Starting an online marketplace business: Old basics in the new generation

Good businesses start with simple ideas. Many successful brands in the online marketplace space started with simple ideas and kept building on what worked for them. There are fundamental cues to be picked up from business success stories, not for blind imitation but to understand the importance of basics and simplicity in business.

Six such important fundamentals need a special highlight for entrepreneurs and businessmen in their journey of starting a new generation online marketplace business .

Scrutinize the business idea

It is the business idea that must be questioned first; the ‘how’ of making it possible shall come later. Some broad and critical considerations here are - is there a need for a new online marketplace business for the target market region, what is the void that the existing players are not able to comprehend or fulfil effectively, what could be the right solution, how easily this value could be created and delivered, are there any market entry barriers, is the environment business-friendly, etc.

These are broad indicators of whether one should go ahead with the idea of starting an online marketplace business in a target market or not at a given time. Answering these questions may also involve conducting market research and applying business intelligence.

Business Model

A good business model rests on the foundation of a solid value proposition. In today’s competitive scenario, it is not easy for online marketplaces to stand out in the competition only based on the products being offered.

Businesses have to think in terms of excellence and innovation in services and customer experience. For instance, easy exchange and refund were all cool when they surfaced for the first time.

But it lost effectiveness when it became a common industry standard. Technologies like AR and VR are now being used by many retail brands to create a superlative customer experience.

Tech-driven innovation will be the key for the new-generation online marketplace business models .

Business Strategies

Striving on a validated business idea, a business model is only a broad map of how the intended value will be created and delivered through a strategic network of value chain activities and internal capabilities. For an online marketplace, this involves formulating various functional strategies like supply chain, procurement, inventory management, distribution and logistics, last-mile delivery, onboarding, policies, support services, HR, finance, etc.

These strategies outline how the various functions will work to execute the business model.

Operational Planning

Operational planning maps how the business processes and operations will actually be carried out. The operational planning need not necessarily emanate from business strategies only.

The strategies give a shape and direction to operations. For instance, if the retailer onboarding strategy requires that stringent verification has to take place, this requirement must find its due place in operational planning.

The process of onboarding retailers must be defined in a systematic sequence including the necessary verification steps. SOPs (Standard Operating Procedures) can be used to prepare a detailed set of operations for the onboarding process.

The other aspects of the onboarding process can be planned with a routine understanding of the prevalent standards and general business objectives.

Business Plan

The business idea, with all the planning done so far, now needs to go through a critical test - checking for its commercial viability. Starting an online marketplace business needs investments for building and developing the necessary IT infrastructure, purchasing robotic tools and machinery for use in distribution centres, acquiring/hiring land and building at various places of operations, buying logistical assets, etc.

Then, there are operating expenditures in the form of payment of salaries, energy consumption bills, payment to vendors and service providers, assets maintenance costs, etc. The income and revenue projections have to be prepared alongside.

Collectively, all these assessments come in the form of projected profit and loss statements, income and expenditure statements, ROI, breakeven analysis, capital budgeting, etc.

Many online marketplace businesses have come and gone simply because they could not establish what they stood for. Or they never had a solid proposition in the first place.

Marketing cannot compensate for the lack of core value. Planning for building an online marketplace business, like any other business, involves a systematic, step by step approach.

Jumping the gun during the conceptualization and planning stages could bring irreversible consequences later on. The online marketplace business is a modern-day concept but that does not make it immune from following the fundamentals and principles of business and management.

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Category: eCommerce Solutions and Developers Profile: Your Retail Coach (YRC) is a retail consulting and outsourcing company in India offering a wide range of services in retail offline, retail eCommerce, and retail omnichannel catering to a multitude of industries. Your Retail Coach (YRC) helps retailers and retail enterprises set up their eCommerce business right from planning (eCommerce business consulting) to implementation. Our experience and expertise in both offline and online retail channels will help businesses overcome challenges in adop ...