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Millions of users frequent online marketplaces such as Airbnb, Uber, eBay and Amazon daily. With businesses increasingly operating online, anyone with an internet connection and a laptop can build a community to connect users with others.

Marketplaces are platforms that pair buyers and sellers with particular products or services. Online marketplaces are becoming one of the most profitable and popular ways of starting a business. Whether you’re a first-time entrepreneur or a traditional business looking to expand, this article explains how to set up a marketplace as well as common pitfalls to avoid.

Quality Assurance

It can be difficult for the marketplace operator to control the quality of products or services that service providers or users supply. Although it may be impractical to monitor every transaction, you can manage customers’ expectations by: 

  • establishing a review system, and 
  • allowing customers to review suppliers and provide feedback.

There are various ways to operate a review system. For instance, Amazon leaves it up to the consumer to base their decision on previous customer reviews. Uber monitors the performance of its drivers and may decide to remove a driver from their system due to negative reviews. Either way, it is important to provide a platform for comments and feedback, especially when your control over the supply is limited.

Striking the Right Balance

On face value, it may seem that marketplace operators can take a step back and leave consumers and suppliers to take care of the transactions. But this is not the case if you wish to operate a successful and reliable marketplace. A marketplace operator is essentially a mediator between the buyers and sellers, and it’s then important to create a managed environment.

Transparency is key to facilitating a great experience with both your service providers and users. Providing clear and concise information will help manage the expectations of both parties. You can achieve this through your terms and conditions, creating a clean and easily accessible website, and providing a platform for feedback or dispute resolution.

Structuring Your Marketplace

The most important issue to work through when creating your marketplace is how to structure your platform. We have set out some questions to ask yourself below.

What is Your Brand?

Selling someone else’s goods and services should not deter you from creating a brand for your business. Try and avoid names that use descriptive language that merely captures what you are offering. Think of something catchy and distinctive that people will remember.

What is Your Role in the Marketplace?

The role you play as the platform operator is up to you. For example, you can provide a platform that facilitates an introductory service between the parties and then takes a step back as soon as a customer proceeds with a supplier’s product. Alternatively, you may wish to operate as a directory, by providing information and contact details of certain suppliers.

Who are Your Target Customers?

Identify your target market and ideal customers – what are their interests? What content do they enjoy consuming and in what medium? Use this research to inform how you design your website. For instance, if you are targeting creatives, try and make your site aesthetically appealing. Or, if you are targeting business professionals, you may prioritise more formal language on the page and a minimalist feel.

How Do You Want Your Customers to Pay?

There are a variety of payment options you can choose from including: 

  • credit card, 
  • bank transfer, 
  • PayPal, 
  • Bitcoin, or 
  • gift cards and vouchers. 

Legal Essentials

The clearest way to outline your role on the platform, the relationships between you, your suppliers and customers, as well as the payment structure, is through your website terms of use and terms and conditions. These should be tailored specifically to your business and need to be comprehensive, especially for a marketplace. You should also take steps to protect your brand by registering your business name, domain name and any relevant trade marks.

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If you have any questions or need assistance setting up your marketplace, get in touch with our specialist e-commerce lawyers on 1300 544 755.

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