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How to start an Online Marketplace to Sell Services | MarketBox

How To Start An Online Service Marketplace: 6 Steps To Take

The gig economy has the second-highest number of work opportunities and more than 68 million people in the US alone work freelance in some capacity. For customers, the gig economy provides convenient access to high-quality service options. In contrast, for those providing the services, it gives them more control over their time, enabling them to earn extra income or fit work around other commitments. 

With that in mind, you might be wondering how to start an online services marketplace. Luckily, the increasing number of software options means starting and creating an online marketplace has never been easier. 

In this article, we will show you how to start a service marketplace in six steps and the factors you should consider to make it a success. 

But before we dive into how to start an online marketplace, let’s first review what a service marketplace is! 

What is a service marketplace? 

A service marketplace is an eCommerce platform that connects customers with service providers and facilitates the booking, scheduling, and payments associated with organizing a service appointment. 

The types of services offered on an online marketplace vary, ranging from education-based services like tutoring or swimming lessons to healthcare, beauty and wellness services, home services like plumbing or lawn care, auto-detailing, and more. Providing there is a market for them, there are no restrictions on the types of services you can offer. 

*In this blog, we’ll use the terms ‘marketplace,’ ‘online service marketplace,’ and ‘service marketplace interchangeably. 

How to start an online marketplace in 6 steps 

how to start an online marketplace | MarketBox

Step 1. Choose an industry for your online marketplace

The first step in starting a services marketplace is deciding which industry you’ll operate in, as this will determine the types of services you offer (and sometimes where you offer them). This is also referred to as “finding a niche.” 

Some niches will be more saturated than others; in other words, there are already a lot of businesses operating in the industry, making it harder to gain traction and compete successfully. However, smaller niches might limit your ability to grow the business over time as demand is lower, so it’s important to strike a balance. 

Some of the most successful service marketplaces focus on one thing and do it well. For example, AquaMobile connects students looking for private backyard swimming lessons with local instructors in North America and Australia. They operate within the aquatics industry, focusing on the private at-home swim lesson niche. 

Other successful service marketplaces stay within one industry but encompass multiple niches, e.g., Thumbtack, which operates in the home services industry. Thumbtack’s online marketplace connects homeowners with local service providers offering home improvement, financial and legal, computer repair, and event planning services. Rather than just focusing on one aspect of home services, say, plumbing, they’ve captured a larger market share without losing focus of the business’s overall objective. 

To summarize, choosing a niche will help you stay focused on a particular market (and its specific pain points), enabling you to offer the highest quality service possible.

Step 2. Identify your services marketplace’s unique value proposition

Once you have determined which industry your service marketplace will operate in, you must identify what will (or already does) make your marketplace different from the rest. What will your business offer that no one else does? 

Ask yourself:

  • What value will you add to the space you are trying to service?
  • What can you offer both customers and potential service providers that other service marketplaces cannot?

Researching your competition is the first step to identifying your unique selling point (USP). In order to know how you can stand out, you need first to know what everyone else is doing. It’s also important to research your target market; what are customers looking for? What issues are they experiencing that your online marketplace could solve? 

You don’t necessarily have to reinvent the wheel when it comes to identifying a unique value proposition. Your USP could be something as simple as a better booking experience or charging providers a lower service fee to advertise on your marketplace.

Don’t forget that your USP needs to attract both customers and providers to your services marketplace if you’re going to be successful. A one-sided USP will inevitably leave you lacking in either supply or demand, and neither is good for business!  

Step 3. Choose your service marketplace software

Now that you’ve identified where your business will operate and the demand for your proposed services, it’s time to set up your online marketplace. 

When it comes to the question “How to start an online marketplace,” there are two answers.

  1. Build your own service marketplace platform 
  2. Buy a marketplace software with customizable infrastructure like MarketBox

We’ve gone into more detail on the pros and cons of building vs. buying in our article “Build versus Buy: 3 options for starting an online service marketplace”, but here’s the TLDR version.

Pros and cons of buying marketplace software

The SaaS (software as a service) industry is finally catching up to the needs of service businesses, and these days there are many easy-to-use platforms and software solutions for service marketplace businesses.

Some are more affordable than others, but they come packed with features that make the process seamless for service providers to conduct their business with customers.

MarketBox, for example, is specifically designed to simplify the process of organizing in-home and mobile appointments. The marketplace software’s features enable you to control how much control over travel zones, schedule availability, and job requests you give providers. It makes it easy to run an online marketplace that can be easily scaled as demand increases. 

The benefits of buying software include

  • Fast set-up and launch times 
  • Maintenance, software updates, and bug fixing is taken care of 
  • Pricing is predictable; you pay a monthly or yearly fee, and there’s no additional cost involved in the upkeep
  • Customizable interfaces and functionality 

Cons of buying software include 

  • Not all solutions are user-friendly for both customers and providers 
  • Little control over what new features are added or the timeline for new releases

Pros and cons of building a marketplace platform 

Unlike buying marketplace software, building a service marketplace from scratch can be expensive and time-consuming. You need to hire a team of developers to code and create the marketplace and maintain/improve the finished product. (These could be full-time hires, freelance developers, or web development agencies.) You must also determine which features to build for your platform and how they should be designed for an optimized user experience. All of this takes time and research. 

If you build your own platform, you’re also responsible for the innovation, and in a fast-paced industry, software can quickly become obsolete if you’re not on top of R&D. 

The benefits of building your own marketplace platform include

  • The platform can be made entirely to your specifications
  • You control the timeline for new features (note: you lose some control if you engage an agency as you’re also reliant on their availability) 

Cons of building your own marketplace platform include 

  • Slow start-up time 
  • Unpredictable costs, both initial and ongoing
  • You’ll likely need to hire additional people to create and maintain the platform’s infrastructure
  • You’re responsible for continual market research to decide what features to release next 

Deciding which route to take is important because it’ll affect how quickly you can get your service marketplace up and running and how much initial capital you’ll need to set up.

Step 4: Find service providers for your online marketplace

Once you’ve chosen a niche and identified how you’d stand out, it’s time to build supply for your service marketplace business. And by supply, we’re talking about service providers. 

Tips on how to find service providers:

  • Advertise on jobs boards, Linkedin, and freelance sites 
  • Check for local Facebook groups or dedicated trade organizations where you could advertise your new service marketplace 
  • Put together a short “sales pitch” — highlight why service providers should join your online marketplace 
  • Incentivize referrals from existing service providers 

If you can find solopreneurs (especially ones who don’t already sell online), it may be easier to convince them to join your service marketplace as you will take over the scheduling admin, which is often the most time-consuming part. As a bonus, if you can attract already established businesses, they will bring their existing customer base, so your marketplace will start making sales from day one. 

Related: How to recruit service providers for your online service marketplace 

Step 5: Attract customers to your online marketplace 

The next step to starting an online marketplace is attracting customers. Here are five ways to build demand around your service marketplace:

‍1. Content Marketing

Creating free content like blog posts and e-books (to name a few) is an effective inbound marketing strategy that will bring people onto your website. The content should educate people looking for information about your particular service(s) so that your site appears in relevant search results. 

The key is to add value through your content. With time, you might even build up enough thought leadership around your industry that you become the go-to source for information and services! 

2. Search engine optimization 

One of the most effective free ways to attract customers to your online marketplace is through search engine optimization (or SEO). SEO deserves a whole blog post, but essentially it is the process of optimizing your website to show up in relevant search results. Blog posts, as we discussed above, are a great first step. In addition, you need to focus on adding relevant keywords to your website’s pages, meta descriptions, and meta titles and look at load speed, backlinks, etc. 

You can keep your SEO strategy in-house, using free SEO tools to help guide you, or you can outsource it to an SEO or digital marketing agency. 

Related: How to increase organic website traffic for in-home service businesses

3. ‍Email Marketing

By building an email list of potential customers, you can keep sending them valuable content to entice them to buy. Valuable content includes 

  • Offers and special promotions 
  • Information on new service offerings or providers in their area
  • Published articles on your blog that might be of interest

For more information on creating an effective email marketing strategy, check out our article ”Advantages of Using Email Marketing for Service Businesses.”

4. Community-Building

Many marketplaces also identify as communities. This form of marketing encourages users on the platform to interact with other users, even if they don’t necessarily intend to buy. Once there, you can send targeted emails and provide valuable free content so when they are ready to buy, you’re the first business they think of. 

Positioning a service marketplace as a community and not just another business makes potential customers feel like they are a part of something bigger and can help attract new customers to the platform through referrals and organic shares. 

5. ‍Paid Advertising

If you have the budget, another effective way of attracting customers to your online marketplace is through paid advertising. The benefit of paid advertising is that it helps build traffic and boost conversions quickly, as long as you’re targeting a specific audience and have clear goals.

In the early stages, this form of marketing can also be used to validate your services marketplace idea by running ads to see how many people click through before going all in on an idea.

Step 6: Be patient when starting an online marketplace‍

‍You’ve probably heard the saying, “It takes 20 years to make an overnight success.” In an age of Google ads and internet searches, it shouldn’t take that long to get your marketplace to a profitable place, but one of the most challenging things to do when starting a new business is to be patient. 

Marketplaces are unlike other online businesses in the sense that they take more time to grow. According to Boris Wertz and Angela Tran Kingyens Guide to Marketplaces, on average, it can take marketplaces about three years to gain traction. But don’t be disheartened. 

When you’re starting and growing an online marketplace, it’s important to keep monitoring your business’s health. Look for signs of growth like repeat customers or new sales, and continue to gather customer feedback and act on it to ensure you continue to service their pain points as your business grows and the market evolves. 

Ready to launch your service marketplace?

Using the strategies on how to start an online service marketplace outlined above will help you create a strong foundation for your service business.

Choosing the right vertical will help to focus your business idea and get off the ground. Eventually, you might wish to expand into other categories or locations, but don’t try to go too big too soon. Deciding how your service marketplace will compete with other marketplaces is also crucial. Determining your unique value proposition is the key to knowing how to set yourself apart and attract mobile workers.

If you’re looking for how to start an online marketplace, MarketBox can help. Book a personalized demo to discover how the MarketBox platform can help you start and grow your service marketplace business.

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