How to come up with a great idea for an online marketplace [2024]

By James Virgo

7th November 2024

8min read

Online marketplaces offer several highly scalable business models.

This makes building an online marketplace business very attractive. Furthermore, building an online marketplace has never been easier. With tools such as Dittofi’s visual app development technology enabling you to build rental, property or service marketplaces within 4 weeks.

That said, it is hard to think of a great idea for an online marketplace business.

In this article we look at some ways to come up with ideas for a new online marketplace. These include:

Modernize your existing business model
Monetize an existing community
Build a marketplace for a niche
Improve on an existing marketplace idea
Convert an existing ecommerce store into a marketplace

Modernise your existing business model

Think about the way that you or your business makes money today.

You could be a real-estate agent with hundreds of properties to rent out, or clients looking for homes. You could be a consultant for someone looking for a particular service where you take their requirements & find a provider for them.

Most of us act as middlemen at some point in day to day life. Connecting buyers and sellers through friendly introductions or more formal partnerships. In each of these cases, building an online marketplace would help counterparties save you & your counterparties time by providing them a platform to communicate with each other directly.

This would leave you more time to find more clients for both sides of the marketplace which you can easily do, by generating content about your marketplace, optimizing your site for search engines, implementing paid ads & by leveraging marketplace network effects.

When you’re modernizing your existing business model, you don’t need to go through the rigmarole of testing the market & validating your idea. This is because your business is already generating revenue. Therefore, you can take your existing community & immediately onboard them onto your own marketplace platform.

Building an online marketplace is simply a tool that you can use to expand your business. It is an extension of what you are already doing.

Monetize your existing community

In general, the driver when creating marketplaces is contacts… so, if you already have a large community this can be highly advantageous. The community provides an initial user base, generates trust with the platform & early activity.

These early adopters can serve as the foundation for the platform. They also attract more users because of marketplace network effects, & provide essential feedback for improvements. In essence, a pre-established community jumpstarts growth and accelerates the marketplace’s path to success by creating a vibrant and engaging environment from day one.

For community owners, you will act as an intermediary for your community. For example, let’s say that your community is a group of people looking for car services and others are providing them. Your main goal is to the supply side & the demand side of your marketplace together.

However, in this case, you do not take any money for bringing the two parties together. Before you do this, you need to validate the idea with your contacts & with parties that you are connecting with. Ask yourself, would it be valuable for buyers & providers to work together in such a business model? Would the two groups of people be willing to pay a commission to transact, or would at least one side (the buyer or seller) be willing to pay? Will they pay for registration in your marketplace?

The task ahead is small, you already have the contacts, all that you need to do now is to validate your idea. To do this, look at Dittofi’s idea validation board.

Need help validating your idea?

Book to speak with one of our marketplace consultants.

Now – I know you’re thinking, how will anyone ever pay me a commission? Well, it doesn’t necessarily have to be commissioned. There are a lot of different marketplace business models. Some marketplaces, for example Airbnb, charge per booking. Others sell ads space or charge listing fees. Others charge a subscription.

Build a marketplace for a niche

Most of us have heard the saying, “the riches are in the niches”.

Multiple time business owners will tell you that this is 100% true. However, it’s often difficult to find a niche opportunity for a marketplace.

What you can do here, is to search for underserved or passionate communities with unmet needs. You can then build a marketplace to fulfil those needs.

For example, agriculture technology is an underserved community. In this space, marketplace technologies could be used to facilitate the exchange of farm equipment, bulk crop sales & services within farming communities. Another example of an underserved community is remote work professionals. You could explore the idea of creating a marketplace for shared office space, virtual team building events and productivity tools.

Before developing any idea for a marketplace targeted at niche communities, you must first remember to validate your idea, to ensure that your marketplace has the potential to solve a real problem for a well defined audience.

Improve an existing marketplace idea

One of the best ways to win in business is to build the best product on the market.

Of course, it’s very hard to do this. There are plenty of other very intelligent people who will all be trying to build the best product in an existing space.

Nevertheless, it’s important to remember that businesses come & go & products only remain competitive while they continue to listen to the needs of their users. If you spot that your competitors have problems with this & customers are constantly complaining about the lack of features. Then this could be the perfect opportunity to create the same product but with all the necessary features.

When doing this, a good way to spot an opportunity is to look for an underserved segment of an existing marketplace. For example, the marketplace Fiverr offers freelancers across a whole range of different categories. The least serviced of these may be the newer categories such as AI & Machine Learning. Therefore you could explore the possibility of developing a marketplace for AI & Machine Learning freelancers.

You can do this same thing with any other existing marketplace. Simply break it down into categories & search for the most underserved or passionate category & build a marketplace just for them.

Remember to validate your idea before building your marketplace.

Need help validating your idea?

Book to speak with one of our marketplace consultants.

Convert an existing ecommerce store into a marketplace

Are you the owner of an existing ecommerce store? If so, you could generate higher margins & benefit from converting your ecomm store into a marketplace.

Potential benefits include:

Diversified revenue streams: An online marketplace can provide additional revenue streams through commissions or other fees (e.g. listing fees, featured listing fees etc.) charged to third-party sellers. These highly scalable marketplace business models can contribute to higher overall margins for your business.
Lower inventory cost: Unlike traditional ecommerce stores, when you have a marketplace, you do not need to invest heavily in inventory. Think about the product marketplace Etsy. Despite having over 100 million product listings, Etsy carries zero inventory. This can therefore reduce carrying costs and improve margins.
Increased product range: By allowing third-party sellers to list their products on your marketplace, you can offer a wider range of products without the overhead of sourcing or manufacturing. This can potentially increase sales and margins.
Scalable business model: Marketplaces can scale efficiently, as they leverage the resources of third-party sellers.
Network effects: Marketplaces are gifted with network effects which can increase your number of users far quicker than traditional ecommerce stores.

Converting your ecommerce store into a marketplace is much easier than building a marketplace from scratch. To begin with, your ecommerce store already has customer flow, it is well positioned on Google & it is well known. This means that it will be easier to attract other businesses wanting to sell on it.

In this case, you don’t need to validate your idea, but there are a special set of tactics & steps that you can take to successfully convert your ecommerce store into a marketplace.

Final Thoughts: What are the best next steps

Before building a marketplace it is important to consider the potential risks & benefits of building a marketplace. Nowadays developing the technology for a marketplace is easy. Tools like Dittofi enable you to build an enterprise grade marketplace in 2 – 4 weeks & without writing any code.

However, building a marketplace business is much harder & more time intensive. So, it’s important to first validate your idea, then build & launch version 1 of your marketplace & finally start to iterate fast by adding new features to your marketplace based on customer feedback.

At Dittofi we’ve helped hundreds of people develop successful marketplace businesses. You can speak with one of our marketplace consultants about your marketplace idea or sign up to Dittofi 14 day free trial and start building your marketplace today. If you’re just thinking things through that’s no problem, I hope that this article helped!

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