What do I need to think about when setting up an online marketplace?

Have you heard of eBay? Have you heard of Air BnB? These are 2 high profile international online marketplaces.

Marketplaces are becoming increasingly popular. If you are looking to set up your own online marketplace, here are the 3 key things you must consider.

What are the legal relationships?

To set up a marketplace, you need to have a good grasp of what you are trading, why you are trading and who you will be trading with.

If you’ve already got an idea in your head, chances are, you know what and why you are trading. The next big thing you need to think about, is who you will be trading with, that is, the relationship you will have with your customers. Ask yourself – who is the buyer and who is the seller?

You will form a relationship with the buyer, and another relationship with the seller. You need to be clear on the rights and obligations of each party in the respective relationships. You need well-drafted business terms and conditions to clarify the relationships, and help prevent unnecessary disputes in the future.

If you only provide a marketplace, you will not want to be a party to the specific agreements formed between the buyer and seller.  You need to make this clear in your business terms and conditions. You do not want to be liable for any agreement between the buyer and seller, or any failure of the buyer or seller to meet the agreement that they have struck.

How does the money flow?

First you need to make sure that you are selling something that people will pay for. After that, you need to figure out when you will get paid and how your customers will pay you. This is one of the most important things to get right because it will form the basis of how your marketplace operates.

Questions you need to ask yourself are:

• Will the sellers be paying you a fee to be registered on your marketplace?
• Will you receive commission from buyers when they purchase a product or service through your website?
• How can you make sure that you get paid?

These issues need to be addressed in the business terms and conditions.

What about intellectual property?

There are intellectual property issues that must be addressed.

You need to make sure that your customers understand that you have rights to use, edit or remove any content that they post on your marketplace. You need to ensure that your own intellectual property is adequately protected. The terms and conditions on your marketplace should clearly state that the material on your marketplace is owned or licensed by you. Use of the marketplace by your customers does not grant them rights to reproduce, use or modify any trademarks, logos or any other material, without your express permission.

Conclusion

Online marketplaces are new and sophisticated. Once you have a good idea of what you want to offer through your marketplace and how you want the money flow to work, speak to a lawyer with IT and online experience. You need a lawyer with the expertise to understand your product and protect your interests.