All businesses start somewhere. If we turn our heads backwards and take a look at the most renowned names in the marketplace industry like eBay, Zappos, Etsy, Airbnb, Uber — none of these companies were very big back in the day. In the early development stages, all they had were niche- or region-limited digital products, each with basic functions and little-to-no investments at all.
That's what the concept of Minimum Viable Product (MVP) actually stems from — having a bare-bones version of a final product that is functional enough to fulfill a specific user's problem, and cheap enough to keep a startup afloat.
In this blog post, we will answer the questions around how to build a marketplace MVP, what features an online marketplace MVP should have, and what business benefits come with the marketplace MVP.
What is Marketplace MVP and Why is it Important?
The term MVP was first defined in 2001 by Frank Robinson, co-founder of consulting agency SyncDev. Almost a decade later, it’s been widely popularized by Eric Ries — American blogger and author of the book 'The Lean Startup.'
According to Ries, MVP is the first version of a product that allows a company to test and validate its business idea with the help of feedback from early adopters, i.e. first users. All this with a minimum amount of effort.
The benefits of such a developmental approach have become even more apparent when we look at the statistics — 90% of new startups fail, with the top three reasons for failure being budget problems, incorrect market choices and lack of research. Failure rates could be significantly lower, however, if more startups started to market their products with an MVP version first.
Aside from the market research and feedback collection, the advantages of building a marketplace MVP are as follows:
What You Need to Know to Create an Online Marketplace MVP
Development of a minimum viable product for a marketplace comes with its benefits as well as its pitfalls. On one hand, it requires startup owners to outline the core features and business goals from day one.
On the other hand, teams need to correctly understand the nature of online marketplace MVP development techniques, and the outcomes they should be looking for.
Here's a shortlist of key aspects that startups need to keep in mind when developing an MVP for a marketplace:
- Focus on the core value of your product and build the MVP around it. The most common problem for the majority of startups is that they want everything all at once. Even an MVP may end up overloaded with unnecessary features that don't influence the product much, while taking time and money to develop. Following the principles of the Lean Startup methodology 'Minimum viable product might be even more minimum than you think' startup owners should keep their focus narrow and work only on the core aspects of the project.
- Keep long-term goals in mind. Companies should always regard the MVP as only one of many steps towards product development. It is the preliminary goal but not the final one. The goal of an MVP for an online marketplace is to answer two basic questions: 'Does my idea have potential?' and, if the answer is yes, then 'What exactly should we do from there to achieve the desired goals?'
- Know your success criteria. Setting defined metrics will help you understand whether the results you get during MVP tests are relevant to your immediate and long-term goals. The number and type of criteria will solely depend on each type of a project; however, if you are not sure which one to choose, here's a list of common metrics to start with: Customer Acquisition Cost (CAC), Churn Rate, Average Revenue Per User (ARPU), Lifetime Value of a Customer (LTVC), Monthly Recurring Revenue (MRR), etc.
Key Features of a Minimum Viable Product for a Marketplace
With ongoing digitalization in today’s world, there's almost nothing left that you can't sell or buy online. Some platforms, like Amazon, sell products in product marketplaces. Some, like Uber, offer services in service marketplaces. Some, like Oodle, combine both of these to create hybrid marketplaces, and some, like Kickstarter, connect startups and investors in project marketplaces.
For each particular type of marketplace there will be a unique feature set; however, the key components will remain pretty much the same:
- Main page — the first page users see once they come to your marketplace. In an MVP version, the homepage may contain your USP, some general information about the marketplace and its distinctive features. Later, it can be expanded to include popular categories, special offers and best-selling items, for example.
- Product page — may include an item's picture, description, technical specifications, and details on shipment and warranty. As the marketplace develops, this page may also house such features as product ratings, customer reviews, comparison options, etc.
- Search — this option is fundamental in a marketplace. The ability for a platform to return accurate and up-to-date results on a user's search request is what may separate success from failure for a marketplace MVP.
- Admin panel — the hidden side of your platform that can't be seen by users. The admin panel allows you to do everything in your marketplace: from improving the website design and working on user feedback to assessing user flow, approving new vendor products, and reviewing statistics.
- User/Merchant accounts — buyers use their profiles to review purchases made, and edit preferences, shipping and payment details. For sellers, on the other hand, a profile is a place where they manage their store pages. They may edit products or services being offered, adjust stock, view reports on orders and transactions, and export this data.
- Messaging option — allows users and vendors to get in touch with any questions regarding requested items, payment, shipping, etc. The back-and-forth communication between buyer and seller, in this case, can be facilitated in a few different ways. It can be manual, automatic, and AI-driven.
- Payout capabilities — users have to have the opportunity to make purchases fast and without the need to leave your marketplace. Allowing users to pay on-site through well-known services like PayPal, Square and Stripe will make their on-platform experience more native.
How to Build a Marketplace MVP: Step-by-Step Guide
So, how to create a marketplace MVP? Here are five steps that a company needs to take to develop a marketplace MVP.
1. Research your market and competition
Market analysis is important and can't be overlooked. Even if you believe that your project idea is the most innovative and 'one-of-a-kind,' do your research first. The simple belief in the project uniqueness should never serve as the justification for your project development.
Examine the market size, figure out the number of companies that are already out there offering similar (or even the same) types of products, define their strong and weak points. Assess users' geography and buying preferences.
2. Study best practices and failed cases of launching online marketplace
Studying best practices will spare you the need to try to 'reinvent the wheel' for your startup company. Taking what works best and applying it — not blindly following but wisely adjusting, of course — in your own business is a tried and true tactic. As good as it may be to learn from successful case studies, getting insights from startup post mortems is even more important.
Looking at companies that have previously failed will help you avoid the same mistakes while validating your MVP for an online marketplace. Here are a few most prominent marketplace failure examples and the reasons behind them:
- Homejoy — heavily relying on sites like Groupon; expanding to new markets way too fast.
- Tutorspree — depending on a single channel to acquire new customers; inappropriate tutor-student interaction model.
- HelloParking — a product that users weren't interested in; inability to scale up.
3. Map out the user flow for your product
User flow represents how users interact with your platform and how they get from point A (opening a platform) to point B (making a purchase) seamlessly. In order to provide that experience, map out all the steps that users should take on your platform to reach the final goal.
Keep in mind, also, that the user flow will be unique for each page of your marketplace. This will help to better shape a hierarchical structure of different components in the future, define entry/exit points, and understand what functionality works best and what features of an online marketplace MVP should be added in the next update.
4. Develop and launch MVP for Marketplace
After studying market and competition, figuring out what users' needs are, and prioritizing marketplace features, you are all set to develop a marketplace MVP. Just a reminder — this is not a full-fledged product, so don't strive for the best quality possible by investing resources into neverending redesigns and work scope adjustments. Your goal is to develop a product that is handy and engaging enough to pique the user's interest.
The next step you want to take is to gather or identify a development team that will be able to create an online marketplace MVP and deliver to your expectations.
Hiring a reliable contractor for marketplace mvp development with an already assembled team will save you much hassle, so we advise you to try that option first. Especially if you are at the early stages of your startup development and don't have enough financial resources to accommodate 20-30 specialists under one roof, pay rent, salaries, taxes, etc.
Make sure that you look for a trustworthy partner with relevant expertise in your market niche.
5. Analyze the results
Once the MVP for a marketplace is developed, you can start collecting customers' feedback and analyzing the results. This is actually not the last but, the very first step of your product development. From here, you will begin to conduct various tests, add new features, adjust marketing strategies, and attract new users.
This is where the principles of MVP and Lean Startup Methodology start to really unfold: you build, test, measure, learn, and build again.
Read also about MVP development for online marketplaces.
As you see, MVP for the marketplace is not just about chopping out all possible features and rolling out a product as soon as possible. It is actually an extremely important asset that keeps startup owners from making lots of mistakes and jumping off their planes without a parachute.
Minimum viable product for online marketplace is a foundation for your short- and long-term goals that helps you move forward and improve your product.
If you want to get more information on how to develop a marketplace MVP or are curious as to how much the development of a custom MVP would cost, how long it can take, etc., reach out to us. At WTT Solutions, we are always ready to offer a helping hand to those businesses who are willing to test new ideas but not quite sure how to do that effectively.
Hit the 'Get in Touch' button in the upper right corner of this page to contact us, and don't forget to subscribe to our newsletter to be the first to receive new insights!