While no one in their right mind starts a marketplace app to take on Uber or Airbnb, the market is still ripe for new service-focused marketplace applications.
According to the Bureau of Economic Analysis, we spend 70% on services. Yet, only 7% of the services we purchased in 2019 were digital. Well, that’s about to change especially on the back of the COVID-19 pandemic.
With online sales growing (up 37% from 2019), we thought it’s time to rehash everything we know about custom mobile marketplace development and provide you with a simple guide on how to create a marketplace app. Because the market is waiting.
Table of Contents
- What’s a Marketplace App?
- Brief History of Marketplace Apps
- Types of Marketplaces
- Top 5 Marketplace Apps Worth Stealing From
- Challenges to Building a Marketplace Platform
- Build a Winning Marketplace App — 5 Steps to Success
- Technology Stack for Developing a Marketplace Application
- How Much Does it Cost to Make a Marketplace App?
- Our Experience with Marketplace App Development
What’s a Marketplace App?
Marketplaces are where we buy stuff, right? Well, a marketplace in the palm of your hand is the same, except it trades products and services.
The most recent trend is to commoditize and package a professional into a product, but we’ll talk about that in the next section. Besides marketplace, it also helps to know such terms as:
- Disintermediation — removal of an intermediary in an exchange process, e.g., replacing taxi operators with algorithms.
- Network effect — every new buyer and seller adds an accumulative positive effect to the whole network.
Brief History of Marketplace Apps
I bet you’d like to know what marketplace apps have the best chance at succeeding before you start building an MVP. One way to do that is by looking at marketplaces through a historical prism.
Li Jin at Andreessen Horowitz (a16z) has compiled an insightful timeline of marketplaces from the 90s till the present days:
As seen in the chart, mobile marketplace apps really kicked in only in 2009, two years after the initial iPhone release. That has been a very prolific decade for Uber-for-X, aka on-demand, marketplaces.
At the same time, only a few major retailers chose to create a mobile marketplace in the early 2010s: eBay, Amazon, Etsy, AliExpress, and Newegg, among others.
Since the mid-2010s, we’ve seen more managed marketplaces popping up. These are platforms like Upwork that take on more responsibility to manage or oversee providers as they deliver their services.
Today, a16z believes that marketplaces that unlock supply for regulated services industries, law, finances, or healthcare, will have greater chances of scaling rapidly. So, if you are in the healthcare business and want to create platforms that connect doctors and care providers with patients, you’re on the right track.
- on-demand nursing
- on-demand therapy
- mobile medical equipment shops
These are just a few use cases for building sustainable marketplace apps in healthcare.
Read also: How to Build an On-Demand Service App
Types of Marketplaces
Not all marketplaces are created equal. I think it helps to know at least the most popular types of marketplace apps based on various criteria. It may spur your own vision to create an app for the marketplace that’s most promising.
by commodity: goods, services, and staffing
The first thing that comes to mind when you try to categorize marketplace apps is the commodity traded in the app. Customers use these tools to buy:
- physical goods like electronics or books
- services like tutoring or housecleaning
- staffing like filling a nursery shift or hiring a site developer
by structure: marketplaces and market networks
There are true marketplaces like Airbnb, where customers focus on the commodity — we do read reviews and check out owners’ profiles, but our focus remains on finding a great place to visit.
Market networks are special marketplaces where both sides are interested in creating a reputable profile and building a network of connections. In such a network, we are more interested in the personality of a service provider we pick.
Pared is a shining example of a market network where restaurant workers create relationships among themselves and restaurant owners. It’s noteworthy that participants can switch places in market networks, like friends taking turns to help each other with babysitting in the Helpkin app we developed.
by participants: two-sided and multi-sided
When I order a ride in Uber and a driver comes to pick me up, it’s a 2-sided marketplace. I’m on the one side, and Uber is on the other side. But when I place an order on DoorDash, I can pick from various restaurants — that’s a multi-vendor marketplace.
by target audience: B2B, B2C, C2C
Depending on who’s serving who, we can discern business-to-business (Dial4Trade — a b2b marketplace), business-to-consumer (Instacart — a b2c marketplace), and consumer-to-consumer (Letgo — a c2c marketplace) marketplaces.
One word of advice here: carefully pick the right niche before you start custom mobile marketplace development.
Top 5 Marketplace Apps Worth Stealing From
What marketplace apps do we pick to make it really worthwhile for you to even glimpse through the list without “catching up” on the old news like Airbnb and Uber.
In other words, what examples of mobile marketplace apps can really help you answer “How to create a marketplace app?”
After analyzing a couple of the lists ranking marketplaces 1 to 100, like this one by a16z, and checking on the CB Insights’ United States Of Startups, I decided we should go with these:
- OfferUp, a shopping app for buying and selling online
- ZocDoc, an on-demand doctor platform
- Postmates, eats delivery
- Udemy, course creators meet students
- Sittercity, childcare network
Why? The top five categories in the marketplace 100 list by a16z include shopping, food & beverage, education, health & wellness, and childcare. And by the way, Andrew Horowitz compiled the list by analyzing where users spend most dollars.
Let’s see what we can take away from these marketplace apps before we create a mobile marketplace of our own.
Type: c2c marketplace
Description: mobile peer-to-peer marketplace app (aka p2p marketplace) to buy and sell electronics, cars, and everything in between.
- TruYou verification that includes a state-issued ID, phone number, and a photo
- showing previous transactions for all users
- search alerts
As you can see, the first two features help with establishing trust between sellers and buyers, and the last one notifies buyers about new items matching their search criteria.
Type: b2c marketplace
Description: on-demand doctor appointment-booking platform that brings together patients and doctors.
- insurance checker to find doctors that match the patient’s plan
- featured doctor reviews
- appointment scheduling
Type: b2c/b2b marketplace
Description: on-demand restaurant meals delivery service (acquired by Uber in December 2020).
- hot spots in the delivery-side app, showing the best areas to pick up orders
- subscription for frequent users to avoid delivery fees
- special option to order time-limited offers from trending places
Type: c2c/p2p marketplace
Description: courses serving platform
- saving courses for offline viewing
- casting video playback to a TV
Type: c2c/peer-to-peer marketplace
Description: a platform for hiring local babysitters, nannies, pet sitters, senior care providers, and housekeepers.
- nanny background checks
- search filters by skills and experience
- secure in-app messaging
Note that all of these apps take good care of both providers and buyers. This seems to be the right way to establish a long-term relationship with both parties and start a marketplace app that becomes an instant hit.
What marketplace app to build
What’s interesting is when you look at the United States Of Startups — they list top-funded tech startups for each state — you see that out of 50 most well-funded startups, 16 are marketplace apps. That’s 30%.
If we zoom in, we’ll notice that three of these startups are healthcare-related, and two are fintech marketplaces. The rest are all over the place and have to do mostly with offering professional services in various industries.
How can you use that? Think of a healthcare or fintech marketplace platform (two-sided or multi-tier) that can solve issues for patients, providers, vendors, insurers, and other market players. The niche is huge (I don’t think we need to quote the figures here; it’s billions of dollars) and desperately needs democratization.
Challenges to Building a Marketplace Platform
You’re probably aware that a real pain point with growing a marketplace app is onboarding the demand side when there’s still no substantial supply and vice versa. Because when you create an app for the marketplace, you need to attract both sides simultaneously.
How do you get users to sign up for your new hyper-local delivery service when you have no partnerships with local restaurants? How do you get new restaurants to partner up and sign up if there’s just a handful of users at the time?
Some would say it’s a purely marketing challenge: you need to ramp up your ad budget and hire an ingenious growth hacker. While this may be indeed the route that solves the chicken-egg issue, I still suggest that you check what can be done in the app to address this challenge.
- the app should be super easy to share
- use deep linking with referral codes for effective referral programs
- use services like AppsFlyer to know what channels bring most users
- offer an API to integrate with other apps for cross-promotion
Little control over inventory quality
What I mean here is you, as a marketplace app owner, have certain limitations on the control over providers’ services or products delivered through the platform. Therefore, you need to hand over these functions to buyers.
- implement spam flagging system
- add verifiable reviews and ratings
- make reviews non-editable after some time to avoid manipulators
Disintermediation is a clever word for taking buyer-seller interactions off the marketplace app.
Unfortunately, that’s the reality for many platforms where interactions between demand and supply are frequent and depend on personal connections.
For example, you would likely hire a house cleaning person after they’ve cleaned your house a couple of times, and you’ve established some personal relationship.
If you have much supply, you can try to make it programmatically impossible to match the same buyer and providers after the first interaction. Another possible countermeasure is to offer buyers a discount for the next order, which stimulates them to come back to the app for new purchases.
Otherwise, it’s mostly an out-of-app issue that you can solve by offering mediation services, guarantees, etc.
Commoditization of services
If you think about it, services are tough to commoditize. What some buyers may value as a 5-star experience, others will regard as a subpar service. So how do you bring everybody to common ground in a multi-vendor marketplace?
- add buyer and seller profiles, with a detailed history of previous orders/jobs
- think through the rating system and adjust it to reflect the most recent experience
- give providers an option to offer buyers pre-packaged services (like Upwork does)
Hopefully, these tips will help you understand how to build a marketplace app, taking into account the above mentioned limitations.
Build a Winning Marketplace App — 5 Steps to Success
If you’ve already read a few how-to blogs about marketplace app development, you probably already know all the major steps:
- market research
- rapid prototyping (includes design) + user testing
- development + testing
- release + maintenance
Even though online marketplace app development includes all these steps, there’s still something different when you develop a marketplace app compared to many other mobile applications. What’s the difference?
First, please take a look at this wonderful illustration from the TaskRabbit founder’s blog The Anatomy of a Marketplace:
Everything you see on the surface is how we often see a marketplace app. Everything under the ground is what makes the app tick. And it takes time and tech skills to develop all of that.
Step #1: Build the boring block
The boring block is a back end with an admin interface. That’s where your app logic will reside, that’s where smart algorithms matching buyers and sellers will run; that’s the magical core engine of your marketplace app.
And the admin interface lets your employees manage the whole process from start to finish: from the moment an order is placed to a transaction to a service/product review.
Even if you’re working on a seemingly self-regulated marketplace app like OfferUp, in some cases, you’ll still need to mediate conflicts, manage transactions, regulate user actions, etc.
So we’re talking about a decent custom developed web application here. It’s not going to be as fancy as Gmail or other state-of-the-art web solutions but will definitely require substantial effort to create.
Step #2: Build the fancy stuff
The fancy stuff is the consumer marketplace app — the one we use to order a pizza, ride, or house repairs. It has to be fancy by definition because customers have become picky since the early iPhone days.
From the customer perspective, the most vital part of any marketplace app is the commodity. So you want to apply additional effort to polishing a product page:
- description of goods or services
- user reviews and rankings
Other features people expect to see in a decent marketplace app include:
- registration and authorization
- user profiles for sellers and buyers
- catalog of products/services with search and filters
- in-app messaging and notifications
- geolocation for matching with providers
All in all, the customer-facing marketplace app is how most people envision any marketplace app. However, as we’ve already established, there are more pieces of this puzzle: you need to consider the core engine part to orchestrate the app. But wait, there’s more.
Related: How to
Step #3: Build the not-so-fancy stuff
Mobile app development for marketplaces should always include a dedicated app for providers or sellers (iOS + Android). Yes, drivers need to receive ride requests with user profiles (that they get to pick, by the way), sellers need a place to upload their products, and a car mechanic needs a profile to fill.
If you’re working on a lean budget, that’s another burden. To minimize the effort required to create a provider app, many companies move profile filling features and everything else not related to order activities to a web application, which is cheaper to produce.
However, things like messaging and order requests (basically everything that has to do with service/product delivery) find their place in the mobile app.
What’s great about provider apps is that you don’t need to spend too much time making them fancy. When you’re just starting, sellers consider your application as a potential add-on revenue stream and kind of have to stick with whatever you provide.
Of course, it goes without saying that the UX should still be well-thought-out. Otherwise, providers may think it’s not worth the effort to register with your app. For example, it’s a well-known fact that taxi drivers flip from Uber to Lyft if there’s a better order. If your marketplace ensures providers receive a steady flow of orders and a super easy-to-use interface, your app will win.
Step #4: Take legit tech shortcuts
Given the development of a marketplace app turns out such a massive undertaking, I recommend using off-the-shelf components to implement various features.
For example, when Leah Busque began working on TaskRabbit back in 2008, they had to create a background checking mechanism themselves. Today, there are services like Checkr that we can plug in a matter of days instead of months.
Here are some examples of SDKs and APIs that you can use for different parts of your marketplace app:
- Authentication: Google, Facebook, Apple ID, Auth0
- Chat: Twilio, SendBird
- Mapping: Google Maps, Apple Maps, Mapbox, Carto
- Payments: Stripe, PayPal, Skrill
- Back-end: Firebase, Parse
You can find more APIs for your marketplace app here. Or you can really zoom in on that image by Leah Busque (click on the image when you open it to enlarge and see what she suggests using for different parts of a marketplace app).
Step #5: Post-release
One thing that’s different with a marketplace platform once you release it is you will need to manage its content to curb rules violations like spam or inappropriate imagery, etc.
All that is available via your dashboard application — part of your core engine we spoke about above. And of course, users should be able to easily flag inappropriate content.
As with any other application, once it’s released, you need to keep it up-to-date with new OS versions and analyze app usage metrics to optimize user experience going forward.
As you can see, it’s one thing to develop a marketplace app, and it’s totally different to maintain it.
Technology Stack for Developing a Marketplace App
You might wonder, “What tech skills does it take to deliver a robust marketplace application?” To tell you frankly, you can pick practically any tech stack for developing a marketplace app.
Anything that’s scalable and includes a high-performance database will work. Therefore, you are not bound to any particular tech skillset.
At Topflight, we love using React Native to develop mobile apps for iOS and Android and React.js/Node.js/Amazon Web Services for the web application. Mongo.DB serves as a great database choice, and if you’d like to get more specifics, I encourage you to book a call with our expert here.
How Much Does it Cost to Make a Marketplace App?
The average cost of a marketplace app is somewhere between $160,000 and $240,000 to build. The good news is you can start by investing $15,000 to $20,000 in rapid prototyping to get an interactive prototype of the app which will not only help validate your idea but also reduce app development costs.
Having a prototype helps because you can run user tests and see how users accept your idea before coding a single line of code. We’ve found rapid prototyping an ideal tool for early-stage startups to raise funds. Companies we work with raised $165 million (as of December 2020) using prototypes.
Our Experience with Marketplace App Development
Our experience in mobile app development for marketplaces is mostly confined to healthcare, fintech, and on-demand projects. Here are some of the most recent marketplace projects we completed in these niches.
#1 Sherpa: a platform that brings together financial advisors and people looking to take their budgets under control.
Users download a mobile app that analyzes their spending habits and projects future budgets accordingly. Financial advisors sign up for a web application that is integrated with the mobile app to provide personalized recommendations to Sherpa’s users.
Learn about how we made that work in a case study.
#2 Helpkin: a marketplace network that allows friends to trade babysitting and dog-walking services. Users schedule their availability hours in mobile apps (iPhone and Android) and easily coordinate with their pals.
More info on how we refurbished the app and made it an acquisition target in the case study.
If you are looking to create your own marketplace app, schedule a call with our expert and learn how we can assist.
Frequently Asked Questions
Do I need to build 5 apps (iPhone and Android for buyers + iPhone and Android for sellers and providers + web application for managing the platform)?
Some marketplace apps, especially those having to do with trading stuff, make do with a single mobile app that works for sellers and buyers
What types of marketplaces look most promising today?
Platforms that connect professional, regulated service providers with buyers and b2b marketplaces.
Is there a fireproof tech stack that I should pick for my marketplace?
You can go with many different tech stacks. That’s the last thing you should worry about. There’s plenty of resources, and the pricing is not much different from one tech stack to another.
What are some ways I can reduce the development budget?
Start a marketplace app with a rapid prototype and use “as-a-service” components wherever applicable, e.g., Firebase for the back-end.
Can I do a very basic app for providers since I'm more concerned about the buyer experience? That would help me reduce the average cost of development.
It depends on the niche you’re serving. For example, Uber completely redid their Uber app for drivers some time ago — to provide them with an exceptional experience. The company spends hundreds of dollars onboarding new drivers, and so every little bit helps.
Should I create my own marketplace from scratch or use white-label solutions?
A marketplace that’s worth creating will serve unique needs and niche, which means you’ll have to tweak a ready solution into something that it may not fully support.
Do I absolutely need to include an online marketplace besides building mobile applications?
No, you don’t. If you don’t envision your users working with the app in their desktop browsers.