What You Need to Know Before Starting a C2C Marketplace
The Top Research Metrics for Startup Founders and Entrepreneuers
C2C marketplaces, or what we’ll call “platform marketplaces”, are those where a platform brings together two distinct parties:
- a seller who provides a product or service and
- a buyer who buys that product or service.
Think eBay, Amazon, Uber, Airbnb. They all match sellers with buyers. That’s their core value proposition.
The question is whether you should launch one of these yourself or not? We will try to answer that question by looking at the pros and cons of this type of marketplace in general. And then more specifically at the most common sub-types: physical goods, services and digital goods marketplaces.
Let’s get started!
Why should you start a C2C marketplace?
C2C marketplaces are extremely valuable. Here’s why:
They are great for buyers:
They give them access to products and services they wouldn’t have otherwise. Or they can find them at a much lower price than elsewhere. A physical goods marketplace is like the “Amazon of local services”, where buyers can find every kind of service at the best price.
In other words, it creates a lot of value for buyers by making them better off than they would be without the platform. That’s why people love Amazon so much. That’s why people love Uber so much. That’s why people love Airbnb so much.
People go there because they get more value out of it than from anywhere else on the internet. The same will happen with your platform if you do it right! (more on that later) They allow sellers to reach more customers, all over the world.
They can easily scale their business by tapping into an international audience without having to invest in marketing or sales. And most importantly, because platforms have access to all their data and feedback, sellers can easily learn how to improve their business and find their target customers.
They are great for sellers:
Because C2C marketplaces are so valuable for buyers, sellers can make a lot of money on them. This is especially true for physical goods marketplaces where there is often very little competition, and where they can capture significant margin.
And if you do it right, you will have the same effect on your marketplace. You will become the “Amazon of local services”. That’s why Uber drivers love Uber so much! That’s why Airbnb hosts love Airbnb so much!
They love it because they get a lot of value out of it compared to what they would get from anywhere else on the internet. And that’s what you want to achieve with your platform too! (more on that later).
They have access to a ton of data and feedback about their business that they wouldn’t have otherwise. They can use this data to make their business better and find their target customers without having to invest in marketing or sales themselves.
In other words, C2C marketplaces give sellers more value than any other kind of marketplace could give them, because they create all these new opportunities for them: new customers, increased sales, more money, more data and better business.
They are great for the platform:
The value that a C2C marketplace creates for its users is directly proportional to the value it creates for itself. It can use this value to make money by selling premium services or ads to sellers. It can also use it to attract investors and acquire new users through marketing.
That’s why C2C marketplaces are very valuable. And if you do it right, you will have the same effect on your marketplace. You will become the “Amazon of local services”. That’s why Uber drivers love Uber so much! That’s why Airbnb hosts love Airbnb so much!
They love it because they get a lot of value out of it compared to what they would get from anywhere else on the internet. And that’s what you want to achieve with your platform too! (more on that later).
Because C2C marketplaces create so much value for their users, they tend to be able to raise a lot of money from investors, which allows them to invest in growth.
This can make it easier for them to become dominant in their niche and create network effects faster than anyone else. This is especially true for physical goods marketplaces, which tend to be able to raise more money than digital or services marketplaces.
This is why the biggest C2C marketplaces are all physical goods marketplaces.
How to Start a C2C Marketplace
Now that we’ve seen why C2C marketplaces are so valuable, let’s talk about how you can create one of your own.
We will first cover the main steps you need to take before launching your platform and then go into more detail about each of them in separate articles. So let’s get started!
Figure out if there is an opportunity for a C2C marketplace in your niche and how big it is
This is the most important step of all! Before starting anything else, you need to make sure that there is an opportunity for a platform like yours in your niche and that it would be valuable enough for people to use it. The best way to do this is by conducting research on the following 3 topics:
1. Demand:
Is there enough demand for your platform? You need to be able to answer this question before starting anything else.
If there is no demand, you should stop right now and move on to something else. There is no point in wasting your time and money on something that won’t work.
To answer this question, you need to look at the demand side of your marketplace. You need to find out how many potential sellers and buyers there are in your niche.
2. Supply:
Is there enough supply of products and services to match this demand? If there is no supply, you should stop right now and move on to something else. There is no point in wasting your time and money on something that won’t work.
To answer this question, you need to look at the supply side of your marketplace. You need to find out how many potential sellers there are in your niche.
3. Competition:
How many other C2C marketplaces are already serving this niche? If there is a lot of competition, you should stop right now and move on to something else.
There is no point in wasting your time and money on something that won’t work. It will be too hard for you to win over the existing players, let alone new ones who will enter the market as soon as they see an opportunity! (think about Uber vs Taxis)
To answer this question, you need to look at the competition side of your marketplace. You need to find out how many other C2C marketplaces are already serving this niche and how big they are compared to yours. To do that, we recommend using the following tools:
SimilarWeb: it allows you to get a detailed overview of all the websites in your niche. You can use it to get data on how many visits they get, how much traffic they generate, where they rank on search engines and much more. It’s a great tool to quickly see if there is any opportunity for you in your niche.
Alexa: it allows you to get an overview of the traffic of each website and how big their audience is compared to yours. SimilarWeb or Alexa are both free tools that anyone can use! Just make sure that you have enough data before drawing any conclusions from them. (it will take time before their ranking algorithms give reliable results) If you want us to do this research for you, we can do that too! (check out our marketplace research service)
Once you have the data, you need to figure out if there is an opportunity for a platform like yours in your niche and how big it is. You can do that by using the following formula:
% of Demand x % of Supply = Total % of Market
If this number is big enough, then there is an opportunity for a C2C marketplace in your niche. If it’s not, then there isn’t. It’s as simple as that! But if it is big enough, then we need to look at the next step: the potential for growth. We will cover that in the next section.
Potential for Growth:
Is your market growing? Are you targeting a niche with high growth potential? This step will help you figure out if there is room for growth on your platform and whether or not it’s worth launching one.
If this number is big enough, then there is room for growth on your platform. It means that there will be more people willing to buy and sell on your platform in the next year than in the previous one. If this number is small, then there isn’t. The potential for growth of your market isn’t big enough to justify launching a C2C marketplace! You need to move on to something else.
To answer this question, you need to look at the potential for growth of your market. You need to find out if it’s growing or not and how fast it’s growing.
To do that, we recommend using the following tools:
Google Trends: it allows you to see how many people are searching for keywords related to your niche and how much interest they have in them over time. This is a great way to see if people are interested in what you’re selling or not! (think about a niche like blockchain)
World Bank Data: it allows you to see how many people live in each country and what their income per capita is. It’s an easy way to see if there is a market for your platform in each country or not.
The World Bank Data and Google Trends are both free tools that anyone can use! Just make sure that you have enough data before drawing any conclusions from them. (it will take time before their ranking algorithms give reliable results).
In summary, you need to figure out if there is a big enough market for your platform in your niche and if it’s growing. If the answer to both questions is yes, then you should consider making your next move and actually building up your C2C marketplace.
About the Author
I am the Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
You can connect with me on Linkedin (https://www.linkedin.com/in/alexanderlhk) and let me know that you are a reader of my Medium posts in your invitation message.
