depends solely on listing fees thus requires a very large volume of listings. Additionally, since paying a listing fee does not guarantee that the item is sold, the marketplace will have a harder time proving that it provides actual value to its providers.

4. Lead fee: Generate revenue through introductions

Lead fees are somewhere between the listing fee and commissions. In a typical lead fee model, customers post requests on the site, and providers pay to make a bid for these customers. Lead fees give a better value proposition than listing fees: you only pay when you are put in touch with a potential customer.

Lead fees only work if the value of the lead is high. For this reason, it's not common in C2C marketplaces. A typical use case is B2C or B2B services, where each new lead can lead to a long-lasting customer relationship with multiple deals. A recent well-performing example of this model is Thumbtack , a B2C marketplace for all kinds of local professional services, from plumbers to guitar teachers. In 2021, the company was valued at more than $3 billion .

However, while Thumbtack has been doing well with lead fees so far, their problem is that the providers no longer use Thumbtack with existing customers—instead, they build the relationship outside the platform once they have the lead. This is why Thumbtack decided to build invoicing, payment, and scheduling tools for professionals . In the future, they may move towards the commission model to extract more value from the transactions they help facilitate.

5. Freemium: Charge for additional features and services

How can you monetize a marketplace where people share low-value items for free? The Dutch startup Peerby has built a C2C platform where people can borrow things from each other at no cost. The basic experience is free for all the users of the platform. Peerby has decided to monetize by offering premium services. They have two main offerings: insurance (the provider can request that the customer while getting the item for free, pays an insurance fee that guarantees the item will be replaced if it is damaged or stolen) and delivery (the customer can pay a small fee to get the item delivered to their door instead of having to go pick it up from the provider).

The logic behind the freemium model is that the core offering is free, but after you get your users hooked, you offer paid value-adding features. The challenge is that these paid services need to provide enough value to be tempting to a good portion of your users. If only 1% of your users are interested in your premium offering and everyone else uses your site for free, it's probably not enough to be a sustainable revenue stream. Coming up with a premium service that is interesting for a wide enough audience can be very tricky. Because of this, many platforms use premium services as additional revenue streams. For example, Mascus offers premium web page services to its customers to complement its listing-fee-based marketplace business model. Etsy complements its transaction and listing fees by offering premium services like direct checkout, listing promotion, and shipping labels to its power sellers and has recently seen strong growth from this revenue stream.

In some cases, a marketplace can start offering premium services as an add-on but eventually shift its entire business strategy to focus on paid services. Vayable started as a pure peer-to-peer marketplace where individual people offer unique experiences to others, but after failing to get enough traction, it decided to pivot to build a concierge service for custom vacations. The downside of this approach is that premium services are often a less scalable option when compared to pure commissions. This is often due to the amount of staff that is required to provide the premium services. Vayable only made the shift because they were not able to get commissions to work well enough.

6. Featured listings and ads: Leverage visibility on your marketplace

Featured listings are a way for providers to buy more visibility for their offerings.Listing on the site is typically free, but providers can pay to have their listing featured on the homepage of the site or at the top of a certain category. An example is Gumtree , UK's most popular classified ads website. Etsy provides featured listings as one of its premium services.

As a marketplace business model, featured listings and ads are relatively close to pure advertising, where you show ads (such as Google AdSense) to your users. Featured listings and ads are both popular revenue streams for classified ad sites. They are often seen on real estate marketplaces (like Zillow ) or free sharing platforms (like Freecycle ).

The challenge with these models is that, again, they require a significant amount of users to generate meaningful revenue. When you're in the business of selling eyeballs, the revenue you generate per user is likely a lot less than if you can extract value from your transaction process. Moreover, when you're placing ads on your site, you're serving two audiences with conflicting interests: from a user experience point of view, ads are almost always a hindrance, and your users would generally be happier without ads. If you want to offer the best possible experience for your users, featured listings and ads is not your best option.

Ad-based revenue strategies work best when you have a really specific niche, and there are commercial providers that are interested in tailoring their offering for that specific audience. For instance, Häätori , a Finnish wedding marketplace for used wedding dresses, lets individuals use the site for free. They monetize by allowing wedding planners, photographers, and other providers of wedding-related services to buy ads on the site. The content of these ads is very relevant for the users of the website, making them less annoying.

Which marketplace business model should you choose

Modern marketplaces employ many different revenue strategies. In general, the best revenue model for most is to "own the transaction" and charge a commission from all purchases made through the site. This approach is very scalable and oftentimes quite lucrative.

However, in some cases, commissions don't not make sense, so alternative models are needed. Trying out multiple business models to find the best option for your concept might be a good idea. In the beginning, you should have only one revenue stream in use at a time to avoid diverting your focus. Eventually, when your platform grows, it might make sense to combine several revenue streams to take everything that is happening on your site into account.

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Home » Building Online Stores » Ecommerce Business Plan Template: How to Make a Business Plan

Ecommerce Business Plan Template: How to Make a Business Plan

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Written and researched by:

As the Benjamin Franklin quote goes, “by failing to plan, you’re planning to fail” – and it’s a sentiment that’s just as relevant today just as it was in the 1700s.

Particularly if you’re an ecommerce business.

After all, one research project (a collaboration between Forbes, Huffington Post, and Marketing Signals) suggests that a whopping 90% of ecommerce businesses fail in the first 120 days of their existence. So how can yours avoid being part of that short-lived majority?

With an ecommerce business plan, that’s how.

So read on – we’re walking you through what ecommerce business plans are, and why you need one. You’ll find a complete ecommerce business plan template below, too – so you can start planning for your own online enterprise’s future, today.

What is an Ecommerce Business Plan?

An ecommerce business plan is a document that outlines your online business’s objectives and strategy. That’s a summary of both your goals and how you plan to achieve them.

A good ecommerce business plan should identify all the potential challenges your online enterprise will face as you chase profitability, scalability, or simply sustainability. They’ll lay out the groundwork, too: including an analysis of the market you’re planning to enter, and the customers you’re intending to target.

And, of course, an ecommerce business plan should get specific. How will you source your products? Which tactics will you use to market them? How will you fund your fledgling business, and maintain cash flow when times get tough?

Though they’re also useful for keeping you on track with your goals, ecommerce business plans are vital for attracting and securing outside investment, too – so it’s important you get yours right.

Food products are an excellent option for selling online, and you find a list of examples here . But remember, you need to factor regulations and food safety requirements into your business plan.

Why Create an Ecommerce Business Plan?

There are plenty of benefits to creating a comprehensive business plan for your online store:

• Gaining a deeper understanding of your business – your blockers, biggest assets, and most lucrative opportunities.
• Understanding the state of the market, and where you want to position your ecommerce store within it.
• Planning for what’s ahead – getting to grips with industry trends, and how they might affect your burgeoning business.
• Testing how viable your ecommerce store’s idea and concept is, and any weak points inherent in the premise.
• Assessing the outlay required – be it time, effort, or money, this is useful for understanding the scope of the work that lies ahead.
• Obtaining funding – business plans are, after all, super useful for selling the idea of your online store to potential investors.
• Clarifying your strategies for marketing, logistics, and finance, as well as exactly who your target audience is. Making your business idea a little more tangible – it’s starting to feel real now!

Ecommerce Business Plan Template

Ready to start penning your plan?

Read on – the ecommerce business plan template below offers a handy framework to get you started.

Executive Summary

Like a blurb on the back of a book or an abstract at the start of an academic article, an executive summary is designed to give time-poor readers a concise, compelling overview of your ecommerce business plan’s contents.

While your executive summary should take pride of place at the top of your business plan, you shouldn’t write it until the end. That’s because you’ll figure out more about your ecommerce store’s plans, ambitions, audience, and strategies as you flesh out your plan – and you’ll want these to be reflected in that punchy, persuasive first statement.

So what should an executive summary include for an ecommerce business, exactly?

Here’s a quick (non-executive) summary:

• What your business does
• What goals you want to achieve
• What product or service you’re selling
• Where you’re selling
• Who you’re targeting
• Who your competitors are
• How you plan to make money
• How you’ll implement the business plan that follows

Remember, an executive summary needs to be crisp, clear, and to the point. Don’t waffle on with overlong or unnecessary analysis – you’ll lose your reader’s interest!

Company Overview

With your reader now hooked, it’s time to explain exactly who you are, what you do, and why you do it.

A company overview should include:

• Details of your products/services – what are you planning to sell?
• Your company’s key details – your name, tagline, logo, and any top-level branding information.
• Your key individuals – your founder(s), CEO, and COOs.
• Its legal structure: have you set up as a partnership, or a Limited Liability Company (LLC)?
• Your vision, mission , and values. Beyond making money, what does your ecommerce store stand for? What do you believe in – and what higher purpose gets your staff up and out of bed in the morning?

Market Analysis

Next up in your ecommerce business plan, you’ll need to provide a detailed analysis of the market you’re entering into. This is crucial – after all, if there aren’t any existing market gaps for your business to service, it’ll struggle to make an impact.

Your market analysis should include an exploration of:

• Market size
• Current competitors
• Any gaps, opportunities, and threats

To do all this, a SWOT analysis is a pretty good place to start. It stands for Strengths, Weaknesses, Opportunities, and Threats. It’s a form of situational analysis that can help you understand the nature of your business vis a vis the competition.

Customer Research

Who are you planning to sell to? It’s a key question you’ll need to know – and that any potential investors will demand to know – before your ecommerce business gets off the ground.

So, your ecommerce business plan needs to get specific about that sweet slice of the pie you’re targeting. That includes a deep dive into the demographics – specifically, your prospective customers’:

To gain this info, you can conduct market research into the portion of the market most interested in – or most likely to buy – your products or services. That could involve running focus groups, or sending out incentivized surveys.

Advice from the Experts

Top tip: for an even more granular way of conceptualizing your potential customers, create buyer personas . these are fictional depictions or real consumers, with pain points, goals, likes, dislikes, and demographic info all fleshed out..

By tailoring all your messaging to one or more of these personas, you can increase the effectiveness of your comms.

Marketing Plan

Next up? Details about how you plan to spread the word of your business.

This will include which communication channels you intend to prioritize, which marketing strategies you’ll implement, and which milestones and metrics you’ll use to measure it all.

Your marketing plan should make clear:

• Your marketing goals
• KPIs: such as engagement rates, traffic, conversion rate
• Key channels: email, SEO content, paid SEM marketing
• Your key marketing tactics: will you focus on social media, or plow your resources into influencer marketing? Perhaps a blend of both?

Need some digital marketing tips to add clarity and clout to your marketing plan? Our comprehensive guide has you covered.

Logistics Plan

You know how you’re going to entice your customers to buy from you – but how will you actually get your products to their doorstep once they do?

This is what your ecommerce business plan’s logistics section aims to explain. It’ll include:

• Where you’ll source your products
• How (and where) you’ll store those products
• How you’ll deal with orders
• How you’ll fulfill orders – in-house, or via a 3PL (third-party logistics) supplier?
• How you’ll handle deliveries, and which shipping provider you’ll partner with
• How you’ll deal with returns

3PL suppliers like ShipBob store, sort, pick, pack, and ship your goods – so they can be a fantastic option if you’re a growing business, and outsourcing the fulfillment process makes sense.

Financial Plan

As it so often does in the world of commerce, your business plan all boils down to this –  the money .

Your financial plan describes how you’ll first fund your business, then keep it afloat. Here, you’ll set out your fiscal stall with a series of projections around cash flow and income. The goal? To convince investors (and, on some level, yourself!) that your business has legs.

Your ecommerce business plan’s financial chapter should include:

• How you’ll fund your store’s start-up costs
• How you’ll price your products
• How much profit you’ll make on each product sold
• Financial projections
• Income statement
• Balance sheet

Do I Need a Business Plan?

Yes. Yes, you do.

It can be easy, as a business that only exists online, to get complacent – to assume that you don’t need a business plan.

‘Business plans are a traditional document,’ you think. ‘They don’t have a place in the world of modern ecommerce businesses.’

Well, guess what? They do – regardless of what you call, or how you classify, your business. But there are certain types of ventures where a comprehensive business plan will be especially useful. Among these are:

• New ecommerce stores
• Businesses seeking investment
• Businesses looking to expand into new markets
• Ventures attempting to increase their share of an existing market

Even if your ecommerce store falls into none of these categories, a business plan is always a good idea. It’ll clarify and crystallize your professional goals, hold you accountable to your ambitions, and keep you on track to making your dreams a reality.

In this article, you’ve learned exactly what a business plan is, and why it’s vital for commercial success – particularly for brands of the ecommerce persuasion.

You’re also well-versed in the structure and contents of an ecommerce business plan:

• Executive summary
• Company overview
• Market analysis
• Customer research
• Marketing plan
• Logistics plan
• Financial plan

What now? Well, it’s time to get researching and writing. So remember – keep it simple, keep it tight, and make sure it reflects the heart and soul of your business (and all that passion you feel for it, too!).

Putting together a business plan is exciting. It’s that tangible, real expression of your goals and vision for your ecommerce store – so it shouldn’t be a chore. Go enjoy it!

How can I write an ecommerce business plan?

Can i hire someone to write my ecommerce business plan for me.

Hiring someone to pen your ecommerce business plan for you will cost anywhere between $5,000 and $25,000. You can recruit them from most of the platforms where creatives dwell: such as Airtasker, Fiverr, and Freelancer.com.

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Marketplace Business Model Guide: Choosing the Right One for Your Marketplace Business

Table of Contents

Common marketplace business models, #1. commission-based marketplace business model.

• #2. Listing Fee Model
• #3. Subscription-Based Model
• #4. Freemium Model

#5. Advertising and Sponsorship Model

#6. affiliate marketing model, choosing the right marketplace business model for your business goals, why is cs-cart multi-vendor one of the best platforms for diverse marketplace business models.

In the dynamic landscape of marketplaces, the foundation for success lies in a well-crafted successful marketplace business model. A business model essentially serves as the blueprint that outlines how a marketplace intends to generate revenue. It's the strategic roadmap that dictates the financial dynamics between the platform, buyers, and sellers.

Imagine a marketplace business model as the navigational system of a ship—plotting the course to profitability in the vast sea of online commerce. For a marketplace, selecting the right online marketplace business model is akin to choosing the most efficient route —one that not only sustains the platform but also creates a thriving ecosystem for its users.

A marketplace business model is basically how your marketplace makes money for you.

The importance of this decision cannot be overstated. A well-chosen, successful marketplace business model not only ensures the financial health of the online marketplace but also determines the nature of interactions among participants. It shapes the dynamics of transactions, defines the value offered to users, and ultimately plays a pivotal role in the sustainability and growth of the platform.

In this guide, we will delve into the intricacies of various proven monetization marketplace business models for marketplaces, exploring their nuances, successes, and potential pitfalls. By understanding the significance of selecting the right business model for marketplaces, marketplace entrepreneurs can chart a course towards sustained success in the competitive seas of business to business and business to consumer online commerce.

Let's talk about how marketplaces make money. We'll explore the basic ways, like when they take a bit of money from each sale or when you pay a monthly fee, and more advanced non-obvious ways. Understanding these ways can help us see how online shopping on marketplaces works and why it's successful.

A commission-based marketplace business model is a straightforward and widely adopted approach where the platform earns revenue by taking a percentage cut from every successful transaction that occurs between buyers and sellers. This revenue model aligns the interests of the online marketplace with the success of its users.

In this revenue model, the online marketplace essentially acts as a facilitator, connecting buyers with sellers. When a successful transaction occurs—be it a product sale, service provision, or any other exchange—the marketplace takes a predetermined percentage of the transaction value as its fee. This percentage can vary depending on the type of products or services offered.

• Uber: Uber, a prime example of a commission-based revenue model, charges drivers a percentage of each fare for using its platform to connect with riders.
• Etsy: The e-commerce platform Etsy charges sellers a percentage fee for each item sold on its platform, aligning its revenue model with the success of its community of artisans and crafters.

Uber charges drivers a percentage of each fare

• Aligned Incentives: The success of the online marketplace is directly tied to the success of its users, fostering a collaborative ecosystem.
• Scalable: As transactions increase, the revenue of the marketplace also grows proportionally, making it a scalable business model.
• Low Entry Barrier: Sellers often appreciate this marketplace model as they only pay a fee when they make a sale, reducing the upfront costs.
• Dependency: Both buyers and sellers may feel the pinch of transaction fees, potentially leading to dissatisfaction and seeking alternatives.
• Pricing Disputes: Determining the fair percentage for transactions can be a point of contention and might lead to disputes between the marketplace and its users.
• Competition: In highly competitive markets, users may migrate to platforms with lower transaction fees, impacting the successful marketplace business model's market share.

In a commission-based model, the platform makes money by taking a percentage from each successful transaction between buyers and sellers.

#2. Listing Fee Marketplace Business Model

A listing fee model in eCommerce marketplaces involves charging sellers a fee to list their products or services on the platform. Essentially, sellers pay a price upfront to showcase their offerings to potential buyers. This revenue model is like renting shelf space in a virtual store.

In the listing fee model, sellers pay a set amount for each item or service they want to feature on the platform. This payment gives them visibility, allowing buyers to browse and consider their offerings. It's a bit like paying rent for a physical store shelf but in the digital realm.

• Amazon: Professional sellers do not have to pay a per-item fee, while individual sellers are charged $0.99 for each item sold.
• Etsy: Etsy charges a $0.20 listing fee for each item posted, regardless of whether or not the item sells.

Etsy’s listing fee policy

• Upfront Revenue: The platform earns money when sellers pay listing fees to showcase their products or services, providing a steady source of income.
• Quality Control: Charging a listing fee can ensure that only serious sellers with genuine offerings become part of the online marketplace business.
• Entry Barrier: For small or new businesses, upfront listing fees can be a hurdle, limiting participation.
• Risk of Overpricing: Sellers might increase their prices to cover listing fees, potentially affecting competitiveness.

Understanding the dynamics of a listing fee model sheds light on how online marketplaces charge sellers for showcasing their goods or services on their digital shelves, forming a crucial part of their revenue models and revenue strategy.

In marketplaces, the listing fee revenue model means sellers pay a fee to show their products on the marketplace’s storefront.

#3. Subscription-Based Marketplace Business Model

The subscription business model in eCommerce marketplaces revolves around sellers paying a recurring fee to access and use the platform's services for a set period. It's like a membership where sellers get ongoing benefits in exchange for their subscription.

Under the subscription-based revenue model, buyers and sellers commit to paying a recurring fee, often monthly or annually, to maintain an active presence on the platform. This ongoing payment grants them continued access to the platform's features, such as increased visibility, marketing tools, or premium features.

• Amazon: Amazon offers a Professional seller plan for $39.99 per month, which includes features like bulk listing tools, advertising credits, and access to Amazon's Brand Registry.
• CouchSurfing: Starting in 2020, when registering on Couchsurfing, new users are required to pay a nominal fee to access the platform, a measure implemented in response to financial challenges stemming from COVID-19. The fee amounts to $2.99 per month or $17.99 per year, covering platform access and user verification.

Couchsurfing subscription plans

• Steady Income: The subscription fees provide a predictable and steady income stream for the online marketplace.
• Enhanced Services: Buyers and sellers subscribing to premium plans often receive additional services, fostering loyalty.
• Risk of Inactivity: Buyers and sellers who pay a subscription but don't actively use the platform may lead to underutilization.
• Affordability: Small businesses may find subscription fees a financial challenge, impacting their participation.

Understanding the subscription-based revenue model reveals how marketplaces create a symbiotic relationship with buyers and sellers, providing ongoing benefits in exchange for regular fees—a dynamic approach to sustaining the platform's vitality, including features such as payment processing to facilitate transactions.

In online marketplaces that use a subscription model, sellers pay a recurring fee to access and use the platform's services periodically.

#4. Freemium Marketplace Business Model

The freemium model in successful marketplaces allows users to access basic features for free, while offering premium, enhanced features. Users pay additionally for these features. It's a strategy where the platform provides a taste of its offerings without upfront charges, enticing users to opt for advanced features through paid subscriptions.

Under the freemium model, sellers can use the basic functionalities of the platform without any cost. However, to unlock additional features or enjoy an enhanced experience, sellers are encouraged to subscribe to a premium, paid plan. This revenue model is like offering a free sample at a store, with the option to purchase the full package for more benefits.

• Craigslist: Craigslist is a classified ads platform that allows users to post and browse ads for free. However, it also offers paid options for users who want to highlight their ads or post ads for a longer duration.
• Cratejoy: Cratejoy is a marketplace where sellers offer subscription boxes for different interests. The platform offers an accessible Marketplace Only plan for free, and also provides the All-in-One plan for $39 per month, which includes additional features.

Craigslist paid services

• User Acquisition: The free tier attracts a large user base, allowing the platform to acquire users without imposing upfront costs.
• Flexible Upgrade: Users can upgrade to paid features based on their needs, providing a flexible and scalable revenue strategy.
• Limited Features: Free users have access to basic features but may miss out on advanced functionalities available in the premium version.
• Conversion Challenge: Convincing free users to upgrade can be challenging, requiring a compelling value proposition for the premium offering.

Understanding the freemium model unveils how online marketplaces balance accessibility with revenue generation, offering a pathway for users to enhance their experience through optional paid subscriptions. This approach ensures a successful marketplace startup by targeting the right market and fostering seamless and secure transactions, often featuring additional revenue streams like fixed or variable fees for premium services or listings.

In the freemium revenue model, sellers access basic platform features for free. To enjoy extra perks, they can subscribe to a premium, paid plan.

The advertising and sponsorship model in an online marketplace business model involves generating revenue by allowing businesses to promote their products or services on the platform through featured listings and ads. It can include display advertising, sponsored content, or partnerships, creating a symbiotic relationship between the marketplace owner, advertisers, and users.

Under the advertising and sponsorship model, businesses pay to showcase their offerings to the platform's user base. Basically they pay for featured listings and ads. This can take various forms, such as display ads on the website, sponsored listings, or even partnerships with the marketplace owner. The revenue stream is generated through advertising fees, creating a marketplace revenue model where sellers can enhance their visibility through paid promotions.

• Zillow: Zillow stands out as the leading platform, where agents and management companies incur charges for promoting their listings through advertising services on the platform.

Advertising opportunities at Zillow marketplace

• Diverse Revenue Streams: The advertising and sponsorship model introduces additional streams beyond transaction-based fees.
• Enhanced Visibility: Sellers can gain increased visibility and exposure to a broader audience through paid featured listings and ads, attracting buyers effectively.
• User Experience Impact: Excessive or intrusive ads may impact the UX, leading to dissatisfaction.
• Balancing Act: Striking the right balance between ads and UX is crucial to maintaining a positive business platform environment.

Understanding the advertising and sponsorship model sheds light on how online marketplaces leverage partnerships and promotions to create a dynamic ecosystem, balancing the needs of advertisers, users, and the marketplace owner itself. This strategic approach becomes an integral part of the overall business plan, especially for niche marketplaces aiming to offer a better value proposition to their audience.

In a marketplace business model, advertising and sponsorship generate revenue by letting businesses promote products or services on the platform.

The affiliate marketing model in a marketplace business model revolves around partnering with external individuals or businesses (affiliates) who promote products or services on the platform. Affiliates earn a commission for each sale or lead generated through their referral efforts, creating a performance-based and mutually beneficial system.

Under the affiliate marketing model, external affiliates promote products or services listed on the platform through unique tracking links. When a referred potential client makes a purchase or completes a desired action, the affiliate earns a commission. This model aligns the interests of the marketplace, affiliates, and sellers, creating a symbiotic relationship where everyone benefits from successful transactions.

• Amazon Associates: Amazon's affiliate program allows individuals to promote Amazon products and earn a commission for each sale generated through their unique affiliate links.
• ShareASale: ShareASale is an affiliate marketing network that connects affiliates with various merchants, enabling them to earn commissions for promoting products or services.

Amazon Associates affiliate program

• Performance-Based: Affiliates earn commissions based on actual sales or leads, ensuring a direct correlation between effort and reward.
• Expanded Reach: Affiliates contribute to expanding the marketplace's reach by leveraging their own networks and platforms.
• Dependency: Success relies on effective affiliate marketing strategies, and the marketplace may face challenges if affiliates are not generating sufficient sales.
• Commission Costs: While performance-based, commission payments can accumulate, impacting the overall cost structure for the marketplace.

Understanding the affiliate marketing model unveils how online marketplaces leverage external partnerships to drive sales and expand their reach. This model is particularly effective for attracting partners with niche audiences, contributing to a diverse and dynamic ecosystem with several money streams. Additionally, it ensures that financial transactions are secure, helping the platform typically sustain revenue while reaching a global audience as affiliates actively promote and sell products.

In the affiliate marketing model of a marketplace business, external affiliates earn commissions by promoting products or services on the platform, fostering a performance-based and mutually beneficial system through referral efforts.

Selecting the optimal marketplace business model for an online marketplace is a nuanced process, and several factors should be carefully considered to align the chosen model with the marketplace's goals and target audience. Here's a detailed breakdown of the main factors and common marketplace business models for specific online marketplace types:

1. Commission-Based Model

Factors to Consider:

• Transaction Dynamics: Analyze the volume and value of transactions on the platform. A commission-based model is well-suited for marketplaces facilitating numerous transactions.
• User Willingness to Pay: Assess whether users are willing to pay a percentage for successful transactions, considering market expectations and industry standards.

Common for: General e-commerce platforms, service marketplaces.

2. Listing Fee Model

• Product or Service Value: Evaluate the value of listed products or services. A listing fee model is effective for marketplaces with high-value items.
• Revenue Accessibility: Balance the need for upfront revenue with ensuring accessibility for a diverse range of sellers.

Common for: Niche marketplaces, platforms with unique or high-value items.

3. Subscription Model

• Frequency of Usage: Examine how often users engage with the platform. A subscription model is suitable when users have regular and ongoing needs.
• Value Proposition: Assess the ability to provide continuous value to subscribers through paid features, services, or content.

Common for: SaaS marketplaces, platforms with specialized services or content.

4. Freemium Model

• Basic Features Appeal: Evaluate the attractiveness of basic features to attract a wide user base. A freemium model is effective when the free offering provides significant value.
• Conversion Potential: Assess the potential for converting free users to paid subscribers based on the perceived value of premium features.

Common for: Social networking platforms, software applications.

5. Advertising and Sponsorship Model

• User Experience: Consider the tolerance of the user base for ads and sponsored content. Maintaining a positive UX is crucial.
• Revenue Potential: Evaluate the revenue potential from partnering with advertisers and sponsors, considering the target audience and market demand.

Common for: Social media platforms, content-driven online marketplaces.

6. Affiliate Marketing Model

• External Networks: Assess the ability to leverage external networks for product or service promotion. Affiliate marketing is effective when external partners can drive traffic.
• Product Suitability: Consider whether the products or services offered are conducive to affiliate marketing and if external promotion aligns with online marketplace business goals.

Common for: E-commerce platforms, content-rich online marketplaces.

Assess the online marketplace's unique characteristics and potential synergies between different marketplace business models. A mixed model, incorporating multiple revenue streams, can often be profitable.

By delving into these nuanced considerations, marketplace owners can make informed decisions about the most fitting marketplace business model or combination of marketplace business models. This detailed analysis ensures not only revenue maximization but also the creation of a sustainable and thriving online marketplace.

In navigating the intricacies of choosing the right online marketplace business model, CS-Cart Multi-Vendor emerges as your dynamic ally. Seamlessly adaptable to any vision, this marketplace software excels in versatility, customizability, and scalability.

Configurable subscription plans for sellers in CS-Cart

Whether it's a commission-based model, subscription model, or the innovative freemium model, CS-Cart Multi-Vendor supports these top marketplace business models out of the box. Tailoring to a listing fee model or exploring an advertising and sponsorship model? This platform integrates effortlessly, promoting seamless and secure transactions for both buyers and sellers.

CS-Cart Multi-Vendor isn't confined to a niche—it thrives in diverse ecosystems. Whether you're developing online marketplaces for consumer-to-consumer interactions or launching a marketplace startup for global commerce, this software provides the tools for success.

Moreover, if you're considering a hybrid approach, combining various models for a dynamic revenue mix, CS-Cart Multi-Vendor gracefully supports this too. It's not just a platform; it's a canvas where your marketplace vision transforms into reality.

Ready to explore the possibilities? Try the CS-Cart Multi-Vendor free demo and witness your marketplace business rise to new heights. Your success story begins here.

Try CS-Cart Multivendor for free

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Launch an Online Marketplace Website and Succeed

• December 13, 2023

Online marketplaces have been the talk of the town for a while now. With these sites getting popular day by day, more entrepreneurs are drawn toward these business models every day. E-commerce amounts to approximately 47% of global sales, according to the statistics for 2019.

Although building a marketplace can be rewarding, this e-commerce comes with its own set of challenges. However, if you’re one with an interest in the field of online commerce, you’ve come to the right place.

Read on to understand better what exactly is an online marketplace, its functions, and how to master the art of selling on the internet.

Online Marketplace: A Better Analysis

In simple words, an e-commerce site where different merchants sell goods or services to clients is known as an online marketplace. Examples of such sites include Amazon, Etsy, eBay, Shopify,  etc.

There are other eCommerce website creation platforms that make the whole process much easier and simple.

Traditional e-commerce involves the selling of products from a single brand. However, online marketplaces do not restrict business to one brand. As these sites have hundreds or even thousands of sellers, the range of products they offer is enormous. This is another reason that draws more and more users to shop from online marketplaces.

One of the main advantages is that these sites bring in a lot of foot traffic, which is one of the greatest exposures to the market. Moreover, customers on an online marketplace can shop from multiple sources without having to click away to different sites.

Even if the sellers are, in no way, associated, the customer can complete the transaction on the same site. The customer also doesn’t have to pay for different items in separate transactions; they can pay all at once.

The merchants get notified when a customer buys their products, and each seller can proceed to ship their products individually. This is exactly why online marketplaces are also commonly referred to as the collaborative economy or sharing economy .

Write a Business Plan

You are too excited to jump in right away and want to launch your marketplace as soon as possible without writing a formal business plan. Please don’t make that mistake .

Thousands of eCommerce marketplaces come and go and shut down their operations within the first or second year. The most common mistake entrepreneurs make is, they do not write a business plan before getting started.

Businesses without a solid business plan are at higher risk of failure.

Investors often rely on the business plan to evaluate the business feasibility before funding it. If you want to get funding for your new marketplace or expand your existing marketplace operations, you must have a business plan.

Before you start writing your business plan, check out our complete guide on how to write a business plan and learn what details you should include in your solid business plan.

Check out our sample business plans for online and retail stores . You can use these sample business plans and can get started with your eCommerce business plan in no time with Upmetrics .

What Is the Need for Starting an Online Marketplace?

Your reason for launching an e-commerce site can be driven by either of the two factors. You can either want to help merchants sell goods or help customers get easier access to goods and services.

By launching an online marketplace, you’re helping users with a platform where they can buy, sell, or even rent goods. These platforms generally provide better quality products at a lower price and more conveniently than offline shopping.

Moreover, unlike offline markets, here, you don’t have to own any inventory . Entrepreneurs of the current age find this option attractive as the investment is very less. Online marketplaces source the inventory from the merchants who are selling them. Thus, the founder is reducing the distance between buyers and sellers with technology.

Different Categories and Online Marketplace

Although most online marketplaces work similarly, there are a few characteristic differences that affect the shopping experience. Moreover, the types of products, customer base, and services provided also vary.

The different categories of online marketplaces are:

Physical product online marketplace:

Digital product online marketplace:, property and spaces online marketplace:, services online marketplace:, things to consider when creating a marketplace website.

• 1. Understanding the target market: If you don’t understand your customers’ needs, you will never know how to convince them. Any business should have a proper idea of its target audience. Researching will help you understand the market clearly, plus finding the right solution for the consumers.
• 2. Assess the market size and volume: Form the business model only after evaluating the market by its size and volume. If you understand the market niche correctly, it is relatively easy to choose the most appropriate one to grow. However, before you jump into any marketplace, it is crucial to research the competition level and its competitors. Learning about the competitors will help you understand their strengths and weaknesses, plus what you need to grow your business in the online marketplace.
• 3. Follow User Behaviour: It is difficult to formulate a strategy without understanding the behavior of your users. Try to find out the goals and challenges of your users and precisely what motivates or influences them. The online marketplace is a two-sided marketplace, and you need to know about all the aspects of buyers and sellers.
• 4. Dig into the needs and solutions of target users: Try finding your target audience’s most significant pain points and how they reduce them. Suppose your target audience uses an online platform for shopping, know-how, where, and why. Once you know all the answers, dig deeper to find out what can be added to improve their experience. The buyers will change their platforms only when they notice something better on the other side. Know about what satisfies them and what they are unhappy about, and try strategizing around that idea.
• 5. Choose the right business model: Selecting the right model is necessary to make the right profit. After taking care of the user needs, try concentrating on designing a viable business model. On the grounds that the sellers are clear about your vision, you can initially charge them a signup fee before thriving. Subscription-based businesses are prevalent, and it also allows recurring revenues. Nothing is better than a selling fee from sellers, as the more orders they receive, the more income goes up.
• 6. Organizing the marketplace operations: Whether you operate an e-commerce platform or a wholesale B2B marketplace , the two-sided functions make the online platform a more complex thing to handle. Sellers are necessary to keep the online platform working. So, you need to focus on attracting new sellers and retaining the existing ones satisfied. There is a need for a proper process to manage the products and services sold by sellers. Check the payment processes keeping in mind the specialized marketplace payment gateways plus different kinds of payments.
• 7. Website Security: Find the right SSL certificate for data security on your website. It not only encrypts the data that can only be deciphered by the intended person but also ensures users that they are dealing with a secured website. It is necessary nowadays to purchase an SSL certificate and install SSL on the server.
• 8. Grow the business through content management: In the long run, growing your business by focusing on the content to attract more consumers is a necessary step. Learn about SEO, business development initiatives, and paid marketing campaigns.

Challenges You Might Come Across at the Beginning

Like all other businesses, online marketplaces have challenges that you’re bound to come across in the beginning. Although these challenges aren’t mainstream, you should remember that your business, too, isn’t widespread.

However, don’t let these challenges dampen your spirits. Here’s a list of the most common challenges faced in the initial phases of launching an online marketplace.

• Convincing buyers and sellers to use your website can be challenging until you establish your reputation.
• You need to dedicate a good chunk of your time to developing a successful marketplace.
• You must provide useful services to your customers.
• You have to face the existing market competition.
• You might also face trouble in financing your marketplace.

You must be aware of these challenges so that you can be prepared to ace your business when the time comes.

Factors to Keep in Mind While Launching an E-commerce Platform to Make It Successful

Before you publish your site, ensure that it fulfills the following requirements.

• Users should be able to log in with their favorite social media accounts.
• Acquire personal information on the profile page.
• Verification procedure, especially for the sellers.
• Customers should be able to edit, add or remove products from the list.
• A detailed description of the products.
• Searches and filters are necessary for a good experience for the customer.
• Notifications to alert users about new offers and updates in their orders.
• Functional payment process.
• History of the purchases.

Getting Your Online Marketplace Website on the Internet

Once you’ve ticked all the checkboxes, it’s time for you to get started. The following are the main steps to follow while launching your platform.

• 1. Finding a domain: Make sure that your site has a simple, unique, and memorable name. You can also register more than one domain to increase your number of options.
• 2. Web hosting is necessary: Before you buy a dedicated server, research your web hosting provider and familiarise yourself with the general feedback. Ensure that you pay attention to their performance and quality of maintenance before you finalize the contract.
• 3. Make your website easy to navigate: Your site should have user-friendly navigation and an intuitive interface.
• 4. SEO friendly: Your site should take advantage of Meta and Alt tags to ensure heavy foot traffic.
• 5. Website analysis: You should be able to monitor the number of visits, average time spent, bounce rate, etc.

The Internet is filled with literature and documents to help new entrepreneurs start their businesses. It’s necessary that you educate yourself and don’t get caught up in the speed. Online markets take several years to scale up, but that’s an even more reason why you should keep working towards your goals.

The Quickest Way to turn a Business Idea into a Business Plan

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About the Author

Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more

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5 Necessary Elements Of A Great Online Marketplace Business Plan

If you want to ensure the success of your multi-vendor marketplace, you need to craft a great online marketplace business plan.

The online marketplace industry is expanding rapidly. According to research and advisory company Forrester, a third of all business in the United States flows through e-commerce, with 63% of transactions occurring on online marketplaces.

Because of this growth, many online sellers have considered adapting to this business model. Some have already grown their online stores. They know the basics: how to attract customers , navigate an e-commerce platform, identify a target market, and manage their inventory .

Others have less experience. While they see the potential of an online marketplace , they have no idea how to get started.

Whether you’re just starting out or are already established, a comprehensive business plan is the cornerstone of every successful e-commerce venture. For this reason, this article will detail five crucial elements that are essential to include in your marketplace business plan.

Why Do I Need An Online Marketplace Business Plan?

Various apps and plugins have made it relatively easy to build a site , bring in vendors , and sell products online . However, that’s just the infrastructure behind the marketplace business model. The real challenge comes from knowing what you will do with that infrastructure.

That’s where a business plan comes in.

In addition to establishing your mission statement , your online marketplace business plan describes the strategy you will use to launch, sustain, and grow your business. Developing a thorough business plan will prepare you to:

• Present your business to investors
• Outline your financial projections for the next 18-24 months
• Focus on the right tasks and next steps
• Make good decisions along the way
• Have a map to return to when things get difficult
• Identify potential weaknesses before you experience them

Having these insights will make it easier to label and achieve your goals as you launch your online marketplace .

1. Know What Sets Your Online Marketplace Apart (And Who It Is Targeted Towards)

There are a number of different online marketplace business models in the industry. Giant companies like Amazon, eBay, or Walmart stand out as the most obvious.

Marketplace operators start salivating when they hear about the numbers that these large companies bring in. For example, the fact that Amazon made over 21 billion in 2020 has tempted many entrepreneurs to create an online marketplace that offers the same scope of products. They want to sell everything or be everything for all people because that’s where the money seems to be.

Unfortunately, this failure to understand the market is one of the biggest mistakes companies make early on.

We’re not here to crush anyone’s dreams, but it’s going to be very hard for any marketplace to compete with these multi-billion dollar organizations. After all, very few customers are looking for a different Amazon or another eBay.

The best way for your marketplace business to survive is by focusing on a specific audience and product that will make you stand out.

What’s the Difference Between Vertical and Horizontal Marketplaces?

As you establish your unique marketplace business model , you’ll want to consider whether you want to position yourself as a vertical or horizontal marketplace.

A horizontal marketplace offers a “one-stop-shop” experience akin to what you find with major players in the industry. In contrast, vertical marketplaces tend to focus on related items or a specific niche.

The Value of Niche Marketplaces

Niche marketplaces thrive when there’s a strong community around a product. People come together because of shared interests in a specific industry. Then, once they trust a brand, they give it a competitive advantage that they can’t find in more established marketplaces.

Success from niche marketplaces will come when you know your audience well. You have to be a master of your target market, knowing what kind of things they want and helping them easily get it.

2. Identify An Appropriate Revenue Model

One of the advantages of an online marketplace is its potential for revenue. Depending on your scope, this type of platform offers several different ways to make money .

There’s not really a single best way for a marketplace to generate revenue, so we’ll cover five of the most commonly used models below:

Commission Model

This is the classic revenue model for marketplaces. Basically, the marketplace takes a percentage of every successful transaction from its vendors. Big brands like Amazon, Airbnb, Etsy, and eBay use this business model.

Subscription Model

The marketplace charges customers and/or sellers a monthly subscription fee to join. However, this concept only works when either party gets access to special or unique perks. For example, customers can pay you a recurring fee to enjoy special discounts or experiences . On the other hand, vendors can pay you regularly to sell products via your platform and gain access to your marketplace’s customer base.

Freemium Model

Freemium models are popular for marketplaces with layered offerings or services. They give away a light version of their product for free but charge for premium services. Some stock photo sites do this by giving away certain photos for free but offering users access to a larger collection if they’re willing to pay.

Listing Model

Businesses that use this model charge sellers a listing fee to post items on their online marketplace platform. This often happens with higher-priced items like cars or houses, especially when the marketplace itself doesn’t get involved with the sale.

For a great example of this business model, check out Autotrader’s site:

Featured Ads

Ads or featured products can be a great way to bring in additional or sustaining income . Sellers pay to have their products listed among the first searches. For many online marketplaces, this serves as one of several revenue streams rather than the primary income source.

In the example below, all the products below are “sponsored.” This means that the brands paid Amazon to be featured higher on the listings.

3. Develop A Plan To Bring Sellers Into Your Online Marketplace

It’s not easy to convince sellers to join a new marketplace. There has to be something that draws them in.

Most people in the industry recognize this as the marketplace’s chicken and egg problem. The marketplace business model really only works if and when you’ve already attracted buyers and sellers. But which one comes first?

You can’t acquire customers if you have no vendors. However, vendors don’t want to join an online marketplace platform if they’re unsure about their ability to sell products on it.

Thankfully, this doesn’t mean that new online marketplaces can’t succeed. They just have to find other ways to incentivize vendors.

Include Dedicated Seller Programs

Some marketplaces offer programs designed to help vendors succeed within the platform. Typically, such programs include trainers and/or account managers who oversee their stores and provide guidance for enhancing their business strategies on the platform.

Make Things Easy

Having a simple onboarding process for an online marketplace can go a long way for vendors. After all, they don’t want to spend too much time trying to navigate a complex system; they want to sell their products and make money. The more you eliminate the roadblocks that get in their way, the more likely they’ll join your marketplace.

4. Make Marketing Part Of Your Online Marketplace Business Plan

Marketing is essential for survival in the digital world. After all, if nobody has heard of your marketplace, no one will visit it.

Unfortunately, establishing a marketing plan is an oft-forgotten piece of building an online marketplace business. Some marketplace operators believe that things will naturally fall into place. Thus, they hesitate to invest the necessary time, money, and effort required for effective marketing.

The more you make your marketing a part of your overall marketplace business plan, the more likely you’ll bring in customers.

Utilizing Various Marketing Channels

The key to marketing in the online marketplace industry is diversifying your channels . Always stay focused on your ideal customers, but maximize your reach by meeting them wherever they may be.

Consider incorporating some of the following marketing strategies into your plan:

• PPC Campaigns
• Email Marketing
• Content Marketing
• Social Media
• Influencer Marketing

5. Use The Right Metrics To Measure Success

You’ll only know how successful your online marketplace business model is if you know the right things to measure.

Many metrics exist, some more meaningful than others. Here’s a curated selection of the most vital ones, accompanied by their respective calculation formulas:

Net Revenue: Multiply your gross merchandise value (GMV) by your take rate to get a sense of the actual revenue you’re taking in.

Repeat Purchase Rate: Divide the number of customers who have shopped in your marketplace more than once by your total number of customers.

Customer Acquisition Cost: Add up the total costs used to acquire new customers and then divide that number by the number of new customers gained from those channels.

Average Order Value: Divide total transaction value by the total number of sales.

Net Promoter Score: Send a customer satisfaction survey to your audience that asks on a scale of 1-10 how likely they would be to recommend your online marketplace to a friend. Then, split the results into promoters (9s and 10s only), detractors (anything under 7), and passives (8s or 7s). Lastly, subtract the percentage of detractors from the percentage of promoters to get your NPS.

Get Started On Your Online Marketplace Business Plan

Now that you’ve got the necessary information, all you need to do is apply it. Create your plan, build your marketplace, and start bringing in revenue.

At WC Vendors, we make it easy to get you up and running. Check out a demo of our product to see how we can help you launch your online marketplace in just a few minutes.

To launch an online marketplace that profits and grows, you need to create an exceptional marketplace business plan.

To do this, you need to:

• Know what sets your online marketplace apart
• Identify an appropriate revenue Model
• Develop a plan to bring sellers into your online marketplace
• Make marketing part of your marketplace business plan
• Use the right metrics to measure success

Do you have any questions about how to craft a great online marketplace business plan? Reach out to us and let us know; we’d be happy to hear from you!

How to Write an Online Boutique Clothing Store Business Plan + Example Templates

Elon Glucklich

7 min. read

Updated October 27, 2023

In 2022, U.S. consumers spent over $1 of every $5 in online shopping on apparel .

From rare, vintage fashion to contemporary clothes for all shapes and sizes, shoppers have increasingly turned to the eCommerce market to stock their wardrobes in recent years. But with that opportunity comes fierce competition. 

Anyone looking to start an online clothing business will need to have an unequaled knowledge of both their target market and competitors. This makes writing a detailed, flexible business plan an essential first step to successfully launch and sustain your online clothing business.

• Why You Need a Business Plan for Your Online Boutique Clothing Store

A business plan will help you determine the startup costs you’ll need to buy inventory, set up an order fulfillment process and establish your online presence. It will also help you set realistic sales expectations and ensure that the revenue you bring in will be enough to cover costs and generate some profit.

In this guide, we’ll show you how to tailor your business plan to meet the needs of the fast-paced online fashion landscape – you can even download a free online boutique clothing store business plan template to help get you started.

• Understand your niche in the online clothing marketplace

The surge in online shopping presents a major opportunity for fashion-minded entrepreneurs looking to enter the online clothing space. But you’ll need to show a firm understanding of the industry, your target market, and the consumers you intend to serve if you hope to carve out a niche online.

As you begin writing your business plan, you should be prepared to go beyond the basics like your company description, focus and management team. While those are certainly important, the business plan gives you an opportunity to describe your store’s unique selling proposition and how you intend to set it apart from competitors.

How will you stand out from the competition?

You’ll definitely be asked what makes your business unique if you hope to secure any outside investment. So take the initiative and start detailing your store’s value proposition here. Maybe it’s that you sell popular clothing styles of old that most shoppers can’t find in stores these days. Or it could be that you emphasize sustainable sourcing and environmentally friendly packaging. The sooner you start thinking about your strategic advantages, the better prepared you will be to defend it to an investor or bank.

You will also need to conduct extensive Research into your target customers, including their demographics (age range, gender, income level and location) and psychographics (values, lifestyles, interests and personality traits).

Create a customer persona

One way you can do this is by creating what’s known as a Target Customer Persona. Basically, you’re creating a representation of your target market in the form of one ideal customer. To do this effectively, you will need to investigate their current online clothes shopping habits, pain points and customer experience expectations.

Then, realistically assess how your product offerings and brand values align with your ideal customer’s needs and desires. Adding this information to your business plan will provide a clear understanding of who you’re aiming to serve.

• Develop a Unique Brand and Product Offerings

In your business plan, document how you will create a unique brand identity that sets your online boutique apart from competitors. This includes developing a memorable brand name, logo, and tagline, as well as defining your brand’s values, voice, and visual style. 

Many stores offer customer retention incentives like loyalty programs. If you are considering strategies like reward programs or discounts for returning customers, use your business plan to determine which strategies make the most sense for your online store. It’s also an opportunity to consider the brand-building initiatives you might undertake to capitalize on these programs, such as personalized email marketing campaigns.

Consider your sales channel

Another consideration for your brand – and your business plan – is whether to host your online clothing store on an eCommerce platform or sell through a standalone website. Platforms like Shopify and BigCommerce streamline many aspects of the online shopping process, but have costs of their own that can grow as you try to scale your business.

In your business plan, consider the costs of choosing a platform versus the boost you can receive using a host like Shopify to let it handle logistics like order processing. Then, outline the platform you’ve chosen and the reasons for your decision.

• Create an Online Marketing Strategy

Your business plan is the place to detail your plan for effectively capturing the attention of your target audience and converting them into loyal customers. In your business plan, detail your marketing budget, reintroduce your target customer traits from earlier, and detail the channels you’ll use to reach them. In a space with as much competition as online clothing, you will likely need to use a combination of tactics to reach your target audience. These might include:

Social media

Platforms like Instagram, Facebook and Pinterest are powerful tools for reaching and engaging your target audience. Explain how you’ll develop a consistent posting schedule, tailor content for each platform and leverage paid advertising to reach a wider audience.

Email Marketing

In your business plan, explain how you’ll nurture relationships with customers and promote new products through email marketing. Discuss your plans to create engaging email content like newsletters, promotional offers and new product announcements. Consider how you will measure the success of your email campaigns through metrics like open rates, click-through rates and conversions.

Search Engine Optimization

While it may seem difficult to find the time to create high-quality, engaging content for your audience while running your business, it can be a valuable tool for attracting customers. Whether it’s blog posts, videos or podcast episodes, targeting certain Google search keywords that resonate with your audience will make your website more visible to them as they shop online. Be sure to discuss in your business plan how you will measure the success of your content marketing efforts through metrics like traffic, engagement, and conversions.

Partnerships

Do you know anyone who loves your style? If so, they could be your next influencer. While people tend to think of big-name celebrities when they think of influencers, establishing partnerships with customers who resemble your target audience can help generate exposure and build credibility for your brand. In your business plan, discuss how you might offer giveaways, collaborate on content or produce sponsored posts to showcase your products and build social proof.

• Plan for inventory management and fulfillment

No matter how popular a brand you develop, you will need to carefully manage processes like inventory management and order fulfillment to avoid disasters like running out of stock or facing delivery delays.

In your business plan, describe all of the logistical aspects of your business and the systems you will put in place to manage them. These include: inventory sourcing channels, whether they are wholesale suppliers or local artisans; inventory management methods, such as dropshipping, holding inventory in a warehouse or using a third-party fulfillment center; packaging and shipping methods; and return policies.

In addition, describe your contingency plans for how you will manage orders in case something goes wrong with one of your third-party suppliers or other partners.

• Set financial projections and funding requirements, then be ready to change them

A key component of any business plan is a detailed financial analysis. Financials can be intimidating for any business owner, but you will need to demonstrate in your business plan that your online boutique clothing store can be both profitable and financially stable. Proving that you have at least thought through the long-term vision for your business could be the difference between securing a loan or investment, or not.

Base your financial projections – ideally a 3-5 year forecast –  on market research and up-to-date industry data. You may also want to consider different scenarios such as best-case, worst-case, and most likely outcomes to account for potential fluctuations.

Prepare for changing customer preferences

Of course, trends evolve quickly, and what’s fashionable at the beginning of your forecast may be passé by the next season. So staying ahead of fashion trends and understanding the competitive landscape will help with your forecast as you go.

As you research trends in the fashion industry, respond to the changing needs of your customers, and identify gaps in the market that your online boutique can fill. As you do so, you may need to change where you source your clothing, or your marketing strategy, or your distribution channels. All of those will affect your financial forecasts. But that’s a perfectly normal part of the business planning process..

• Download a free online boutique clothing store business plan template and example

To help get your business started, check out our free online boutique clothing business plan template . You can download this document in Word form and use it as a foundation for your own business plan.

In addition to these resources, you may want to brush up on how to write specific sections of a traditional business plan. If so, take a look at our step-by-step guide on how to write a business plan .

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Elon is a marketing specialist at Palo Alto Software, working with consultants, accountants, business instructors and others who use LivePlan at scale. He has a bachelor's degree in journalism and an MBA from the University of Oregon.

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14 Professional Business Plan Samples [Downloadable pdf]

Looking for business plan examples for inspiration? Download or view 14 business plans examples/samples, vetted by our MBA business plan writers. Download in PDF format or read like a book. These real business plan samples would help in writing your own business plan.

• View Real Business Plan Examples/Samples

As an entrepreneur, effectively pitching your idea to attract investors and secure funding can be a challenge. Moreover, when launching a business, creating a comprehensive business plan is paramount.

To aid you in these crucial tasks, we offer a collection of real-world and sample business plan examples across diverse industries. A well-structured business plan is indispensable in the fast-paced entrepreneurial landscape, as it delineates your goals, strategies, and financial projections, providing a clear roadmap for your venture.

Our aim is to facilitate the creation of an effective business plan by integrating real-life examples to elucidate the key elements involved. Below, you’ll find a range of 14 detailed business plan examples available for download and use.

Important Sections to Include in Business Plan

Practical business plan examples illustrating strategies for startup success, 1. e-commerce plan sample or example, 2. online marketplace business plan example or sample, 3. snack bar business plan sample / business plan example, 4. coffee shop business plan sample/business plan example pdf, 5. food hall business plan sample/business plan example pdf, 6. printing shop business plan sample/business plan example plan, 7. acquisition business plan sample/ example pdf, 8. l-1 visa business plan example with sample pdf, 9. e-2 visa business plan sample/ example pdf, 10. eb-5 business plan sample/ example pdf, 11. investor business plan sample/ example pdf, 12. nonprofit business plan sample/ example pdf, 13. bank business plan sample/ example pdf, 14. cannabis business plan sample/ example pdf, detailed overview of key components of a business plan, 1. executive summary, tips for writing executive summary, 2. company overview or description, tips for writing company description, 3. market analysis, tips for writing market analysis, 4. product and services, tips for writing product and services, 5. marketing and sales plan, tips for writing marketing and sales plan, 6. operation planning, tips for writing operational planning, 7. organization and management, tips for writing organization and management summary, 8. financial plan, tips for writing financial plan, 9. key external drivers, tips for writing key external drivers, 10. startup summary, tips for writing startup summary, 11. projected industry growth, tips for writing projected industry growth, 12. break-even analysis, tips for writing break-even analysis, 13. management summary, tips for writing management summary, 14. financial indicators, tips for writing financial indicators, discover business plan formats and free templates, business plan examples for students pdf, common types of business plan, 1. one page business plan, 2. start-up business plan, 3. strategic business plan, 4. feasibility business plan, 5. internal business plan, conclusion​, frequently asked questions, download pack of 14 business plan examples, are you looking for top business plan writer.

To create a robust business plan, ensure inclusion of the following key sections:

• Executive Summary: A brief snapshot of your business and the key highlights of your business plan. Read more
• Product and Services: An elaborate description of the offerings you will provide to your customers. Read more
• Marketing and Sales Plan: A strategic roadmap outlining how you intend to promote and market your business before, during, and after its launch. Read more
• Operating Planning: An explanation of the systems, processes, and tools necessary to efficiently run your business behind the scenes. Read more
• Organization and Management: Organization and management in a business plan outline the structure and leadership of the company. Read more
• Financial Plan: A comprehensive plan mapping out your short-term and long-term financial goals and the associated costs of running your business. If you require funding, this section is where you can outline your request and financial needs. Read more
• Key External Drivers: External drivers encompass factors like outsourcing, economic changes, industry competition, and business legislation complexity. Read more
• Startup Summary: The startup summary offers a comprehensive financial overview of , detailing expenses, asset value, and total requirements, crucial for transparency with entrepreneurs and investors. Read more
• Projected Industry Growth : Projected industry growth forecasts the sector’s expansion, offering a 10-year perspective and average annual growth rate, providing clarity to investors. Read more
• Break-even analysis: The break-even analysis visually presents key metrics and a 12-month revenue forecast to help stakeholders grasp the point where the business covers costs and starts generating profit . Read more
• Management Summary: The management summary provides a concise overview of organizational structure, key personnel, their roles, and financial commitments, ensuring stakeholders understand the business’s operational strength and leadership capability. Read more
• Financial Indicators: The financial indicators section evaluates organizational fiscal health, focusing on year-over-year profitability metrics, leverage ratios, liquidity ratios, and additional metrics, providing a comprehensive understanding of the business’s financial performance and efficiency in revenue generation from equity investments. Read more

Something Borrowed Something New is a burgeoning e-commerce enterprise specializing in wedding accessories and personalized gifts. Operating on a drop-shipping model, this business has the capability to make a significant impact in the market.

Moreover, leveraging social networking and blogging can be instrumental in generating awareness and capturing interest, thereby creating a robust online marketing strategy for Something Old and Something New.

To enhance their business operations, they are contemplating the integration of a WhatsApp CRM system. This initiative aims to optimize communication with potential customers, ensuring prompt responses to inquiries and fostering a seamless interaction process.

EPlace Solutions will be an innovative online marketplace business portal offering a variety of products to consumers throughout the globe. Founded by Mr. John Jones, a seasoned business visionary with an eye toward profit and achievement, the organization is set to enter the market in 2023.

Online shopping is at an all-time high with new consumer mindsets calling for them to shop for the types of deals and bargains that will be so much a part of the online marketplace business model.

There is an increasing demand for snack-type fast food to be consumed while window shopping and walking around inside a shopping mall.

Do you plan to start a snack bar business? Then here’s a complete snack bar startup business plan template and feasibility report you can use FREE of charge. It sounds easy to open a snack bar, but in reality, you need well-planned strategies to ensure that your business stands the test of time. 

Our snack bar business plan sample includes a detailed description of the products and services offered, as well as a market a nalysis  and competitive analysis.

It also includes a financial plan that outlines the startup costs, revenue projections, and break-even analysis. We like this sample plan because it demonstrates how to build a profitable snack bar business by creating a unique menu and offering healthy, high-quality snac ks that meet custome r demand.

Your snack shop business plan can look as polished and professional as the sample plan. It’s fun and easy, with Wise Business Plan. Let’s review the  snack shop business plan sample  and adjust them according to your audience for the best results.

A coffee shop business plan is a document that outlines what your business idea is and how it will be implemented. Its purpose is to answer questions such as what it costs to start a coffee shop, how these costs will be financed, and how much money you can expect to earn from your cafe.

Are you looking for the right business plan for your cafe? Let’s review the  Coffee shop business plan sample  to find out how cloud-based software can make your day-to-day work more efficient.

Our coffee shop business plan sample includes a detailed description of the products and services offered, as well as a market analysis and competitive analysis.

It also includes a financial plan that outlines the startup costs, revenue projections, and break-even analysis. We like this sample plan because it demonstrates how to build a profitable coffee shop business by creating a unique brand and offering high-quality products a nd customer service.

In the food industry, there is fierce competition. To ensure success, you need to hit the ground running with the right pitch. Our food house business plan is the ideal solution with an attractive design highlighting key information and conveying the right message.

This food business plan example features food images intended to tantalize the taste buds. It captures the theme perfectly and will convey the ultimate message to investors, clients and customers.

It is important to remember that the business plan template can be customized to meet your company’s specific needs and requirements. It will help showcase your business as a leader in the modern industry.

This food business plan template provides key slides to showcase everything from finances to marketing and key competitors. If you prefer, you can alter the content displayed to meet your specific needs, but this is a good starting point.

Ultimately, this  food house business plan  will be suitable for any business operating in the food industry and keen to get interested from key individuals. It will ensure that you can build up the rep of your company.

We provide a one-of-a-kind sales pitch deck designed to appeal to your prospective audience, as well as a custom presentation tailored to their information requirements.

When establishing a think tank, you will need to develop a business plan and document it properly. As a mass think tank, you need a special strategy to legalize the think tank as a non-profit organization and to raise funds for your project successfully.

Copy and print businesses offer a variety of services to both businesses and consumers. A copy and print shop can handle everything from single-page printing to large-volume jobs using several types of media.

Our printing shop business plan sample includes a detailed description of the products and services offered, as well as a market analysis and competitive analysis. It also includes a financial plan that outlines the startup costs, revenue projections, and break-even analysis. We like this sample plan because it demonstrates how to build a profitable printing shop business by offering high-quality, customized printing services with a focus on customer s ervice and efficient operations.

Let’s take a look at Printing and Photocopy Business Plan Sample that you can use to inspire your own and easily create one.

The acquisition business plan sample is intended for businesses seeking to acquire another company or merge with a competitor. This plan includes an analysis of the target company, a valuation, and a strategy for integrating the acquired business into the existing operations. We like this sample plan because it provides a clear roadmap for the acquisition process and demonstrates the potential benefits of the deal.

At Wisebusinessplans, we understand that obtaining an L1 visa for an executive or manager requires a thorough and compelling business plan.

Our L1 business plan sample includes all the necessary components to satisfy USCIS requirements and demonstrate your qualifications and your company’s viability in the US market.

The L1 business plan sample is a comprehensive plan for a new business seeking L1 visa approval for an executive or manager. This plan focuses on demonstrating the applicant’s qualifications and the company’s viability in the US market.

We like this sample plan because it is specific to the L1 visa process and includes all the necessary components to satisfy USCIS requirements.

If you’re an entrepreneur seeking E-2 visa approval, Wise Business Plans can help you create a persuasive business plan.

Our E-2 business plan sample outlines your investment, business operations, and financial projections, providing a clear and compelling case for your ability to successfully run a business and make a significant economic impact.

The E-2 business plan sample is designed for entrepreneurs seeking E-2 visa approval, which allows individuals to invest in and manage a business in the United States. This plan outlines the applicant’s investment, business operations, and financial projections. We like this sample plan because it provides a clear and compelling case for the applicant’s ability to successfully run a business and make a significant economic impact.

If you’re looking to obtain an EB-5 visa by investing in a new commercial enterprise in the United States, Wise Business Plans can help you create a compelling business plan.

Our EB-5 business plan sample includes a description of your business, a market analysis, and financial projections, providing a detailed and persuasive case for the potential success of your venture.

The EB-5 business plan sample is designed for individuals seeking to obtain an EB-5 visa by investing in a new commercial enterprise in the United States. This plan includes a description of the business, a market analysis, and financial projections. We like this sample plan because it provides a detailed and persuasive case for the potential success of the business, which is crucial for obtaining EB-5 visa approval.

If you’re seeking investment from angel investors, venture capitalists, or other private equity firms, Wise Business Plans can help you create a compelling pitch.

Our investor business plan sample includes a pitch deck, financial projections, and a detailed analysis of the market the potential return on investment and the scalability of your business.

The investor business plan sample is intended for businesses seeking to attract investment from angel investors, venture capitalists, or other private equity firms. This plan includes a pitch deck, financial projections, and a detailed analysis of the market opportunity. We like this sample plan because it emphasizes the potential return on investment and the scalability of the business.

At Wisebusinessplans, we’re committed to helping non-profit organizations achieve their social impact goals.

Our non-profit business plan sample includes a mission statement, programs and services, marketing and outreach strategies, and a financial analysis, providing a clear roadmap for establishing or expanding your organization.

The non-profit business plan sample is designed for organizations seeking to establish or expand a non-profit entity. This plan includes a mission statement, programs and services, marketing and outreach strategies, and a financial analysis. We like this sample plan because it demonstrates a strong commitment to social impact and outlines a clear strategy for achieving the organization’s goals.

Whether you’re seeking financing from a bank or other financial institution, Wise Business Plans can help you create a detailed and persuasive business plan.

Our bank business plan sample includes a thorough financial analysis, market research, and a strategy for achieving profitability, highlighting the key factors that banks consider when evaluating loan applications.

The bank business plan sample is tailored for businesses seeking financing from a bank or other financial institution. This plan includes a detailed financial analysis, market research, and a strategy for achieving profitability. We like this sample plan because it highlights the key factors that banks consider when evaluating loan applications, and provides a strong case for the borrower’s ability to repay the loan.

The cannabis industry is rapidly growing, and Wise Business Plans can help you enter it with confidence.

Our cannabis business plan sample includes a market analysis, operational strategy, and regulatory compliance a comprehensive overview of the unique challenges and opportunities in the industry and offering a clear roadmap for success.

The cannabis business plan sample is tailored for entrepreneurs seeking to enter the rapidly growing cannabis industry. This plan includes a market analysis, operational strategy, and regulatory compliance plan. We like this sample plan because it provides a comprehensive overview of the unique challenges and opportunities in the cannabis industry, and offers a clear roadmap for success.

The executive summary is a concise overview of your business plan, highlighting the key points of each section. It should capture the essence of your business, its mission, and the purpose of the business plan. This section should be written last, but it’s placed at the beginning of the business plan. Here is an example executive summary from our professional business plan written for Eplace Solution , an innovative e-commerce portal.

• Keep it brief and focused on key points.
• Clearly define the problem and your solution.
• Highlight market opportunities and growth potential.
• Showcase your team’s qualifications.
• Include financial projections.
• End with a clear call to action.
• Tailor it to your audience.
• Review and update regularly.

In this section, provide a detailed description of your company, including its history, legal structure, location, and vision. Explain your mission statement and core values that guide your business decisions. Use real-life examples of successful companies and how their strong company descriptions have contributed to their growth. In addition, you can reuse your company description on your About page, Instagram page, or other properties that ask for a boilerplate description of your business.

This section also allows you to describe how you register your business . Here you must choose whether your business is a corporation, sole proprietorship, LLC , or another type of business .

• Describe your company’s mission and vision.
• Explain what your business does and the problems it solves.
• Mention your target market and customer base.
• Highlight your unique selling points.
• Provide a brief history and background.

A market analysis analyzes how you are positioned in the market, who your target customers are, what your product or service will offer them, and industry trends. It might be useful to do a SWOT analysis to discover your strengths and weaknesses to identify market gaps that you may be able to exploit to build your business.

As part of your market research, you’ll also need to perform a competitive analysis. It will give you an idea of who your competition is and how to differentiate your brand. Here’s an example of a competitive analysis we did for a food business.

• Research and understand your industry thoroughly.
• Identify market trends and growth opportunities.
• Analyze your competitors and their strengths and weaknesses.
• Define your target audience and their needs.
• Include data and statistics to support your analysis.

Adding products and services to a business plan involves more than listing your company’s offerings. If you intend to gain funding or partner with another business, your products, and services section needs to demonstrate your company’s quality, value, and benefits.

Here’s an example of a product and service section in the business plan we wrote for an e-commerce business that offers wedding accessories.

• Clearly describe your offerings and their features.
• Explain how your products/services address customer needs.
• Highlight any unique qualities or advantages.
• Discuss your pricing strategy.
• Mention any future product/service development plans.

Here is example of services section of a bank.

It is always a good idea to have a marketing plan before launching your business. A potential investor will want to know how you will advertise your business. Therefore, you should create a marketing plan that explains your planned promotion and customer acquisition strategies.

Discuss how you will make a sale. How will you attract customers and maximize their lifetime value? Ensure your marketing and sales forecasts align with your financial forecasts Marketing plans are usually based on the four Ps : product, price, place, and promotion. Breaking it down by marketing channels makes it easier. Discuss how you intend to market your business via blogs, email, social media, and word-of-mouth. Here is an example of marketing strategies we develop for a restaurant business.

• Define your marketing goals and objectives.
• Outline your marketing strategies, including channels and tactics.
• Explain your sales strategy and target sales goals.
• Include a budget for marketing and sales activities.
• Discuss your sales team and their roles.
• Detail your customer acquisition and retention strategies.
• Mention any partnerships or collaborations for marketing and sales.

Example of marketing and sales plan section of a bank

The operation plan should include all the steps needed to run the business in the long run. The plan should include details about logistics, duties for each department of the company, and responsibilities for the team.

The main aspect of running a business is its costs. Whether it’s machinery or services, each requires capital.

how to write an operation plan in a business plan

• Describe your day-to-day business operations.
• Explain your supply chain and production processes.
• Outline your facility and equipment requirements.
• Discuss your quality control and efficiency measures.
• Mention any legal and regulatory compliance considerations.
• Detail your staffing and management structure.
• Include contingency plans for potential disruptions.

In this section, you can describe your current team and the people you need to hire. You will need to highlight your team’s relevant experience if you intend to seek funding. Basically, this is where you demonstrate that this team can be successful in starting and growing the business.

• Introduce your leadership team and their roles.
• Highlight their relevant experience and qualifications.
• Explain your organizational structure and hierarchy.
• Discuss key personnel responsibilities and functions.
• Mention any plans for team growth or development.
• Address any advisory boards or external support.

Management summary of coffee shoppe business.

A financial plan should include sales and revenue forecasts, profit and loss statements , cash flow statements , and balance sheets .

Now, if you plan to pitch investors or submit a loan application, you’ll also need a “use of funds” report. Here you outline how you plan to leverage any funding you might acquire for your business.

With our business templates , you can create your own income statement, cash flow statement, and balance sheet.

• Include detailed financial projections (income statement, cash flow, balance sheet).
• Explain your funding requirements and sources.
• Discuss your pricing and revenue model.
• Describe your expense management and cost controls.
• Mention any financial risks and mitigation strategies.
• Highlight key financial milestones and goals.

Financial highlights of foodShack business.

External drivers refer to the external factors or influences that significantly impact the activity and growth of an industry. These drivers include outsourcing of non-core activities, changes in economic activity, competition from other industries, and the complexity of business legislation.

Additionally, external drivers encompass the effects of changes in new business formation, especially among small businesses, which directly affect the demand for services within the industry.

• Identify and analyze current and emerging market trends in your industry.
• Assess potential positive or negative impacts these trends may have on your business.
• Evaluate broader economic conditions, including inflation rates, interest rates, and GDP growth.
• Elucidate how changes in economic conditions could influence consumer behavior, product demand, and overall cost structure.
• Outline key industry regulations and compliance requirements, discussing potential impacts on operations, costs, and market access.
• Highlight relevant technological advancements and explain their potential effects on your product or service offerings, operations, and competitiveness.
• Analyze current and potential future competitors, emphasizing the evolving competitive landscape’s impact on market share, pricing strategy, and overall business strategy.
• Consider social and cultural factors influencing consumer preferences and behaviors, exploring how societal changes can affect product demand.
• Evaluate environmental trends and regulations, discussing potential impacts on operations, supply chain, and customer perceptions.
• Assess political stability, government policies, and geopolitical factors, exploring potential risks and opportunities from political changes.
• Discuss global market conditions, analyzing how global economic trends, trade policies, and currency fluctuations may affect operations and expansion plans.
• Identify and discuss potential risks in the supply chain, such as disruptions, shortages, or geopolitical issues.
• Consider demographic shifts affecting your target market and discuss how changes may impact your customer base and marketing strategies.
• Highlight key legal and regulatory factors affecting the business, discussing potential legal challenges, compliance costs, and regulatory changes.
• Outline comprehensive risk management strategies, including contingency plans and risk mitigation strategies.
• Explain how you will monitor external drivers and emphasize the importance of staying agile and responsive to changes in the external environment.

The startup summary serves as a comprehensive overview of essential financial aspects, encompassing total startup expenses, the overall value of startup assets, and the total requirements, which is the cumulative sum of all expenses and startup investments.

It provides a clear financial snapshot, outlining the costs involved in launching the business, the value of assets acquired, and the overall financial needs for the startup.

This section is crucial for entrepreneurs and potential investors, offering a transparent understanding of the financial foundation required to initiate and sustain the business successfully.

This roadmap ensures a realistic evaluation of the business idea, identifying potential challenges and offering solutions.To write an effective plan, focus on what sets your venture apart from competitors, maintain conciseness, and embrace flexibility as a living document.

Answer fundamental questions about your business, create actionable checklists, execute the plan, and continually revise and update based on experiences and feedback.This iterative process fosters continuous improvement, helping entrepreneurs stay adaptable and enhance their business strategies over time.

• Clearly state the startup’s name and provide a concise description of its activities.
• Include a succinct mission statement capturing the startup’s purpose and goals, reflecting its core values.
• Specify the founding date and offer brief bios of key founders, highlighting relevant experience.
• Summarize the startup’s concept, explaining offered products or services and key distinguishing features.
• Clearly articulate the problem or need in the market that the startup addresses, defining the target audience.
• State what makes the startup unique, whether it’s a special feature, market gap, or competitive advantage.
• Provide a brief description of the market opportunity, covering target market size, trends, and growth prospects.
• Outline how the startup plans to generate revenue, detailing streams, pricing strategy, and potential partnerships.
• Offer a snapshot of the startup’s current status, highlighting key achievements such as product development or partnerships.
• If seeking funding, clearly state the amount sought and its allocation, covering areas like product development and marketing.
• Include a high-level financial summary with key projections for revenue, expenses, and profitability.
• Briefly outline future aspirations and plans, encompassing areas like expansion, product development, or strategic partnerships.

The projected industry growth is a pivotal aspect that forecasts the expansion of a specific sector over a defined timeframe.

For instance, it could provide an estimate of where that particular business will be standing in the next 10 years, and what will be the average annual growth rate of that industry.

This information provides prospective investors and stakeholders with a clear understanding of the industry’s potential and positions the startup within a dynamic and flourishing market.

• Emphasize the importance of industry trends and growth to your business.
• Provide a concise overview, including market size, major players, and recent trends.
• Briefly explain how you gathered data on industry growth projections (e.g., market research reports, expert interviews).
• Identify and discuss prevailing trends, such as technological advancements, changes in consumer behavior, and regulatory shifts.
• Summarize the industry’s historical growth, highlighting growth rates, market expansion, and notable milestones.
• Highlight key factors expected to drive industry growth, such as emerging markets, technological innovations, and demographic shifts.
• Discuss specific opportunities within the industry, including gaps in the market, underserved segments, or areas of competitive advantage.
• Acknowledge potential challenges or risks that could impact industry growth, demonstrating a realistic understanding.
• Present projections for future growth rates based on historical data, expert opinions, and your analysis. Include short-term and long-term projections.
• Discuss how key competitors are positioned to leverage industry growth, emphasizing your business’s differentiation strategies.
• Consider the regulatory landscape impacting growth, discussing anticipated changes and their potential effects on the industry.
• Explore international trends and their implications for industry growth, including factors like global economic conditions and geopolitical influences.

Here is example of market analysis section of a bank.

The break-even analysis serves as a vital financial tool, offering a detailed estimation of key metrics such as Sales Revenue, Cost of Sales, Gross Profit, Fixed Expenses, and Income Before Tax.

These critical components are visually presented through a bar graph, providing a clear and concise overview of the financial dynamics.

Additionally, the break-even analysis delves into a 12-month forecast, outlining the projected amount of revenue generated and the corresponding fixed costs.

This section is instrumental in helping stakeholders understand the financial threshold at which the business covers its costs and begins to generate profit.

• Define break-even analysis as a financial calculation where total revenue equals total costs.
• Identify constant costs regardless of production or sales levels.
• Enumerate and explain costs changing with production or sales.
• Present the break-even analysis formula, indicating the units needed to cover costs.
• Perform a practical break-even calculation using business-specific fixed costs, selling price, and variable cost per unit.
• Include a break-even chart or graph for a visual understanding of cost-revenue dynamics.
• Conduct a proactive sensitivity analysis to explore how changes in variables impact the break-even point.
• Specify the anticipated timeframe to reach the break-even point in terms of months or units sold.
• Clearly outline assumptions made in the analysis and provide justifications for transparency and credibility.
• Acknowledge potential risks or challenges that may affect the accuracy of the break-even analysis.
• Briefly mention contingency plans for difficulties in reaching the break-even point within the projected timeframe.

The management summary within the business plan provides a concise overview of the organizational structure and key personnel.

This includes a count of individuals, specifying the number of founders and operational team members integral to the organization.

The summary delves into the roles and responsibilities of each key figure, offering insights into the leadership dynamics driving the business.

Furthermore, the management summary sheds light on the financial aspect by presenting details about personal wages and payroll allocations for both founders and operational staff.

This comprehensive section ensures a clear understanding of the human resource framework and the financial commitments associated with the management team, crucial for stakeholders evaluating the business’s operational strength and leadership capability.

• Highlighting the critical role the management team plays in the business’s success, the introduction emphasizes their significance.
• Listing each key member with names, positions, and brief role summaries introduces the core of the management team.
• Providing brief biographies for each team member underscores their relevant experience, skills, achievements, and industry-specific expertise.
• Clearly outlining roles and responsibilities emphasizes how each team member’s skills contribute to the overall success of the business.
• Sharing the team’s vision and strategy involves discussing key strategic goals and outlining the plans to achieve them.
• Highlighting notable achievements or milestones showcases the team members’ successful ventures, industry recognition, or career accomplishments.
• Discussing team dynamics emphasizes collaboration and the complementary nature of their skills in driving the business forward.
• Introducing advisory board members, if applicable, underscores the additional guidance and expertise they bring to the business.
• Discussing how the team plans to contribute to future growth and development includes strategies for talent acquisition, leadership development, and succession planning.
• Touching on the team’s culture and values emphasizes their role in shaping the overall ethos of the business.
• If seeking investment, briefly mentioning how the management team plans to use funding for business growth and development provides insight into their financial strategy.

Here is example of marketing and sales plan section of a bank.

The financial indicators section within the business plan helps in evaluating the fiscal health and performance of the organization.

Year-after-year profitability estimates take center stage, encompassing key metrics such as gross margin, net profit margin, and EBITDA to revenue.

These indicators provide a comprehensive understanding of the business’s ability to generate profit relative to its revenue.

Furthermore, the financial indicators extend to leverage ratios, including the critical Debt to Equity ratio, Debt to Assets ratio, and Interest Coverage ratio.

These metrics illuminate the organization’s capital structure, debt management, and its capacity to meet interest obligations.

Liquidity ratios includes the Current Ratio and Current Debt to Total Asset Ratio.

These ratios provide insights into the company’s short-term financial health and its ability to meet immediate obligations.

The financial indicator toolbox is enriched with additional metrics, notably the Revenue to Equity ratio, which sheds light on the efficiency of generating revenue from equity investments.

• Detailed revenue forecasts for the next 3-5 years. Breakdown by product/service and geographical regions.
• Detailed breakdown of anticipated expenses. Include fixed and variable costs, operational expenses, and other relevant expenditures.
• Historical P&L statements if available. Projected future profits and losses based on revenue and expense projections.
• Outline of expected cash inflows and outflows. Emphasis on the ability to meet short-term obligations.
• Snapshot of the company’s financial position. Includes assets, liabilities, and equity.
• Calculation and presentation of key financial ratios (liquidity, solvency, profitability). Discussion on the significance of these ratios.
• Identification and explanation of relevant KPIs. Highlighting alignment with the overall business strategy.
• Discussion of potential financial risks. Mitigation strategies and addressing uncertainties.
• Clear statement of the amount and purpose of funds required.
• Outline of key assumptions underlying financial projections. Rationale for these assumptions.
• Summary of industry financial trends and business positioning. Outlook on future financial prospects considering market dynamics.

Looking For The Right Business Plan Format?

These sample business plans will provide you with a complete structure and format for your business plan, which will give you a head start on developing your document, so you won’t be stuck seeing an empty page and wondering what to write.

Simply going through the process of writing a business plan is one of its key benefits. If you sit down to write, you’ll naturally think about your startup costs, your target market , and any market analysis or research you’ll need to conduct. In addition to defining your position among your competitors, you will establish your goals and milestones.

You can see what should be included in a sample financial plan, but It is wrong to assume that a sample company’s financial projections will fit your own. If you need more resources to get you started, we recommend this guide on how to write a business plan .

In addition, you can download our 40+ free business plan templates covering a range of industries.

One-page business plans are short, compact, and to the point and are designed to make the plan easy to read at a glance. Make sure to include all of the sections, but truncate and summarize them

Start-up business plans are for businesses that are just getting started. They are usually developed to secure outside funding. In this regard, financials are of increased importance, as well as other sections that determine whether your business idea is viable, such as market research.

A strategic business plan lays out a company’s goals and how it will achieve them at a high level. It is a foundational document for the company as a whole. A strategic business plan allows all levels of the business to see the big picture, inspiring employees to work together to reach the company’s goals.

Developing a feasibility plan answers two primary questions about a business venture: who would purchase the service or product the company wants to sell, and if the venture is profitable.

Internal Business plans are geared to a specific audience within a company to keep your team on the same page and focused on the same goals.

In conclusion, whether you’re venturing into a traditional business or creating an innovative startup, the significance of a well-crafted business plan cannot be overstated. Different types of business plans cater to specific needs, from internal alignment to strategic expansion. Employing a template in MS Word ensures a polished presentation. The process of writing an executive summary, creating a plan, and defining the components of your business plan is essential.

Recognizing the need for a comprehensive and standard business plan can help guide your endeavors. Whether you choose to write a full business plan or opt for a one-page business overview, leveraging templates in MS Word can simplify the process. In essence, understanding the types of business plans and utilizing an executive summary template provides a structured approach to showcase your business overview.

Take inspiration from example business plans to tailor your strategy, ensuring a roadmap for success in the dynamic world of entrepreneurship. Always remember, a meticulously crafted business plan not only communicates your vision effectively but also serves as a valuable resource that can help secure investments and guide your business’s growth trajectory.

Begin with an executive summary, delve into market analysis, outline your strategies, create financial projections, and use available business plan examples as templates to guide your writing.

A comprehensive business plan template should encompass key sections such as an executive summary, business description, market analysis, marketing strategy, organizational structure, and financial projections. Seek templates online that cover these elements.

Tailor your business plan to the scale of your small business. Define your objectives clearly, outline cost-effective strategies, and emphasize agility in adapting to market changes.

Explore well-crafted business plan examples you can visit our website  wisebusinessplan.

The fundamental components include an executive summary, business description, market analysis, marketing and sales strategy, organizational structure, product/service description, and financial projections.

Investors focus on growth potential, detailed financial projections, market analysis, competition analysis, and the qualifications and experience of your management team when reviewing a business plan.

To find a business plan example for a tech startup,you can visit our visit wisebusinessplan .

A business plan provides a comprehensive overview of your entire business, including strategies, operations, and financials. In contrast, a business proposal typically focuses on a specific project or offer, outlining the details and benefits to a potential client.

Craft an engaging executive summary by summarizing your business’s mission, highlighting the market opportunity, showcasing your product or service, and providing a concise overview of your financial projections.

Seek tailored business plan examples for nonprofit organizations you can visit wisebusinessplan .

These business plans are written by MBA writers. Real-world use cases were used in these plans.

Get our business plan writing and consultation service.

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Ecommerce Business Plan Sample

Oct.12, 2016

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Table of Content

Ecommerce Business Plan for starting your own online store

Are you looking for startup ideas that can easily be initiated and run from home? Well, you must then consider ecommerce business as after the prevalence of coronavirus pandemic internet sales have really shot up.

E-commerce business is based on selling things through the Internet. The line of products may vary from electronic possessions such as e-books or audio/videos to actual physical entities including clothes, furniture, toys, vehicles, etc.

To guide you about each and every aspect of this business, we are providing here a sample business plan for ecommerce of a recent startup ‘TradeE’.

Executive Summary

2.1 the business.

TradeE will be a licensed B2C ecommerce startup that will be run through its ecommerce website. The online enterprise will be owned by Diana Blunt.

The business will sell downloadable products throughout the world, however, delivery services for physical items will be provided in just three cities, San Jose, San Francisco, and Oakland.

2.2 Management of Online Retail Store

Management is an important aspect of business as it ensures that everybody clearly knows what they have to do and there is a check on every employee to ensure a perfect workflow.

Starting an online business usually seems easy since you don’t have to personally interact with customers and employees. However, this too can end up in a mess if you are failed at managing it.

Online management is a challenge because your ecommerce site and online transactions are always prone to hackers, frauds, and copycats. To make sure that your and your customer’s data is protected and everything goes like you intended, you must write a detailed business plan.

If you are looking for how to write a business plan for online store you can take help from here.

Diana will govern the business herself. To manage the online store , the company will be hiring social media manager, digital marketing director, virtual assistants, IT specialists, and delivery personnel.

2.3 Customers of Online Retail Store

The groups that are expected to be our major customers will mostly comprise of young, adults, and senior citizens. We believe that college students, working moms and dads, and senior members of households will surely find many things to buy from us.

2.4 Business Target

Our target is to become a renowned online store in our service areas. We believe in generating profits by serving our customers with our best.

Company Summary

3.1 company owner.

Diana Blunt is the owner of TradeE. She has recently completed her MBA from the Lucas College and Graduate School of Business.

During the years of her graduation, she was constantly involved in learning emerging disciplines and skills such as graphic editing and ecommerce management.

Besides being tech-savvy she is also a great communicator, leader, and tourist.

3.2 Why the online store is being started

Diana had always wished to start a business that can be expanded or contained whenever she wants. Viewing her digital skills and interests she decided to go for an online shop.

Another factor that helped her in this decision was her extreme love for traveling. She wanted to start a business that she can govern without being actually present there.

From this sample business plan ecommerce you can see how the online business TradeE was planned and executed.

3.3 How the online store will be started

Before starting the business, the company owner will do research on which product line should be chosen to get the most recognition. The company will also collaborate with other online businesses to buy their products and sell them on the company’s platform.

Since the business will mainly sell toys, clothes, bags, and accessories, a storage room will be taken on rent to keep the things.

Following the making of business plan ecommerce template, the company will hire the required personnel. TradeE will seek the services of a web developer and IT specialist to create a website that fulfills the criteria of secure transactions, foolproof client database, and copy-protected access. It will be ensured that the web design is user-friendly and descriptive.

The business owner aims at hiring the digital marketing team and director two weeks before the launch so that ecommerce business marketing plan could be executed.

Products and Offers

Deciding your line of products is the most important part of your startup as it depends on your surroundings, budget, and target customers as well. Rather than being just fashion ecommerce or specifically jewelry ecommerce TradeE has decided to introduce itself as a multiple product line company.

The large range of products offerings by TradeE includes:

Clothes: We will provide all departments of garments for men, women, and children ranging from casual dresses, suits, daily wears to sports & swimming outfits. All the dresses, shirts, T-shirts and suits offered by us will be branded and designer-made.

Bags & Accessories : We will offer branded bags and clutches and a range of accessories including wristwatches, jewelry items, hats, sunglasses, keyrings, mobile covers, socks, gloves, umbrellas, hair accessories, and stationery.

Household Items : We will offer small household items such as home linens, baking dishes, baby items, and kitchen essentials.

Gifts: We will also provide packed as well as un-packed gifts to be given to people of all age groups.

Downloadable Products: We will also be selling e-books, audio and video files, games, movies, stock images, etc.

Marketing Analysis of Online Retail Store

If you are planning e commerce business you must not ignore the fact that market analysis is equally important like all other aspects of a business. Before setting out for a new ecommerce venture, you must analyze where and how you can find the most people to turn into your customers.

Especially if your online business is based on physical products you must figure out which areas for delivery services will be suitable and which cities can help you in getting a maximum number of customers.

Analyzing and discovering your target people is also essential in the case when you are making decisions about social media campaigns. Your approach to promote your startup can only be effective if you know the age groups and the mindset of your target customers.

5.1 Market Trends

Ecommerce businesses are flourishing day by day because people found it convenient to have their favorite thing in their hands by a mere click. Another reason for increased sales is that many people avoid visiting shops personally after the pandemic has hit the earth.

The figures reported by IBISWorld supports the fact that one can’t be at a loss if they devise a comprehensive and workable ecommerce project plan before starting. According to the market research company, 234,699 online businesses are successfully running in the United States. A 10.2% growth rate in the ecommerce businesses has been observed in the past five years and a 6.9% growth rate has been predicted for this year that is 2020.

5.2 Marketing Segmentation

TradeE has categorized its target customers into three groups so that their corresponding choices, preferences, and needs could be thoroughly studied. It is advisable to also classify your intended clientele when you are writing a business plan for ecommerce startup.

The detailed marketing segmentation of our target audience is as follows:

5.2.1 Young & Adults: Our major target group will comprise of young people. They are expected to avail most of our downloadable products such as e-books, music, games. Moreover, we also believe them to be the biggest buyers of our clothes, bags, and accessories.

In addition, moms, the homemakers are also included in this category. Thus, we are confident that the major customer of our home items such as house linens and eating utensils will also be catered for in this category.

5.2.2 Senior Citizens: Our second target group comprises of senior citizens. They are expected to avail all of our services. The elderly persons will also purchase household items as they usually are devoted to homemaking.

Moreover, we expect this respectable category of our customers to be the biggest purchaser of our gifts, as grandpas and grandmas are the ones who want to make kids and grandkids feel special on various events.

5.2.3 Teens & Kids: Our third target group is comprised of children and teens. They are expected to purchase accessories such as wristwatches, mobile covers, stationery, and jewelry items. We also think that they could be the major consumers of our audio and video files and games.

5.3 Business Target

Business targets as specified by TradeE to be achieved over a certain period of time are given here:

• To maintain an average rating above 4.65 throughout the year
• To increase our marketing qualified lead by 30% every four months
• To improve our lead conversion rate by 10% every month
• To reduce the time we take for delivering items by 15% by the first six months
• To earn a net profit margin of $10k per month by the end of the first six months
• To achieve customer repeat rate of 40% by the end of the first year

5.4 Product Pricing

Our prices are in similar ranges as those of our competitors. However, we will keep on providing several discounts to our repeat customers.

Marketing Strategy

If you are going to start any ecommerce company such as an online boutique you must focus on your marketing plan because that’s what makes an ecommerce site successful.

Without a detailed and perfect marketing strategy, it would be very difficult for you to reach out to people who are most likely to purchase your products.

Considering its importance, TradeE will start executing its sales strategy plan two weeks before the launch.

6.1 Competitive Analysis

Our biggest competitive advantage is that we are providing a very vast product line so to increase the niches of our target groups. All our products will be authentic, and replaceable within 2 days. Moreover, we’ll be offering several discounts in the startup phase to attract more and more customers.

And finally, another thing that will be in our favor is that we will be able to deliver items fast as we are offering delivery services in the three cities that are really close to each other.

6.2 Sales Strategy

• We’ll run a campaign through social media & ensure a strong web and social media presence
• We’ll advertise our startup through local newspapers
• We’ll send gifts to our first 200 customers
• We’ll offer a 15% discount on every shopping above $60 for the first three months

6.3 Sales Monthly

6.4 sales yearly, 6.5 sales forecast, personnel plan.

Your planning for electronic commerce couldn’t be justified as ideal unless you include in it the ways you will adopt to hire the most competent persons.

Since most of the employees of TradeE will be freelance workers, the company will conduct rigorous online interviews to find the most suitable employee.

7.1 Company Staff

The company’s owner will perform the duties of CEO and HR Manager. The list of company’s required staff, as well as their jobs descriptions, is given below:

• 1 Co-Manager to manage company’s store and delivery operations
• 1 Digital Marketing Officer to manage company’s graphic team
• 1 Social Media Manager to run company’s web pages and social media pages
• 2 IT specialists/Web Developers to maintain and update company’s website
• 1 Graphic Designer to create graphic for company’s site
• 1 Content Writer to write products description and general content for website
• 10 Drivers to ensure quick delivery
• 1 Customer Care Representative to manage client’s requests

7.2 Average Salary of Employees

Financial plan.

One of the biggest advantages of online businesses is that even if you starting an ecommerce business from scratch you won’t need a huge amount to invest. Your major spending will be the salaries of your employees and rent of your storeroom.

So in order to analyze expected profits or future investments and identify the resources that are available or could be needed in the coming days, you must prepare a financial plan.

Your financial plan should also include the details of at what financial status you would prefer to contain or expand your product line or service area.

The financial plan for TradeE is given as follows:

8.1 Important Assumptions

8.2 brake-even analysis, 8.3 projected profit and loss, 8.3.1 profit monthly, 8.3.2 profit yearly, 8.3.3 gross margin monthly, 8.3.4 gross margin yearly, 8.4 projected cash flow, 8.5 projected balance sheet, 8.6 business ratios.

Download Ecommerce Business Plan Sample in pdf

OGS capital professional writers specialized also in themes such as quality retail business plan, stationery business ideas , corner store business plan , unique retail business plans , pharmacy business plans , underwear line business plan and many others.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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