Online marketplaces have grown in demand among agencies and individuals. A study by Digital Commerce 360 reveals that 58% of online retail sales came from marketplaces in 2019. As the market is growing, let’s explore the concept of an online marketplace and how to develop one in 2022.

Table of contents 

• P2P marketplace vs an ordinary e-commerce site
• The peer-to-peer marketplace explained
• How to build a P2P marketplace: 4 ways to choose from
• How does a P2P marketplace make money?
• How much does a P2P marketplace cost?
• Conclusion

P2P marketplace vs an ordinary e-commerce site

Since the marketplace falls under an e-commerce category, it is often confused with an online store. Let’s explain the difference. An e-commerce platform is managed by a single vendor, where only a website owner decides which products to sell. Although users can buy goods, they still can’t register as vendors.

Thus, an online marketplace provides functionality that an e-commerce website can’t offer. That is why e-commerce CMS platforms like Shopify, OpenCart, and WooCommerce are great to develop an online store. However, they are not a great fit for building an online marketplace.

The peer-to-peer marketplace explained

Artists, mechanics, car renters, or booksellers all can become vendors via a P2P marketplace. All it takes is a simple registration, creating a product listing, and uploading the items for sale. Vendors can easily become buyers, and vice-versa.

The benefits of peer-to-peer marketplaces for users are:

• Speed & convenience. A user has a wide array of options gathered in a single place. He can scroll through hundreds of choices in an hour, from almost anywhere. From a vendor’s standpoint, marketplaces allow saving costs of renting a physical store and related expenses. An artist can post their goods online and wait until someone buys them.
  
  
• High profitability for store owners, vendors, and cost efficiency for consumers.
  Since marketplaces erase any middle man between vendors and the end buyers, this cuts costs on offering him a commission. Instead, you receive a commission as a marketplace owner. It can vary from 5% to 20%, depending on the products it sells. Yet, these fees are insignificant compared to the value marketplace provides to both parties. 

Unlike B2B, the P2P marketplace connects consumers with individual vendors instead of businesses. Even if you don’t know what price to set, you can rely on recommended prices by the embedded software.

Peer-to-peer marketplaces can be divided into 4 categories by services they offer:

• property rental marketplaces (HomeAway or Airbnb). These P2P marketplaces are easy to use and useful, as they gather hundreds of properties in one place. The platform owner charges fees for each transaction and extra fees from renters.
• selling products (such as Etsy or eBay). In this case, product vendors showcase their products via listings and sell them virtually, paying a fee. This type of peer to peer marketplace is among the most popular ones, as it lets you sell even the weirdest items with little effort.
• offering services or skills. Online portals like Helpware or TaskRabbit let you find people with the necessary skills fast. The latter also sets interviews and checks a candidate’s skills before providing them access to the platform.
• money and loans. These marketplaces refer to investing in loans or receiving funding. Kickstarter and GoFundMe are the most well-known examples of this service. The main difference between them is that Kickstarter serves entrepreneurs and creatives such as art makers, musicians, and tech enthusiasts. Meantime, GoFundMe is a fundraising platform for education, treatment, or disaster recovery. Startups use it to receive funding.

How to build a P2P marketplace: four ways to choose from

Now, we’ve come to the essential part of this article: “How do you build a P2P marketplace from the ground up?”

Broadly speaking, there are four key methods:

1) create a marketplace from the ground up

2) use a ready-made software platform

3) build on top of SaaS software

4) develop using APIs

Each of them has its own advantages and pitfalls, so let’s discuss them in more detail. 

1. Creating a peer-to-peer marketplace from the ground up is a sound idea if you need an extended functionality or a high level of customization. However, keep in mind that this approach consumes the most time and money. Among the key advantages of custom development are:

• no problem with integrating any third-party services, tools and APIs;
• possibility to add complex or custom functionality to your software (for instance, you can build your payment gateway);
• security, as you get to choose security measures and apply best practices to your software product;
• dedication & tech expertise. With your development team, you can get as simple or complex marketplace as you need. 

If you find yourself puzzled by the technical terms, integrations, and compatibility issues, it’s worth finding an experienced technology partner who can help you out. Building a software development team of skilled professionals, you will get the right UI & UX designers and engineers to guide you on the way to product launch, and even after that. 

But for now, let’s explore the other options.

2. Develop using an open-source platform

Open source platforms can cut the time and costs of P2P marketplace development greatly. However, each of them has its limitations.
Take, for instance, Magento. 

Although Magento is a solution for traditional e-commerce stores, its extensions enable marketplace functionality as well. These are: 

- Multi-Vendor Marketplace by Webkul ($349). This add-on adds the vendor sign-up, seller dashboard, storefront, invoices, and product reviews functionality to a website. It is among the most popular Magento add-ons available.

- Multivendor marketplace by PurpleTree Software ($149). With the help of this solution, you can manage sellers and vendors via separate control panels. Make your store available in many languages and set different product commissions for multiple vendors.

- Etsy Marketplace Integrator. This add-on allows turning your Magento web store into a complete marketplace, managing diverse categories of products. It also offers different pricing and delivery options. 

We’ve cited these extensions to give you the idea of what Magento marketplaces are. It’s worth using them if you already have an online Magento store that you want to extend into a marketplace. Otherwise, there are better alternative options cited below.

3. Develop using a SaaS Marketplace

This method is among the fastest and the most cost-effective ones. SaaS marketplaces provide all the basic multi-vendor features needed. Some examples of SaaS marketplaces are Sharetribe, Cocorico, and Marketplacer.

Sharetribe
It is both an open-source platform and a SaaS software.
Pricing plans: $79/month - Hobby (100 users limit); $119 - Pro (1000 users); $239/month - Scale (100 000 users). It charges for hosting, maintenance, and updates monthly.

Sharetribe was specifically сreated to build peer-to-peer marketplaces. Coded in Ruby on Rails, it has a solid developers community. You also get PayPal and Stripe payment systems integrated and the 24/7 technical support. 

With its help, launching, managing, and maintaining your marketplace becomes much easier. Some of its features are:

• managing listings and categories;
• admin dashboard
• multi-language support;
• multiple currencies & smooth checkout;
• complete user profiles.

Yet, you will need to do some coding to add the original design or add some features beyond the pre-packed features. By adding your functionality on top of Sharetribe, you can adjust your peer-to-peer marketplace to your business needs. 

However, software like this entails functionality & update limitations you can’t go beyond. For instance, if a new security update comes in 6 months, you can’t implement it earlier. So keep this in mind when choosing this approach. If you’re planning to scale up your business later and add complex business logic to it, it’s worth considering alternative options.

Examples of Sharetribe websites: Studiotime, the Quiver.

Alternatives to Sharetribe: Cocorico, Mayocat, Cloud Commerce Factory.

4. API-based marketplace software

Last not least, you can build your peer-to-peer marketplace based on API-based SaaS.

API as a Service is a kind of marketplace SaaS that combines great customization options with no-cost management. Take, for example, Sharetribe Flex, and Stelace. It gives you the freedom to create your own feature set and design while speeding up the development.

The estimate is that using Sharetribe Flex can accelerate development by around 90-95%. The same percentage is attributed to the cost economy.

On the technical side, this approach requires more development skills and work. Building a front-end, creating UI & UX design, and integrating 3rd party marketing software is on you. Thus, you might need an experienced software development partner to develop the right architecture and UX for your platform.

On the other side, the API solution provider will cover the maintenance, provide documentation, and offer the necessary developer tools to accelerate your time to market.

Which approach to choose for your P2P marketplace?

The answer will differ depending on your resources and goals. Early-stage startups with limited budgets might begin with marketplace SaaS development. Consider these 4 points:

• budget
• tech skills/ability to hire a tech team
• time frames
• how much customization do you need?

For complex UI and business logic, starting the development from zero may be an effective strategy.

How does a P2P marketplace make money?

The first and most popular P2P business model is by receiving commissions. A commission is a percentage of each transaction made on a platform. This cost may vary depending on the price of a product or service. For example, Upwork charges 20% fees for the first $500 earned by a freelancer, 10% for the billings ranging from $500 to $10 000, and 5% for the biggest sums billed.

You can create a similar dependency for your product or service offerings. Remember to make it transparent and clear to both vendors and customers. Another advice: enable transactions and chatting solely on your marketplace by closing the gaps where one can leave the platform. You can do this by providing an enhanced security layer, making your software trustworthy, and banning users from exchanging their social media & contact details.

The next model is subscriptions-based. You can offer different membership plans to users depending on the value proposition. Example: CrateJoy offers gift boxes with low to high-price products depending on the pricing selected.

Thirdly, you can get payments from listed products or services. This P2P business model is quite transparent and can improve the quality of published products. Since the seller will pay for any item posted, they will think twice before doing it and adjust the offer to the customer’s demand. 

If you plan to develop a P2P marketplace in a narrow niche, you can equally consider featured listings. These are advertisements bought by specific service vendors. Wedding photography or clothes websites can practice this revenue model and get their users satisfied by showcasing only relevant offers.

How much does a P2P marketplace cost?

The cost will directly depend on the p2p marketplace development you choose. If you need to build the front-end and back-end from zero, the price will be higher than if you choose the off-the-shelf software.

You can calculate the costs of marketplace development the following way:

Total Hours Spent * Rate of Each Specialist You Hire = Development Cost

The approximate time needed to implement different features (based on our experience):

As you can see, the development of core features can be completed in 1 month.

However, development is just a part of a process. Add to this the wireframing and UI/UX design (15 to 180 hours), quality assurance, or software product testing at the very least.

Now, the development rates depend on the country, seniority level of specialists and the technology stack you choose. Here are web development rates by countries, according to Clutch.co:

Respectively, Cluth.co estimates the cost of e-commerce web development by regions:

• North America: $46,200 - $237,600
• Western Europe: $21,350 - $109,800
• Eastern Europe: $12,250 - $63,000.

Technology stack, or a set of programming languages and tools, is another aspect affecting the total cost. Here are technologies we have commonly used in our experience:

Front-end: AngularJS, React.js
Back-end: Node.js, PostgreSQL, Ruby on Rails, Symphony, PayPal/Stripe integrations, RESTful API

Concerning the team size, here is the optimal structure for a medium-size project:

• 1 front-end developer;
• 1 back-end developer; 
• 1 UI & UX designer;
• 1 project manager;
• 1 DevOps;
• 1 QA engineer.

If you decide to go with a ready-made platform such as Magento, the price will be comparatively modest. However, it will leave you with limited functionality and scaling options.

Conclusion

Multi-vendor marketplaces are more complex than ordinary e-commerce stores. Therefore, it takes more time and effort to create a service like eBay or Fiverr. Leverage each approach to choose the right fit and build a reliable software product.

Read more: 5 best Shopify alternatives