Service Marketplace Development: Full Guide

An online service marketplace is a place where a buyer can compare and purchase services from several sellers at once. The marketplace acts as an intermediary between the consumer and those who offer their services.

Service Marketplace Development

You can use ready-made solutions to organize your business - create your own online store or sell through social networks. However, an online service marketplace is a much more convenient platform for selling services, because this format provides more chances to attract an interested buyer. Why? Because the buyer is more likely to visit a resource promoted on the internet than an unfamiliar website.

How Does a Professional Marketplace Work and Earn?

You can choose any of the existing business models for marketplaces.

Commission-based

A commission for orders is the most obvious source of marketplace revenue, though it’s not the only one. Here is an example of the Alluneed.de marketplace created by the logistics operator DHL. The benefits that DHL receives are not only monetary. The operator delivers all the goods, utilizing the capacities of the company's main, logistic, and business lines.

Subscription-based

For the business owner, this is a great way to increase the customer base. Meanwhile, the client gets the opportunity to access the resource at a reasonable cost.

The vulnerability of this business model is customer acquisition and retention. You may need several email marketing funnels or dozens of ad posts on social networks to convey the value of the marketplace to the client.

Subscription-based C2C marketplaces include Love Home Swap home swapping site, or dating sites such as OkCupid and Tinder. Such resources often study their users to offer them personalized services and thus justify their subscription fees.

In the B2B segment, such a model is in demand among websites dealing with HR, such as StackOverflow Careers, which charges for access to the candidate database. Another example of a successful use of this business model is Studiotime, a website for finding and renting studios.

Innovation

Placement Fee

In this format, the marketplace provides an audience for the seller and guarantees coverage of the target audience. The placement fee is beneficial both for the marketplace and for the seller - the owner of the marketplace earns on the cost of placing ads and the seller of the product or service wins on the success of ads.

Innovation

Lead Commission

This model is something between the placement fee format and a simple fee. Customers leave requests, and sellers respond to them and pay a commission to the website. This format is more profitable for sellers because they pay when they come in contact with a potential customer.

For the effective work of this model, the likelihood that the seller will receive a new customer must be high. In the segment of C2C marketplaces, lead commission is rare: it is more often used by websites that work on the B2B or B2C model. If there is a client, the seller will be able to establish a long-term relationship and carry our multiple deals.

Innovation

Premium Fee

The Danish startup Peerby is a great example of a marketplace where customers can exchange unnecessary things for free and even borrow them. All major features are free, but to get premium services you have to pay.

Peerby's success is based on two paid features:

  • the person who provides the item may ask for some money from the new owner as an insurance policy;
  • the buyer can order delivery of the item instead of picking it up from the former owner.

The main problem is that the premium features need to be really valuable. If only one percent of the total number of users pays for them, something needs to be changed in the model.

What Benefits Does the Marketplace Model Bring to All Participants?

This model is convenient for all participants: customers, service providers, and the owner of the platform:

  • the benefits for the consumer are obvious: on one website, they can quickly and conveniently find a specific offer or several. All emerging problems can be solved without contacting each service provider directly.
  • the benefits that service providers get include access to a wide audience. Such a platform helps to build up a new business or stay afloat in the market.

Statistics shows that marketplaces are visited more often than the websites of niche players. It is also important that service providers can take part in consumer research carried out by the owner of the marketplace and, thus, better understand their clients and evaluate their purchasing power.

Besides, there is a wide range of commercial services that can bring additional profit to the marketplace, like providing premium services for merchants: targeted mailing, promotional placement, and much more.

How to Build a Service Marketplace

There is more and more data on the internet every year, and it’s starting to become more difficult to find a product/service through Google. Niche resources that structure a particular segment services are being created all over the world.

A classic example is Booking.com, which unites a wide rental market.

Cost to Develop a Service Marketplace

At first glance, a niche marketplace is expensive to implement. But let's look deeper. There are three main objects of expenditure in service marketplace development:

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website development
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technical support
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traffic generation

Now let’s talk about each of these.

It’s not that much more expensive to create a service marketplace website than an average online store. Their functionality is 80% similar. In addition, you do not have to do a fully custom project from scratch. To start a service marketplace, you can take the functionality of a regular average online store and expand it to a marketplace using a ready-made module. The module is an extension that will add to the store the ability to sell services from different providers and create personal accounts for the providers to manage their offers.

The development cost depends on the number of hours spent working on the project. Here is an approximate list of required and additional services and staff time.

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Our service marketplace developers always advise customers not to go for the most extensive functionality right away. It is likely that 2-3 out of 10 functions will not be used by your target audience. We recommend creating a so-called minimum viable product (MVP) and start receiving traffic. Traffic generation will attract new merchants, which means you will start earning.

Over time you will have studied the user route and, based on this knowledge, improved the usability of the site. You will need to add 20-30% of the functionality to the main site - such custom development will cost you from $1000.

Other costs will depend on the attendance of the marketplace.

Do You Really Need a Custom Solution?

What are the benefits of a custom service marketplace platform? Ready-made marketplace software and services like Sharetribe are convenient, but:

  • the work is based solely on the functionality of Sharetribe;
  • you are 100% dependent on someone else's business, which may unexpectedly close or change the terms of support;
  • if a large number of users are registered in the service, then, for example, for AWS scaling, you will have to ask Sharetribe for a solution;
  • the inexpensive minimum package may not meet your needs, and the extended one is too expensive.

As for an out-of-the-box functionality, you have to make a choice between costs and the prospect of business development. It is suitable for a startup, but if you use the CMS for a project that needs a lot of functionality or a lot of users, the quality and performance will suffer greatly. That is why out-of-the-box solutions are suitable for small projects only.

A custom marketplace means a project that is developed exclusively for the user’s needs. In the process of development and testing, the necessary changes are introduced to it, providing maximum efficiency for all users.

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Jalopy as an Example of a Successful Customer Service Professional Marketplace

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Jalopy is a service marketplace we have created. It connects garages that provide repair and maintenance services with car owners around Ireland. It allows people to post jobs and specify the type of work they need while garages compete by providing estimates for this type of work.

At first, the customer was looking for front end developers to build a responsive single-page application for а garage owners - vehicles owners marketplace. He contacted us for a front end solution. After an extended negotiation, the backend and the endpoints were entrusted to our team as well.

Upon receiving the specifications and the design prepared by the customer’s side, we saw a difference from what we had been discussing. The screens were not made for the web version but for mobile apps, which were not the type of product our developers had been preparing for.

The client’s budget did not allow building native iOS and Android versions, so we had to do research together with the Customer’s technical backend team on the best and most efficient solution.

The solution was to build a Progressive Web App with the Service Worker that allowed the marketplace to be available on both iOS and Android devices, and of course to have push notifications and camera access like in the native apps.

Besides, there was no need to submit the app to the stores, as the user could access the PWA from a web browser. The content loaded very fast, and as the PWA was optimized for search engines, it appeared among the first search results and could be easily found by the users.

Conclusion

Soon, traffic and unique data will have the highest added value. You can confidently occupy a free niche by choosing a very specific target audience.

Feel free to contact us for any questions regarding the development of a service professional marketplace. We are always ready to offer you the best solutions that will ensure an effective start to your business.

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