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How To Create An Online Marketplace Like eBay From Scratch

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How To Create An Online Marketplace Like eBay From Scratch
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How To Create An Online Marketplace Like eBay From Scratch

Are you considering building an online marketplace like eBay and don’t know where to start? Have you ever wondered how much time and money do you have to spend to create a successful auction website? Then, you came to the right place.

The success of ecommerce marketplaces like eBay and Etsy shows a tendency towards growth. According to Statista, eBay’s annual net revenue reached 10.8 billion U.S. dollars in 2019. It’s quite obvious that such high returns have resulted in many businesses wanting to learn from the eBay success strategy on how to create an auction website. 

Elogic has been in the ecommerce business for 10+ years and we’ve seen hundreds of websites similar to eBay appear and disappear every year. It’s quite tricky to get into this business since it seems like all good ideas have been taken. 

We are ready to provide you with our insights into this subject and share action-oriented recommendations and useful tips on how to create an online marketplace like eBay on Magento in a fast way and with reduced costs. Ready to learn more? Let’s go.

What is a multi-vendor ecommerce marketplace?

Before we talk in detail on how to create an online marketplace like eBay, it’s crucial to define what a marketplace is. An online marketplace, also known as a multi-vendor marketplace, is a platform where a customer can purchase various digital or physical products, services from multiple sellers, suppliers, or shops. In comparison, traditional ecommerce websites sell the products of one brand or one niche. 

Marketplace websites offer streamlined processes, user-friendly shopping experience, and a greater product offering. The owner of the marketplace is in charge of customer retention, order management, website optimization, managing financial transactions, and third-party vendor deals.

Basically, shopping in an online marketplace is like shopping from a few different ecommerce stores at the same time. Customers are able to pay all the vendors in a single transaction rather than in multiple transactions.

eBay and its story of success

According to Statista, the most popular online marketplace in the US is eBay. In January 2020, merchants ranked the marketplaces on a scale from 1 to 10 based on four main areas such as customer service, profitability, communication, and ease of use. 

eBay popularity
eBay popularity

Before we talk about how to create an auction website like eBay, let’s have a look at eBay’s path at the initial stage and how it evolved. A software engineer Pierre Omidyar launched an online service called Auction Web as a hobby in 1995, at which he offered a few small second-hand items for sale. 

Auction Web home page
Auction Web home page. Image credit: Artdriver

In the second quarter of 1997, Omidyar changed the company’s name to eBay and started investing in advertising. For 23 years, eBay has been expanding globally and now includes billions of products on its auction website. 

At present, eBay positions itself as an online multi-vendor auction marketplace that enables ecommerce businesses and shoppers to sell and purchase new and second-hand items. Just like any other marketplace, eBay allows people to sell and purchase items online and these items can be sold either at a flat rate or through bidding. As for the bidding, there is a starting price and then shoppers can start haggling. The shopper who offers the maximum price gets the product or service.

eBay home page
eBay home page

Let’s also check the monetization strategies used by eBay to earn a profit:

  • seller subscriptions
  • fees for sellers 
  • adding listings ($0.35 extra money for a product, in case the seller posts more than 50 items per month)
  • PayPal fees (2.9% on the total deal value and $0.30 fee per transaction)
  • affiliate programs
  • advertising
  • freemium packages (with extra paid services)

How to create an online marketplace like eBay

When eBay ventured in, it had no alternative, but to start everything from the ground up. Nevertheless, modern technologies made the whole process of developing a multi-vendor marketplace easy with less upfront investment. Now let’s research a few steps you need to get started. Here they are:

Find your specific niche

When starting a new auction website, many ecommerce businesses should take into account high competition as their biggest challenge. Ecommerce giants such as eBay, Etsy, and others have already covered multiple market segments and won the trust of millions of customers globally, so to win the competition would be very difficult.

Thus, it’s better to choose a unique niche to narrow your focus. By finding a specific niche that has not been occupied by the competitors yet, you will definitely increase the odds of success in attracting new customers. You should go through your marketing strategy and come up with USP (unique value proposition) for the customers and sellers. Your offer should look more lucrative against the growing competition and be good enough to generate the first movers right after your auction marketplace goes live. 

Choose a monetization strategy

The next step is to decide on a monetization model.  Your online marketplace business model will influence how you will generate outcomes and how your vendors will make money, as well. The various types of online monetization models you can select from include:

Commission-based model

One of the most popular ways to monetize a marketplace is commission-based models. With monetization strategy, you will get a commission per every transaction that occurs on your online marketplace. Typically, vendors prefer to work on those terms, as they are not charged any fee until they derive their first income through the marketplace.

A commission fee monetization strategy strengthens the credibility of sellers and customers as they know that maintaining successful transactions is beneficial for you as you have an interest in it. 

Membership fee model

The membership fee model is an effective strategy in which each seller or customer pays a membership fee to trade or purchase on the auction website. With this monetization strategy, you get a constant amount of income per month, but it can also discourage vendors and shoppers from using your marketplace. This model fits ecommerce platforms that sell expensive products.

Listing fee model

Listing monetization strategy charges vendors a fee for listing their items or services on the auction website. The listing fee can be based on a fixed rate amount or a percentage of the value of the digital or physical product.

Merchants with low sales figures that sell just a few pieces of items opt for this model, as the long run subscription is not beneficial for them. This strategy fits those sellers that would like to pay for access to a large audience, and the marketplace can ensure adequate coverage.

The main disadvantage of using this strategy is that to obtain a stable income, you will need to drive a significant number of sellers who will consistently place new product listings. 

Freemium Model

When using the freemium model, sellers and shoppers can use the multi-vendor ecommerce websites for free, and the website will provide other services that the sellers and merchants can purchase to boost the value of the marketplace. With the freemium monetization strategy, the consumer has access to the basic features for nothing and pays for the advanced features where necessary. 

The key benefit of the freemium model is that it’s much easier to find the audience to a marketplace that offers its services for free. However, to encourage customers to pay for additional services, you need to make them truly useful. If a small number of customers use a premium offer and the rest use the free option, the model will not operate successfully. 

Ads business model: 

With the ads business model, marketplaces charge a fee for demonstrating ads on their homepage. This strategy is well suited for marketplaces with an already established base of sellers and customers. It is used both as an independent monetization strategy and in combination with other strategies (the second option is more frequent). 

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Solve the chicken and egg problem

How to attract shoppers when you don’t have a large number of vendors? How to attract vendors when you don’t have the shoppers? A common dilemma of whether to chase the sellers or customers is called the chicken and egg problem. Underestimating this problem could be devastating when you are building an online marketplace.

Let’s briefly address the most efficient solutions to the chicken and egg problem.

  • Start small
  • Bring high-value users on board first
  • Concentrate on a particular niche
  • Organize an exciting live event
  • Attract the hardest side first
  • Set time or demand constraints

Select a reliable domain 

The choice of a reliable domain name is an important step for the best multi-vendor marketplace. Choose the name that accurately conveys what your brand stands for. Make sure that your domain name is:

  • unique and catchy
  • easy to remember
  • short and simple to type and pronounce
  • include targeted keywords.

It’s also better to avoid using a domain name that is similar or identical to existing popular marketplaces.

Define the key features

The relevant features will help you to provide a superior user experience to drive traffic to your auction website. Here are the features that are necessary to build an auction website like eBay: 

  • Authorization process
  • Product catalog and product description
  • Inventory management
  • Admin dashboard
  • Advanced product search
  • Shopping cart
  • Chat support
  • Multiple payment gateways
  • Reviews and ratings
  • Powerful analytics
  • Product images and video
  • Shipping options
  • Easy checkout 
  • Order reports
  • Discounts and special offers

Choose an ecommerce platform

Since you’re planning to build an online selling site like eBay, you need to decide on the best-suited ecommerce solution. Take into consideration that your future auction website should deal with huge traffic volumes and be able to scale right out-of-the-box to support fast-growing businesses. To create your own online marketplace, it’s vital to analyze each platform on the market and understand its advantages and disadvantages. 

When exploring the process of how to build a multi-vendor ecommerce website, you can find great ecommerce solutions that allow ecommerce businesses to launch websites like eBay at reasonable prices.

Need help choosing an ecommerce platform? These guides will help you select the right one for your business. 

To build the best online marketplace website, we recommend opting for Magento multi-vendor platform since it enables building scalable and robust marketplaces. It is a flexible solution that provides an extensive range of powerful tools for developing and running your online store.

How to build a multi-vendor ecommerce website with Magento

Magento offers online vendors a flexible and highly customizable shopping cart system with advanced marketing, search engine optimization, and catalog-management tools. Magento has everything a future marketplace owner needs to create an online marketplace tailored to specific business needs.

Related story: How to build a Magento Website: Step-by-Step Guide

The best course of action to create a multi-vendor marketplace with Magento 2 would be to leverage one of the multiple Magento 2 marketplace extensions. Magento multi-vendor extensions can enable ecommerce businesses to build a marketplace environment that is easy to use by both shoppers and sellers. With the Magento marketplace, sellers can easily upload products, add categories, product photos, and descriptions, manage inventories, track sales, and more. While customers can smoothly log in and make financial transactions in a secure way.

Here’re the most well-known extensions used to build an online marketplace with Magento.

  • Apptha Multi-Vendor Extension
  • Vnecoms Marketplace Magento 2 Extension
  • Rocket Bazaar Magento 2 marketplace solution
  • WebKul Marketplace Multi-Vendor Module
  • CedCommerce Magento 2 Marketplace

Each Magento multi-vendor extension has its own pros and cons. If it’s difficult to find a perfect fit tailored to your specific need, you can also hire experienced Magento developers to set up the marketplace environment or build a custom extension for you.

How much does it cost to build a marketplace website

How much does it cost to build a website like eBay? When it comes to the cost to build a Magento marketplace, you have to carry out a thorough study. The price of building selling websites similar to eBay consists of many factors, including the set of features, developer hourly rate, customization, and more. 

Magento developers from North America and Western Europe charge on average $150-200 per hour. South American and Eastern European developers charge about $50-100 per hour.

Check out our article “The ecommerce website development cost breakdown” to find out the costs involved in launching and maintaining websites of various sizes.

If your ecommerce business requires custom development of a future marketplace, be ready to spend from $10,000 to $100,000. higher. Based on our experience, the development team delivers the project in a minimum of 3-4 months.

Ecommerce developers may charge from $60 to $175 per hour. Our hourly rate is only $35,00

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Are you the next eBay?

Do you have a big idea that could be the next eBay success? Websites like eBay encourage many businesses to create a similar platform. It is understandable as building a successful marketplace yields results with lots of shoppers, a high conversion rate, and great revenue. 

Now that you’ve read our guide, you are now aware of how to start a site like eBay. With numerous extensions on the market, the whole process becomes hassle-free. If you’re up to start your own online marketplace, drop us a line and we will transform your idea into a successful product. 

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