What is a P2P marketplace? Key steps for building P2P marketplace software

To start with, let's shed some light on the essentials first. A marketplace is an online platform where goods and services are bought and sold. In this matter, the peer-to-peer marketplace is an outstanding business idea under the e-commerce shell. In a P2P model, two individuals or business parties interact directly with each other to buy, sell, or produce services and goods together.

In the new economic reality, peer-to-peer (P2P) marketplaces come to the fore. According to Precedence Research, the global peer-to-peer lending market size was valued at US$ 83.79 billion in 2021. This scope is expected to hit over $705.81 billion by 2030, with a registered CAGR of 26.7% from 2022 to 2030.

Before starting the peer-to-peer marketplace, it is necessary to study all the nuances. For example, you should analyze which marketplace business model to choose, which stages of development are expected, and how much it will cost. We suggest you discover these and many other exciting P2P things in this article.

What are peer-to-peer marketplaces?

In fact, peer-to-peer marketplaces are among the most popular online platforms where people who want to sell their products or services meet people who search for these goods or services. The basis of the P2P marketplace is the resources and activities of the community. Most importantly, marketplace owners guarantee reliable interactions and payments on these platforms. Therefore, on peer-to-peer marketplaces, two roles are available to you simultaneously - buyer and seller.

Anyone who intends to be at the top of e-commerce should create a unique marketplace business model that would attract buyers and sellers. Obviously, each marketplace owner will probably have to face the chicken and egg dilemma to know all the nuances of attracting a target audience.

Let's now expand in more detail on the main types of peer-to-peer marketplace businesses.

Main categorization of peer-to-peer marketplace platforms

There is a large selection of marketplaces on the global market according to various criteria that meet users' requirements. To face the competition, marketplace owners create different peer-to-peer websites depending on the items, services, or approaches.

Conditionally, we can divide peer-to-peer marketplaces into the following common categories:

Local and global P2P marketplaces

First of all, we can distinguish peer-to-peer marketplace types by the scale of their activities. Therefore, local peer-to-peer platforms are fixed to a particular country or region. For example, the German mail-order company OTTO is a vivid example of such a peer-to-peer marketplace platform. This company specializes in retail e-commerce, real estate, and financial services.

On the other hand, there are global peer-to-peer marketplaces. They operate in most parts of the world with millions of users.

For example, we can take the famous business giants Amazon or Airbnb. Amazon is one of the most valuable brands in the world, specializing in e-commerce, online advertising, and artificial intelligence. In turn, Airbnb is an American company that operates an online marketplace for short-term homestays and experiences.

Service and product P2P marketplaces

They provide a convenient online marketplace platform for service providers and their consumers where they can satisfy each other's needs. For example, online educational classes, selling culinary products, and travel guides are quite popular categories.

Among other famous P2P marketplace examples are Uber, Lyft, Helpware, TaskRabbit, and Fiverr.

Trade A Boat

At Codica, we have plenty of experience building various solutions. In our portfolio, you can find many compelling examples including service P2P platforms. For example, our team developed a boat selling website in Australia. With Trade A Boat, you can participate in the process of buying or selling new or used boats and marine equipment.

Our specialists built a modern, robust, and fast-loading web solution. These characteristics positively influenced the platform’s rating system, increasing the number of user visits. Thanks to our improvements, the client has increased the conversion rate by 480%. Also, we customized the function of choosing different packages to promote advertisements and increase sales for private sellers and dealers.

In addition, our team created a new UI and UX design for the boat sales website to make it user-friendly. The new look of the online marketplace platform for boats helped our client improve customer satisfaction and increase user engagement.

Below you can see the customer review video of this boat buying marketplace.

It is also worth mentioning P2P product marketplaces as an influential subject of online trade. These e-commerce platforms ensure the interaction of sellers with consumers for the subsequent purchase of physical or online products. In peer-to-peer product marketplaces, sellers can list products online for a transaction fee or charge fees.

In general, peer-to-peer product marketplaces include seller or buyer accounts, free listings, search and navigation systems, shopping carts, and browsing systems.

By the way, eBay is a trendy peer-to-peer product platform. Let’s check it in more detail.

eBay

In particular, eBay enables a large target audience to buy/sell various goods, such as clothing or electronics. The platform derives most of its revenue from advertising and sellers who receive a limited number of free listings.

According to the Statista report, eBay was the second most popular e-commerce and shopping website worldwide, accounting for more than 3.18% of desktop visits to sites in this category in May 2022.

Horizontal and vertical P2P marketplaces

It is essential to understand that the horizontal peer-to-peer marketplace provides users with an extensive range of products and services, from clothing to software. The horizontal marketplace covers a large customer base, allowing you to sell almost anything.

What global companies belong to the horizontal peer-to-peer marketplaces? First of all, we are talking about Amazon and AliExpress. These online platforms offer a vast range of products in different niches.

Statista reports that the online retail giant AliExpress bridges the gap between third-party sellers and consumers worldwide. Between November 2022 and April 2023, the website garnered approximately 2.7 billion visitors, constantly achieving around 432 million monthly visits.

On the other hand, vertical peer-to-peer marketplaces are also very popular. They are aimed at a limited target audience and are focused on one specific niche. The vertical P2P business model is an effective method of developing a profitable business and increasing sales. Because it will be easier for you to satisfy the needs of limited user groups than a vast audience. As a result, you can provide your target audience with a more personalized customer experience.

Famous examples of companies following vertical peer-to-peer websites include Uber, Etsy, Airbnb, and Booking.com.

Another example of a marketplace specialized in a single market sector is an activity booking marketplace built by Codica. Our team created a personalized service marketplace to connect parents with providers of kids’ activities.

PlanMyKids is a children's leisure online planner. This marketplace allows parents to find after-school activities based on kids’ interests, family preferences, and budget. The online platform has convenient account management and administrative dashboards. They allow parents to plan the activities for children and coordinate them with family and friends.

Let's watch a customer review video from our client David Watkins, founder of PlanMyKids.

Benefits of peer-to-peer marketplace platforms

Fortunately, peer-to-peer marketplaces have several advantages for successful business entrepreneurs. Let's explore these benefits in more detail for a better understanding.

Inventory is not needed

The creation of such platforms is mostly characterized by speed and the economy of funds. A significant advantage is that the suppliers create the inventory themselves, so market companies do not need to invest money. Thus, if you don't support a considerable amount of the platform's technology, starting a business will be much easier.

P2P network effects

Another benefit of peer-to-peer websites can be built-in network effects that help companies scale more quickly. If early users increase the overall value of the platform, then the business has a network effect.

In fact, peer-to-peer network effects have a significant impact on your business development. The scheme is simple: 1) more customers - more demand - more suppliers; 2) more suppliers - more choice - better customer experience - more other users.

Must-have features of a successful P2P online marketplace

The main features of P2P marketplaces guarantee a solid foundation for your business idea. Therefore, some of them must be applied from the very beginning of the creation of your platform.

1. User profile

First of all, an essential component of P2P marketplaces is user profiles. They help build trust between customers and suppliers.

These profiles must contain personal information, preferred payment methods, and delivery details. The registration process must be pretty simple so that users can quickly fill in their details.

During registration on the platform, users can add, for example, their name, address, gender, and location. These components provide information about the use of personal data and payment processing data.

2. Listings

After creating a profile, users can find available lists of goods or services on a specific platform. In this case, feedback is vital to build user trust.

Therefore, providers can add, delete, edit, and publish certain elements. Whereas customers can rate, review, and comment on specific products or services.

3. Checkout pages and payment system

It is also crucial to integrate modern payment systems in your peer-to-peer marketplace. For example, there are some great payment systems like Stripe, Dwolla, Authorize.net, and standard PayPal payment systems.

Also, it's a good idea to apply UI/UX best practices to create a simple and intuitive checkout page. Therefore, users can pay for their products or services in just a few clicks.

Often users leave your online platform due to complicated checkout forms, lack of transparency, and cumbersome payment processing. Therefore, providing convenient online payments is essential to gaining trust in your brand.

4. Feedback and reviews

Probably every business is happy to receive customer feedback, especially if there are lovely reviews. For customers, reviews play an essential role in brand trust when choosing products or services. For suppliers, the rating system is a crucial indicator to improve the quality or maintain the current level of their business.

So feedback and reviews are other tools to build trust and filter users on your marketplace. This way of interacting with the marketplace's customers can improve its control quality and value.

5. Communication portal

After all, it is also necessary to build a convenient and reliable communication platform between customers, suppliers, or administrators. It's messaging about new inquiries, transactions, or feedback.

Therefore, users should be able to write a message to the seller on the platform and receive a response. Active communication on your peer-to-peer platform will help you attract more users and ensure their interest.

Also, companies can create web push notifications. Therefore, it also effectively promotes user engagement without needing their data.

Challenges of building an online P2P marketplace

In addition to the obvious benefits of creating peer-to-peer marketplaces, there are some risks you may encounter. We have prepared four main challenges and solutions for you so that you know what to expect in advance.

Solving the right problem

Validating your idea should be a priority component when building your peer-to-peer marketplace. It would be best to put your significant time and financial commitments on the back burner. It is also critical to get feedback from the early users for further marketplace development process.

Finding product-market fit

Another problem you may run into right away is the wrong niche. Therefore, it is vital to choose a narrow niche and verticals from the very beginning. A lack of focus can hurt your business, especially in the early stage. Therefore, you should focus on finding product market fit and then expand it to other markets and categories.

Identifying the right business model

The wrong marketplace business model is a direct threat to your profitable business. Therefore, you must choose a sustainable marketplace model that will scale with the company. It is crucial to analyze whether your market prices work for your sellers, customers, and business.

Building trust

As a startup, you won't have initial customer trust in your brand. In general, this issue should be spent a lot of time testing different strategies to build user trust, such as social proof or secure payments.

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What do you need before creating a peer-to-peer marketplace?

Your peer-to-peer marketplace's success largely depends on your platform's functionality and interface. Therefore, below, you can find out exciting attributes of peer-to-peer platforms before creating your own marketplace.

A ready solution vs. custom development

When you create your peer-to-peer platform, your choice depends entirely on the general business idea and functions, budget, and time frame. Therefore, you can buy a ready-made platform or create it from scratch.

• Using a ready solution. You can use open-source P2P marketplaces if you are looking for a simple and fast solution. Therefore, a completed product will help you test your business model as soon as possible. Also, you will save money since the developers will only deal with the customization of your project. For example, Sharetribe, Marketplacer, or Near Me are popular and reliable solutions for creating P2P marketplaces.

  But bear in mind that you will not be able to fill your project with additional features. Moreover, there may be problems with scaling, as the platform will not allow bringing innovative features to the market. Also, you may face a lack of quality control over third-party technical issues.

• Developing a new platform. If you decide to build your peer-to-peer platform from scratch, you have more room for change in every aspect of the market. The development team will then remove any restrictions on functionality, user interface, statistics, or other features for you. Moreover, you can get expert advice for your business idea from developers. Finally, you will get simple maintenance since it is easier for developers to find bugs in their codes.

  Among the disadvantages of developing a peer-to-peer marketplace from scratch, we can highlight the costs of a development team, UX/UI designers, and software testers. Although on the other hand, these specialists lay the technical foundations for your successful project.

  With an online marketplace development services, Codica builds optimized and engaging platforms that increase traffic volume, conversion, and grow sales. So, we will help you create a successful, scalable, and high-quality custom marketplace website that your users will enjoy.

Find the right monetization strategy

Before you start working on your marketplace, you need to understand your business model clearly. There are several preparatory measures for forming a long-term business vision:

1. Define the target niche.
2. Outline the crucial functionality.
3. Create a business model.
4. Consider scalability.

Most marketplace owners probably understand that it is vital to choose a suitable business model that would benefit the future project. But how do you determine which business strategy is best for your peer-to-peer platform? There are several online marketplace business models you can choose for your peer-to-peer marketplace:

Commission. This is the most common model for P2P marketplaces. This model charges all sellers for listing products or for each completed payment transaction (e.g., Etsy, Airbnb, Uber).

Advertising. This business approach allows advertisers to get paid for each product impression or click on an ad on a website or app. LinkedIn and SkillShare use this business strategy.

Subscription. Users must pay for a monthly or annual membership that provides access to premium services or products. This model is used in particular by eBay, CrateJoy, and Rover.

On the other hand, there is a price list for those who want to sell and promote their business. Below you can see the pricing policy for sellers.

Source: eBay

Freemium. In general, sellers have free access to the platform, but there are things for which they still have to pay. For example, payment is made for placing many ads or certain advanced functions (e.g., OLX, PayPal).

You may also like: An Online Marketplace Marketing Strategy That Works in 2023

Lower costs at the beginning phase

The issue of saving money at the initial stages of creating a peer-to-peer marketplace is quite relevant among people in business. Therefore, a good idea first would be to create an MVP that will help entrepreneurs get a prototype of their project. MVP (minimum viable product) is the best approach for new product development, allowing you to test a hypothesis fast with no significant investment.

Also, MVP services help to attract new investors. Less functionality means less development effort and a smaller budget. So, it’s the best way to validate your idea cheaply.

Moreover, on peer-to-peer websites, business founders save money on stocking or delivering. Instead, they can spend it on advertising or other business investments.

Read also: 6 Tips for Choosing the Right Web Development Firm

How to build a great P2P marketplace website?

You have already familiarized yourself with the main features of peer-to-peer marketplaces. Therefore, now it is essential to learn how to create these online platforms. Let's review a thorough guide on the stages of development of a successful peer-to-peer marketplace.

Research and discovery phase

A unique idea is the beginning of a successful business. However, founders can find it challenging to determine a good idea at the start of a business project. Moreover, they begin to wonder whether this idea will engage potential users.

Interaction with users and challenging your assumptions is also an essential component of the beginning stage. However, you won't know whether your marketplace solution meets users' needs until you launch your business on the market. Active users who pay to use your service are the best indicator of the success or failure of your project.

As a marketplace owner, you may first fail to test your business idea. It is one of the most common mistakes. Thus, you can quickly get excited about the idea and start building your peer-to-peer marketplace. On the other hand, you should first make sure that people are really interested in using your platform. Let's imagine if your idea fails, and it will be quickly. Therefore, you will have time to return to a new idea.

At Codica, our experts started the SDLC (software development life cycle) by conducting product discovery sessions. These sessions help validate the client's idea and define what needs to be developed to be valuable for users. Also, these sessions provide the client with a detailed technical proposal for product development. Moreover, based on the product discovery data, we can define the approximate time for your project's building process.

Below you can watch a short video where our sales manager, Taya, listed the main project discovery deliverables and described them in detail.

Product interface: UX and UI design

The design stage of developing your peer-to-peer marketplace is also critical. Excellent UI/UX design services will help you attract users to your marketplace.

Since peer-to-peer marketplaces have two P2P user groups (sellers and service providers and buyers and customers), creating user interfaces for each user group makes sense. Experienced UI/UX designers will help you create a design that adds value to your platform.

At the design stage, clients share their vision of the finished product. For example, a client can prefer a specific range of colors for their project. It is vital to provide designers with more information to ensure clarity during the building process.

Next, your potential project falls into the hands of design experts:

• UX designers review the relevant market features, draw up a portrait of the target audience and its research, and create a working prototype of the software.
• UI designers style the entire site, evaluate the state and appearance of all UI elements and font hierarchies, and develop a guide to bring all the above parts together to facilitate development.

At Codica, our UX and UI designers have colossal experience designing custom software products. You can also see attractive and user-friendly designs we created on our Behance profile. Our UX/UI specialists also select examples of websites similar to the subject matter.

MVP development

It is a stage when your software development team starts work with the infrastructure, backend, and frontend.

The first phase of developing your peer-to-peer marketplace is creating a minimum viable product (MVP). With MVP, you can save your budget and analyze user feedback before making important decisions. Also, using MVP, you can get investment for a startup in the market.

Therefore, you should launch your peer-to-peer marketplace quickly and cheaply to find out as soon as possible whether your platform is solving customers' problems. Once your idea passes this test, try it with potential users.

How is the development process running? Software engineers develop new features. While quality assurance specialists simultaneously test these features to spot bugs quickly and fix them immediately.

And after the MVP, Codica's developers and designers create a fully functional product, QAs test it, and then it can be released to the market.

In the video below, we discuss what MVP is in software development and talk about the benefits of MVP for businesses.

Testing

The testing process is one of the crucial steps in controlling quality techniques. The software testing stage includes the following:

• Planning;
• Development of tests;
• The launch of the web solution;
• Analysis of the obtained results.

While creating your peer-to-peer marketplace, QA engineers work in parallel with designers and developers. They focus on specificity, accuracy, and consistency to detail the platform's nuances. After analyzing the product, QA specialists create a testing strategy.

QAs must create a single possible vision of releasing the customer's request. As a rule, the testing stage involves close interaction with the client to eliminate ambiguous interpretations of their vision.

Moreover, regression testing involves reviewing all the features that are in the project. That is, we must ensure that both the new and previous versions of the project function well. Once we confirm that both versions work as intended, the project moves to production. In addition, QA services provide the necessary verification directly on the product.

At Codica, quality is our top priority when creating marketplaces. Our technical team always performs quality control and software testing for the best results of the final product. Also, we test our web products on different devices and operating systems to make sure everything works correctly.

Read also: Test Driven Development: Key Benefits and Disadvantages for Your Project

Further improvements and updates

It is essential to understand that peer-to-peer marketplaces are a powerful mechanism. Therefore, our skilled team carefully maintains the database and servers, processes user complaints and suggestions, and improves response time.

You can also ask early users of your peer-to-peer marketplace to leave feedback, which you can use for the further development process. This additional growth allows you to update your peer-to-peer platform, add new features and improve existing ones.

At Codica, we have a specific stack for monitoring the performance of web products. The leading monitoring solutions that receive metrics and alerts are the following:

• Prometheus. This is a monitoring system designed specifically for a dynamically changing environment.
• PagerDuty. This is a system that helps to alert and track critical errors.
• Grafana. This is a well-known open-source analytics solution that allows us to query and visualize data and understand metrics wherever they are stored.

Related reading: How to Create a Successful Custom Web Product Step by Step: Codica's Experience

How much does it cost to create a peer-to-peer platform?

"It depends" is the most common answer to the question of how much it costs to develop a marketplace. The development cost may depend on various factors, especially the complexity of the implemented functions.

Our team provides you with the main factors of P2P development when estimating the cost of building a marketplace MVP.

Codica estimates that MVP development for the P2P platform takes approximately 1,168 hours. If you take an average hourly rate of $50, building a marketplace website will start at $58,400.

Furthermore, the number of development hours depends on the unique requirements of each project. Also, the total cost of marketplace website development depends on the hourly rate of the company you choose, a ready-made solution or a custom MVP, or a full package with all features, design requirements, and much more.

Outsourcing vs. in-house teams

Business owners usually need help deciding on the best development model for their business. In this case, such a problem can be simplified for you by comparing the advantages and disadvantages of outsourcing and in-house teams. Let's look at them in more detail.

When choosing an outsourcing model, it is necessary to pay attention not only to the cost but also to technical expertise, similar cultural and business values, and time zones. For more understanding, let’s consider the ups and downs of both outsourcing and in-house teams.

Also, business companies can calculate the software creation cost of the entire marketplace based on the in-house team’s hourly rate.

Read also: How Much Does It Cost to Build an Online Marketplace in 2023

Why should you build a P2P marketplace in 2023?

Now is a perfect time to build your booming peer-to-peer marketplace. In 2023, business owners with their financial capabilities and market needs will prefer this direction of the marketplace. That is because the peer-to-peer model has many benefits, with unlimited potential for creativity and growth.

In turn, you should take the time to test your idea, choose an appropriate business model, and provide the platform with powerful features. Also, it's always essential to engage with your target audience to build trust and brand engagement.

The Codica team has considerable experience developing P2P marketplaces in different parts of the world. With our professional experts, you can create a unique solution in any niche you are interested in. Do not hesitate to contact us if you want to turn your idea into reality. We will be happy to help you!