Launching an online marketplace is the most profitable and challenging business idea with enormous scope and a bright future. 48% of online buyers prefer to shop from marketplaces instead of online shops as they save time by having everything in one place. And it has been a while since the online marketplaces for artisans and craftsmen have been gaining huge traction.
Etsy is one of the best examples of an online marketplace intended to sell handmade or vintage goods. It is hard to believe how in this modern world full of competition and information, a marketplace like Etsy has managed to survive, and if that is not enough, be profitable and bring success to its owners.
Founded in New York City in the year 2005, this unique online marketplace has gained immense popularity for bringing real artisans in front of the world. With 96.3 million active buyers and 7.5 million active sellers, Etsy reported an annual net income of $493 million in 2021.
From vintage bridal gowns to handmade wall decor, buyers can find the widest range of unique items made from recycled and upcycled materials on Etsy. We acknowledge that the competition in the online marketplace industry is intense and starting a business can be overwhelming. Therefore, we are here to help you with the procedure and steps to start a marketplace similar to Etsy.
What Makes Etsy a Popular Online Marketplace
There are a couple of reasons why websites like Etsy are popular, despite the competitors like Amazon and Alibaba offering a wide range of products. The USP of Etsy is its exclusivity. The products available on Etsy either will be handmade or made decades ago.
Another reason for its growing popularity is that it allows users to communicate directly with the sellers making it more convenient and easy for them. Stats report that more than 80% of Etsy’s buyers return to the platform to buy another product.
How Does Etsy Make Money
To know how to start a marketplace similar to Etsy, we should have an idea of its revenue generation model. We have researched and discussed it below:
Listing Fees
Sellers are charged 0.20% for listing one product on the website and making it visible to the target audience.
Commission Fees
In addition to the listing fee, Etsy also charges a commission for every sale from the sellers. The commission fee has been fixed at 3.5% so even if the sale price differs, Etsy cuts a commission of 3.5% from every sale, and the remaining amount is transferred to the seller’s account.
Advertising Fees
Esty also receives profit from advertising and promotion of recommended sellers and products.
Essential Features Required to Build an Etsy-Like Marketplace
A marketplace like Etsy should have a number of features to work and run successfully. Let’s have a look at what features are required to build an Etsy-like marketplace.
Admin
- Dashboard for real-time updates
- Ability to set commissions
- Detailed reports & analytics
- Stock management
- Customer management
- Invoice management
- Category management
- Tax management
- Invoice management
Seller
- Internal chat system
- Page creation with vendor-specific store URLs
- Order management
- Stock management
- View upcoming/past purchases and shopping information
- Transaction management
- Reports & analytics
Buyer
- Profile management
- Product search
- View listings
- Chat system
- Shopping cart
- Payment management system and transaction history
- Reviews
In addition to all the above features, it is also recommended to have the below-mentioned features in an Etsy-like marketplace:
- Secured payment gateway
- Product Comparison
- Customer reviews
- Product images
- Discounts
Starting a Marketplace Like Etsy
Now that we have gathered sufficient knowledge of this successful business and are inspired by its numbers, let’s know how a marketplace like Etsy can be built. Below are the necessary steps needed to get the complete product.
Market Research
Studies reveal that a significant reason for startup failure is the absence of buyers’ interest, so the initial stage is always to research the market. Analyzing the target audience and considering how you can interest and delight customers is an essential step to curating the concept of your project.
This will include rigorous research to determine what type of users you plan on targeting and analyzing how this audience interacts across other sites and platforms. This step will also include conducting competitor analysis and looking for unique features that can be embedded to attract customers. You can scrutinize each business’s specifics to identify areas in which your company can excel.
You must do a thorough analysis of all the leading competitors’ positions, growth scope, profit & revenue graphs, business & monetization models, and forecasts. This will help you determine whether there are opportunities for your idea in the market, and help you understand how to make your business idea fit in. Besides this, choosing the right business model also is of prime importance.
The right business model will give you a long-term vision and identify gaps & weaknesses along with predicting possible problems with your business idea.
Build the Marketplace
There are a number of ways to build a marketplace like Etsy. Factors such as cost, time, customization, maintenance, and more, all come into play when deciding the way to build the platform. Let’s go through several approaches to help you make the best decision.
Building from Scratch
When you build your online marketplace from the ground up, you can build something that suits your needs perfectly. You have the freedom of choosing everything that’s on your list of features so that you fulfill the exact vision you want. You won’t have to make compromises based on what readymade solutions offer.
Once you have your online marketplace up and running, you can later decide which advanced features you want to add when planning to scale. It’s much harder to do this when outsourcing to an agency, as they will try to batch multiple features together before they tackle the features, resulting in unknown timelines.
However, this development approach can take months to build a minimum viable product for the marketplace. Delaying the launch of the marketplace will make you burn through cash and miss out on the earnings from the marketplace. In addition, the development from scratch is usually delayed due to unexpected issues coming up along the way when building the software.
The undertaking of building the complete marketplace from scratch is not fully realized at the outset, however, several bugs and issues arise which can immensely strain the development team in the long run. On the surface, one might think that it is easy to build a marketplace, but it is actually hard to crack what features to include.
Checking a competitor’s website and what features they have does not actually resolve the problem. A number of processes take place under the hood which is not visible from just looking at the website. Gaining in-depth knowledge of all the processes can distract business owners from focusing on the actual business.
Outsourcing to an Agency
If scouring through the internet and numerous guides to build marketplaces is not your thing, another viable option is to outsource the development project to an agency. Similar to building from scratch, outsourcing the project to an agency will also get you all the features integrated into the marketplace you have in your mind.
You will get a completely customized solution with exactly what you need with little to no limitations than a readymade platform. Business owners get the freedom to focus on growing their businesses while the agency focuses on the technical side of the marketplace. Although this approach is a bit faster than building it yourself, however, you still need to rely on their timelines.
Agencies most likely work on multiple projects simultaneously, which can delay the delivery of your marketplace. Therefore, this can be slower than building with a readymade platform. Moreover, since the marketplaces become obsolete very quickly, business owners need to continuously tweak the platform to compete with the other marketplaces.
Also, as you operate, you get multiple feedback from the users, according to which you would want to make updates in the marketplace. However, it is very time-consuming to find agencies that would agree to offer these services. Furthermore, not being a “one and done” cost, the cost of outsourcing can be out of reach for many business owners.
In addition, if the development at any point goes outside the scope of work, which was outlined at the outset, the risk of going way over budget also escalates leaving the business owners frustrated and stressed.
Using a Readymade eCommerce Platform
The readymade eCommerce platforms, which are also known as off-the-shelf solutions, are based on the concept of “one size fits all.” They keep up with the latest industry developments, from incorporating popular features to incorporating popular monetization platforms. Readymade platforms have several benefits which is why they have grown in popularity.
They have a quick ramp-up time and do not take very long to integrate the features into any specific marketplace to give a custom feel. They are faster to purchase, install, and use that can be up and running by the next day. Full support is provided to walk business owners through the process of setting up the marketplace and running it as quickly as possible.
Unlike building from scratch, you can actually have a free trial of the readymade platform. The hands-on demo and the client testimonials on the review websites and online forums make it easy to evaluate the software to see if it can work for you. Another reason for the growing popularity of readymade platforms is that the cost of the marketplace is known from day one.
There is only a one-time upfront cost of the license which is to be paid and no recurring costs to be concerned about. Compared to the marketplace built from scratch, the cost of ownership is significantly lower. This is because the platform is developed for the mass market and the overall cost of development is spread over many users.
Since readymade platforms are not particularly unique but rather ubiquitous and are made for widespread use, they can seamlessly integrate customizations without much hassle and complication. You could buy a ready-made Etsy clone, which may fetch you almost the same results.
A Market Leading Readymade eCommerce Platform – Yo!Kart
Spending a fortune on custom creation would be pointless if your aim is to build a marketplace like Etsy that may have most of the common features like Etsy. One such popular readymade eCommerce platform is Yo!Kart which can be leveraged to start a marketplace like Etsy.
Yo!Kart is a feature-rich, affordable, and scalable eCommerce platform which is trusted by more than 2000 brands across the globe. This self-hosted and lifetime-licensed multivendor platform has become a prominent player in the eCommerce landscape. The platform has an intuitive user interface and powerful features that make the cumbersome process of managing an eCommerce marketplace like Etsy smooth and streamlined.
With integrations like PayPal, MSN Translator, TaxJar, Quickbooks, Google Maps, Aftership, and many more. Yo!Kart is a good choice for business owners looking for an end-to-end solution for selling online. In addition, the platform comes with 12 months of free technical support and free installation.
