Do you want to start a successful marketplace like eBay, Amazon, or Etsy? Online marketplaces are on the rise now, so it’s a sound idea. For example, according to Statista, eBay has generated $11 bln of net revenue in 2020.
If you are new to marketplace development, you may want to know: how much does it cost to build a marketplace website in 2021?
We have prepared a thorough guide on how to create an online marketplace, including such aspects as required features, technology stack and cost. Also, we included important information on marketplace websites classification and how they work.
Types of online marketplaces
What is a marketplace website? It is an e-commerce platform that works as an intermediary between buyers and sellers. It facilitates virtual shopping for consumers who can buy goods or services from different suppliers. Marketplaces can vary depending on the business model and on the participants.
Marketplace classification: by business model
Before building an online marketplace, you should define the type of your future platform. It is a business model that will help you implement the right monetization strategies. They are as follows:
What is the difference between horizontal e-marketplaces and vertical e-marketplaces? Let’s find out by comparing different marketplace types.
How does this marketplace work? This type of marketplace websites is focused on a specific category of products or services.
You can think of the Airbnb vertical marketplace that specializes in short-term rental options.
Horizontal marketplaces provide a wide range of products and services from different categories. These e-commerce platforms can be described as a one-stop-shop.
A good example of horizontal marketplaces is Amazon that provides the broadest set of product categories.
Global marketplaces are not limited to a particular geographic location. They cover the exchange of products or services beyond geographic borders. Thus, global marketplaces target relevant customers all over the world.
Etsy is a global marketplace dedicated to a wide range of handmade and vintage products and craft supplies.
To draw together the marketplace website types, we have prepared a summary table for your convenience.
|Types of marketplace websites (by business model)|
|Vertical||This type of platform focuses on a particular industry or niche.||StockX, TrueFacet, Chegg, Zillow|
|Horizontal||This type of platform covers various goods and services with a common unifying characteristic.||Etsy, Couchsurfing, DogVacay, Poshmark|
|Global||This type of platform offers goods or services from a variety of categories.||Amazon, eBay, AliExpress, Upwork|
Marketplace classification: by participants
Besides, marketplace websites can be divided by participants involved. They include the B2B, B2C, and P2P marketplaces. This classification is also important to calculate the cost to build an online marketplace.
B2B stands for a business-to-business model of marketplace websites. Here, the goods and services are sold from one business system to another. These e-commerce platforms connect multiple sellers with buyers. You can think of Alibaba, one of the world’s top platforms for global wholesale trade.
B2C refers to the business-to-customer e-commerce model. It implies the process of selling products or services between businesses and customers directly. In contrast with the previous type, B2C platforms rely more on the emotional response of their brand than on the true value of a product. A good example of such a platform will be Bonanza, one of the world’s e-commerce leaders.
P2P, or peer-to-peer, marketplace websites are mediators between people who own a product and those who want to purchase it. The P2P e-commerce website provides its users a platform for sharing products and services. You must know Uber, which is a great example of such platforms.
|Types of marketplace websites (by participants)|
|B2B||This type of platform connects multiple sellers with buyers.||Amazon (also B2C), Alibaba (also B2C), Rakuten, Mercateo, Global Source|
|B2C||This type of platform facilitates selling products between businesses and customers.||Amazon (also B2B), Alibaba (also B2B), eBay, Bonanza, App Store, Google Play|
|P2P||This type of platform acts as a mediator in sharing products and services.||Etsy, Amazon, Uber, Postmates, eBay, Upwork|
Now, we have cleared what is a marketplace website and revealed its main types. So let’s turn to the question of how to create an online marketplace website as it has a large impact on marketplace development cost.
How to create a marketplace website?
Ready-made solution vs custom marketplace development
When it comes to building an online marketplace, you can choose from two possible options:
- Off-the-shelf solution;
- Custom software.
Let’s discuss each solution, its benefits, and drawbacks to pick the right one.
If you want to build a marketplace platform easily and quickly, you can choose an off-the-shelf solution. Most entrepreneurs opt for this software as it takes less time to launch compared to a custom software development solution. Mostly, it happens due to the fact that you have an opportunity to avoid wireframing, development, and testing.
On the flip side, an off-the-shelf solution has cons, for instance:
- You may not be able to make some customizations due to the software specificity;
- Competitors might use the same template.
If you want to create an online marketplace website, you may consider turning to a ready open-source option. It provides you with more control over your platform and more room for customization. Magento is one of the most popular open-source e-commerce platforms.
So, how much does it cost to build a marketplace when you opt for ready-made solutions? Here is the example of Sharetribe pricing, one of the leaders in marketplace software providers.
Build your marketplace from scratch
Do you need to start a marketplace with personalized business logic? Then you should choose custom software development. This way, you absolutely define the functionality that will be included on the platform.
The tailored solution frequently requires more resources, and it of course means a higher cost to build a marketplace. However, it is a perfect option if you need to add some advanced features and integrations to improve your marketplace website.
Different ways of starting the development process affect marketplace website development cost. The main options are as follows:
- In-house development team;
- Freelance services;
- Software development agency.
The core benefit of the last option is that such companies have solid experience in marketplace development. This way, you can be sure to get the solution that you need.
How much does it cost to build a marketplace website with a custom software approach? It fully depends on the location and the developers’ rates. For example, according to PayScale, the average hourly rate of a web developer in the USA can be more than $100 per hour.
In Eastern European countries, the rates are lower. For example, if you decide to turn to Ukrainian software development companies, they will charge you around $25-49 per hour.
See the table of average web developer hourly rates for the US, Western, and Eastern Europe regions according to Accelerance.
|Average web developer hourly rates|
|United States||Western Europe||Eastern Europe|
|$132-$140 per hour||$61-$80 per hour||$35-$56 per hour|
Technology stack for marketplace development
Before building a marketplace, consider the programming tools you will use to create a platform. Why is it important for entrepreneurs? The tech stack you implement will influence the application’s performance and maintainability. Shortly, if chosen the wrong tools, you may get low page loading speed and face scalability and update problems.
The cost to build a marketplace website also depends on your tech stack. So we suggest choosing a framework that will allow you to build your app quickly and launch as soon as possible.
Let’s take a look at the main technologies you will need to implement the marketplace platform features.
We recommend using the most up-to-date and modern tools. They allow making your product scalable, maintainable, and sustainable. To develop the server-side part, you can take into consideration Ruby, Ruby on Rails, ElasticSearch, Redis, i18n gem, MySQL, Sidekiq.
Our team has a vast experience in building marketplaces. You can see the examples of Ruby on Rails marketplaces in our case studies.
Tools and integrations
Integrations and tools simplify development, communication, DevOps, and other processes. At Codica, we use the following instruments: AWS S3, GitLab, GitHub, Slack, Digital Ocean.
Core features for an online marketplace
You cannot answer the question “How much does it cost to build a marketplace?” unless you note down the list of functionality you want to include in your solution.
We always recommend our clients start with a marketplace MVP, or minimum viable product. In such a way, you can test your idea with a minimum budget spent. Further on, as your platform grows, you can add more functionality.
Main marketplace MVP features
Based on our vast experience, we suggest including the following functionality in a marketplace MVP.
Registration / Authorization are important features that allow newcomers to start using your platform. Registered users can sign in to their accounts and list products or search for goods.
Profiles contain all the necessary information, about both suppliers and buyers.
The vendor panel includes specific data, such as shipping and payment methods used by a seller, their product listings, etc.
Buyers’ accounts are mostly about personal information, the ability to view previous orders, and a wishlist.
Item listing allows sellers to offer their goods or services and make them visible to potential customers.
Advanced search is a vital feature for any online marketplace as it makes navigation easier and less time-consuming. This way, buyers can search for services or goods listed by suppliers.
The product page should provide customers with comprehensive information about each item sold. High-quality photos and videos, detailed descriptions make your platform look reliable.
The shopping cart contains the products chosen. It is the space where a buyer can change the number of goods they want to buy, delete them, view payment methods, shipping prices, etc.
Payment methods allow buyers to purchase via different types of cards and multiple gateways. With a wide array of payment options, you will give your customers the possibility to choose the one that suits them best.
The administrator panel is a must-have functionality for the business holder. The owner of a platform customizes settings for various groups of suppliers. These settings include shipping and payment methods, fees. The administrator can also manage sellers’ listings, filters, and categories.
Shipping is a must-have function that helps consumers choose the most convenient delivery option.
Additional marketplace functionality
Additional features increase the cost to build a marketplace, and we suggest adding them as your marketplace scales. You can start with the following.
Ratings and reviews help buyers come to well-thought purchasing decisions. It makes your website more trustworthy, because you provide users with both products’ and vendors’ ratings.
Wishlist is a strong marketing strategy as this feature allows customers to save products they are likely to buy. When buyers share their wishlists with their friends or family, it sends free traffic to your online marketplace. So, let vendors create extra possibilities to drive engagement to the platform.
Notifications allow both buyers and sellers to reach a certain web page as fast as possible. It works pretty simply: you get a notification, click on it, and immediately shift to a certain page. This way, it greatly boosts user experience and accelerates many processes.
Messaging enables sellers and buyers to discuss the details of products, pricing, shipping, etc.
Community support is a valuable service that processes users’ problems and helps to solve them.
Of course, this is not the full list of all the possible functionality you can include in your platform. We have listed examples of the most common features that users love, but they are not necessary on the MVP stage.
How much does it cost to build a marketplace app?
If you are looking for specific numbers, below is the detailed table. It shows the approximate costs of building must-have features for a basic online marketplace website.
|Average cost of building a marketplace website|
|Features||Time, hours||Cost, $45/hour|
|UX/UI Development||42 hours||$1,890|
|Authorization and Security||72 hours||$3,240|
|User Profiles||42 hours||$1,890|
|Home page||84 hours||$3,780|
|Search and filters||96 hours||$4,320|
|Product page||42 hours||$1,890|
|Reviews & ratings||48 hours||$2,160|
|Shopping cart||64 hours||$2,880|
|Buyer panel||120 hours||$5,400|
|Vendor panel||164 hours||$7,380|
|Admin panel||124 hours||$5,580|
Thus, you can see that it will take approximately 972 hours to build an online marketplace. If we take the average rate of $45, the cost to build a marketplace website will start from $43,740.
In fact, the amount of development hours depends on the unique requirements of each project intended to build a marketplace site. Also, the final price of building an online marketplace depends on the hourly rates of the software company you choose.
Codica expertise in marketplace website development
At Codica, we have been delivering complex custom marketplace websites since 2015. Our priority is to build fast-loading and engaging platforms. This helps our clients generate traffic, boost conversion rates, and increase sales.
Multi-vendor vehicle marketplace
The platform was built by Codica team for a successful startup that stands for the first vehicle marketplace in Africa. It allows buyers and sellers to connect for the purpose of buying, selling, and exchanging new and pre-owned cars, motorbikes, and trucks.
What are the results?
- 430% traffic growth for the past two years thanks to the SEO-optimized website;
- 90+ independent online marketplaces operating separately as part of the platform;
- Decreased page load time within 2-3 seconds.
We hope our detailed guide helped you understand how much does it cost to build a marketplace website.