How to Build a Peer-to-Peer (P2P) Marketplace

P2P Market

Just by looking at the statistics of the P2P market and its key players, it becomes obvious that their revenue grows annually. Here’s the list of its most famous and successful members:

• Amazon
  This business had a quite humble beginning as an online bookstore back in 1995. Now you can sell or buy anything worldwide there, from designer bags to cat food.Recently, it has made it to the trillion-dollar companies club with a net worth of $2.08 trillion, along with Apple and Microsoft.
• Airbnb
  Based in the USA, this P2P marketplace platform helps travelers easily find affordable accommodation all over the world. They boast more than 300 million guest check-ins over the last 10 years.
• Etsy
  This one focuses on selling handmade or vintage things. It was created back in 2005 and has become the most popular place for craftspeople to find buyers. The company charges listing fees and gets a percentage of each sale.
• AliExpress
  The e-commerce platform connects Chinese retailers with buyers and manufacturers all over the world. Since costs of production are considerably lower in China, many goods come at a lower price. In 2020, AliExpress’s revenue for GMV (Gross Merchandise Value) reached a historic $1 trillion.
• Uber
  This most successful on-demand taxi service is a digital aggregator app platform that connects drivers with passengers who need a ride. The company also provides on-demand food delivery via Uber Eats and on-demand trucking via Uber Freight.

Financial Benefit

Developing a two-sided marketplace demands minimum effort but promises a good profit. You don’t have to deal with setting up production, shipping issues, finding suppliers of goods, or creating a smooth service process. Your main goal is to come up with a software solution that offers exceptional functionality. Then you attract your first visitors, and the business is off the ground.

High Demand

As mentioned before, people keep buying more and more online. And obviously, they want to save money. By building a peer-to-peer marketplace, you erase any intermediaries between vendors and the end buyers. This cut costs on commissions, which makes products or services cheaper. So, buyers spend less money, but vendors get more customers or clients. It’s a win-win situation for everyone involved.

Scalable Business and Monetization Models

A peer-to-peer marketplace platform gives you an easy way for scaling since you’re not tied to just one product or service or a group of them. Plus, many leading players of the P2P market started locally and then developed into global companies.

As for monetization models, there are several of them that are highly attractive for vendors:

• Receiving commissions
• Subscriptions-based model
• Listing fee model
• Featured listings model (for a P2P marketplace in a narrow niche)

Scalable Business and Monetization Models

Since each new user increases the overall value of the P2P platform, the business has a network effect. It gives an opportunity for significant growth and quicker scaling. More customers mean more demand, which attracts more suppliers. More suppliers mean a wider choice for buyers. This, in turn, creates a better customer experience, bringing in more shoppers.

1Conduct Competitor and Market Research

Before you get into the actual making of a P2P e-commerce website, you have to validate your business idea. Ensuring that your customers need your solution will save you from unwanted losses.

Things to consider in your research:

• Demand: Is there a need for your peer-to-peer (P2P) marketplace? What group of customers will benefit from it?
• Market size: How large is that group?
• Market saturation: How many similar platforms already exist?
• Analyze competitors’ platforms: What is the user experience like on their website? What are their pros and cons? What do their reviews say?
• Identify areas for improvement: What can you do better than your competitors?

After gathering all this information, make a SWOT (Strengths, Weakness, Opportunities, and Threats) analysis.

2Highlight Your Minimum Viable Product (MVP) Features

A Minimum Viable Product (MVP) is the earliest version of the platform you start a P2P marketplace website with. When you’ve done a SWOT analysis, you should be able to identify its main features. Most P2P marketplace websites have these features:

3Create Prototypes and Design

When you have a list of features you need, it’s time to create a prototype of the platform. This will be a general website model visualizing all features and layout elements. Thanks to it, you can change and finalize the platform at a minimal cost. In addition to that, you can estimate the timeframe and expenses for the scope of work more precisely.

The low-fidelity prototype is mainly for checking and testing functionality. At this stage, you can add some other features that you might have overlooked before. The simplest form of clickable, interactive prototype is a wireframe.

After that, you can move to a high-fidelity prototype, which is characterized by detailed UI design, real content, and real interactivity. Now, start testing UI elements and interactions to gain meaningful feedback from test participants. If something isn’t the way you planned, you can make the required adjustments.

4Develop an MVP Version

There are several reasons why developing the MVP version is important:

• It’s developed quickly and inexpensively. You can even launch several versions to run A/B tests.
• You don’t waste time meticulously creating a website just to find out it’s not convenient for real users.
• Since you don’t invest much money in MVP development services, you can easily make changes to the platform in the initial stages without wasting resources.
• If you’re looking for funding, having a working model of your idea will help you gain support.

5Keep Improving

As you can guess, launching an MVP version of your P2P online marketplace isn’t the end of the story. The only way to succeed is to constantly strive for improvement. And you can’t do it without deep knowledge about who your users are and how they behave.

Gather user engagement metrics, such as session length, session interval, acquisitions, retention rate, customer satisfaction score (CSAT), customer effort score, and churn rate. Analyzing it will lead to adding valuable functionality to your website — thus helping you grow the user base while keeping the balance between sellers and buyers.

1Ready-made websites

You can take open-source solutions, such as Mayocat, and adapt them to your needs.
Pros:

• It’s a simple solution with a fast development process.
• Simplicity and a ready solution mean you save money.

Cons:

• Typical design.
• It’s more difficult to scale.
• You need to hire an expert for adapting the open-source software to your needs.

The cost to create a peer-to-peer marketplace using off-the-shelf solutions is relatively low. But your website won’t have any custom features.
Here you can find our ready-made marketplace solution.

2Built-from-scratch P2P marketplace platforms

A custom-developed product is a must if you have a unique idea for your future two-sided website.
Pros:

• You can go a non-standard way.
• You can easily extend the platform’s functionality.
• Slow speed and slowdowns won’t be a problem for you.

Cons:

• You need a software development team.
• It’s expensive and can take a long time.

So, how expensive is it actually? The answer to this question is highly dependent on the desired functionality, which involves different tech stacks and UI/UX design requirements.

Let’s say you go for a standard pack of features we’ve talked about before. Then your core development team will consist of:

• Product/Project manager. Their main responsibility is to manage the processes and team members. They also conduct marketing research at the initial stage.
• Front-end developers. Their main responsibility is to develop and maintain the user interface (UI).
• Beck-end developers. They manage the operational logic of the app and data use, including the server and cloud storage.
• UI/UX designer. Their role is to create the best user-centered designs possible for the website and that are aligned with business requirements.
• Quality Assurance Engineer. They test, review, and access the platform.

Typically, you won’t need more than one of each expert to build a marketplace website unless your deadline is tight. Here are the average web development hourly rates by region:

To estimate the full cost of creating a P2P platform, let’s see how much time you need to build each feature:

So, it’ll take somewhere around two months to build the main features. Add to this time for creating a design, prototypes, and quality control. You’ll end up with a timeframe between three to four months, depending on the number of features and the expertise of developers.

In the end, the total sum starts from $28,000. There are additional costs that include:

• Domain name
• Hosting
• Maintenance

Focus on Your Expertise

You should know all the ins and outs of the niche you’ve chosen. Whatever it might be, dive in deeper to use your knowledge at every stage of P2P marketplace development.

Do Pre-launch Homework and Use Marketing

Before you launch, work on starting a P2P marketplace website effectively by attracting sellers. Try to form a base of vendors who can suggest goods or services without expecting to get any sales at once. You can do it using these options:

• Get in touch with sellers who provide goods or services for competitive marketplaces.
• Find providers for your unique niche using business directories and Google search.
• Check related Facebook groups and forums.

You will also want to build loyalty to your platform in advance by reaching out to your potential buyers in these ways:

• Gather emails by setting a pre-launch landing page.
• Involve influencers of your target audience to promote your marketplace.
• Create your own blog or community.

Consider SEO at the Development Stage

This will help your website rank high on Google and get good conversion rates to attract more potential buyers. SEO optimization includes:

• Composing a semantic core and group keywords according to different pages.
• Checking pages for indexation, web site map, 404 errors, and 301 redirects.

Analyze the Behavior of Your Site Visitors

The simplest way is to use Google Analytics. It can provide information about how people are getting to your site. Google Analytics also creates the Behavior Flow report to let you know what exactly visitors do on your website. This report shows you what actions lead to conversions. It will also spot roadblocks that make visitors leave your website. After gaining these insights, you can work on removing those roadblocks.