In 2018, more than half of all eCommerce purchases were made through online marketplaces. The revenue of 67% of marketplaces made $50M while 33% of the marketplaces earned more than $100M. No wonder more and more marketplace startups have emerged in recent years.
However, at the same time, only 10% of startups become successful! The number one reason for startup failure is running out of the capital before the project becomes profitable.
One of the ways to prevent this is to estimate the project cost carefully in advance.
If you are hesitant about starting an online marketplace and the biggest uncertainty is the cost, you’ll want to get some estimates right away.
In this article, you’ll see the ballpark figures for the development of 5 different marketplaces. We’ll outline their peculiarities and give an estimate of the most typical features.
Bare numbers raise a lot of questions and suspicion. So, let’s dissect the estimation process into components that make a fair estimate of the cost to develop a marketplace website.
There are fixed and hourly prices. Most of the contractors measure development efforts in hours. This method is called Time and Material.
At Greenice, we use this way of estimating our efforts. It allows us to break down the project requirements into tasks and milestones and charge the client only for the work done.
During the development process, all team members record their actions with special screen-saving and time-tracking tools and our clients can check how many hours were spent on this or that job in reality.
The advantage of this method is that we can use Agile development and stay flexible for changes in the requirements even after the project has already begun.
Fixed price suites more conservative projects with concrete requirements (detailed and prepared for a long time) without the opportunity to change your mind after the project starts. This approach, known as Waterfall, was massively used maybe 10 years ago and mostly for Enterprise-size software. But now the market changes quickly and frequently and startups should be agile.
On the flip side, with the Time and Material method, it is impossible to arrive at some fixed number of hours and dollars when estimating requirements. However, based on our vast experience, we try to be as precise as possible.
No two projects are identical, so not even similar websites can be estimated in the same way.
Each marketplace has its peculiarities that influence the marketplace development time and budget. To illustrate this better, we’ll present estimates of the most common types of marketplaces that we have expertise with.
There are marketplaces for:
Products (like Amazon, Etsy, Aliexpress)
Crowdsourcing (like Arcbazar, XPrize, MTurk)
eLearning courses (like Coursera, Udemy, Edx)
Property booking (like Booking, Agoda, Airbnb)
Freelancers (like Upwork or Fiverr)
Now, we move into the sweetest part of this article, and will give you the numbers you are looking for!
Basic Features of Marketplaces
Registration, user profile creation, search, payment methods integrations – these and some other features are more or less similar from project to project. Building a marketplace from scratch, we will most likely start with these core features. At the same time, typical features vary depending on the type of marketplace.
So, first, let’s outline and estimate basic features first and then describe and estimate each marketplace type in particular.
Here are the most common basic features for marketplaces of all types:
Sign up and Login/logout
User registration and login process. Sign-on through social media
16 – 24
Whether it is a seller, buyer, job poster, or contributor, they will have a profile created upon registration. They should be able to enter contact details, choose preferences and account settings
32 – 40
There are plenty of payment methods, but for MVP it is enough to implement at least one payment gateway (PayPal, Stripe, Authorize.net)
16 – 32
Users should be able to lookup listings by keywords, categories, and filters
40 – 80
Rating and reviews
Users should be able to view, write and respond to feedback
56 – 112
An internal messaging system between customers and sellers/service providers
80 – 120
Notifications, alerts and automatic emails
System notifications and emails like ‘welcome’, ‘complete your profile’, ‘complete the order’, etc.
40 – 56
Login for Admin User
8 – 10
Users listing, user role management, user verification, blacklists
80 – 96
Adding and editing website static content
24 – 40
Service fees management
24 – 32
Notifications and email templates
40 – 64
Integration with ZenDesk
40 – 64
KPI reports, users statistics, finance report, website statistics, number of customer-provider engagements (i.e. open/closed deals)
96 – 144
We can develop this basic functionality in around 600 – 900 hours. The cost will start from $21,000 – $31,000 depending on the complexity of the features. Of course, this figure will change as we discuss the details of your project.
Now, let’s add the typical features to get the total cost of building an online marketplace in a specific field.
Typical Features of Different Types of Marketplaces
1. How much does it cost to build a product marketplace like Amazon/Etsy/Aliexpress
Amazon, Aliexpress, and Etsy are some of the largest marketplaces in the world. But even they started with simple websites that gradually evolved into the global online eCommerce platforms, turning their founders into billionaires.
As we have already estimated the basic functionality, let’s forecast the cost of typical features of a product marketplace:
This is where sellers can create and manage their own shops, transactions, shipping, and communication with customers. Here is a list of necessary features:
Seller profile verification: Sellers are usually required to provide business registration licenses and other documents to prove their legal compliance. A newly registered seller should be approved by Admin before a profile is created.
Virtual store creation: Besides listing products in the shared stores, vendors should be able to create their own online stores with logo, description, and categories.
Add products: Listing products with description, category, attributes, photos, price, ratings and reviews, payment and shipping details.
Shipping integration: The platform should be integrated with third-party services that provide order delivery and give back the tracking information to the system.
Transactions details: Sellers need to view the history and status of payments from the customers.
This is where customers can search and buy products, view their orders and payments, communicate with sellers, manage contact and shipping information, set preferences for notifications, etc. The following features are characteristics of this section:
Shopping cart, or Checkout page: Buyers should be able to complete the purchase with minimum hassle. This page usually contains a list of chosen items, their quantity, and price, total sum, choice of payment and shipping methods.
Order management: History of orders, their details, payment and shipping status.
Returns and refunds: Possibility to return the goods and request for refund.
2. How much does it cost to build a crowdsourcing marketplace like Arcbazar/X-Prize/MTurk
Crowdsourcing is a popular model of solving challenges and generating creative ideas using the collective mind. But to find people eager to contribute (solve the problem), seekers (those who arrange competitions) need a service that will host the competition/challenge details and attract people who are eager to get the prize. The main advantage is that the internet allows finding specialists globally ‒ maximizing the pool of contributors and ideas.
Here are the crowdsourcing-specific features that would be added to the basic features:
In this section, people who want to offer a task, can describe it in detail and set the prize sum for the winning solution. The feature list can be:
Competition creation: Adding description, photos, due date, and prize to winners of a challenge.
Competition page: Each challenge should have a solution or bid list page.
Choosing the winner: The mechanism of selecting and notifying the winner or winners should be transparent. The winner can be chosen either by users’ voting or by the seeker’s decision.
In this section, problem-solvers or contributors can view and participate in the competitions by submitting their ideas to the platform. The features include:
Competition details page: Challenge description and the ability to submit a solution.
Rating or score: There can be a mechanism of gaining points by participation, winning or voting for others that influences the overall rating of contributors.
3. How much does it cost to build an eLearning marketplace like Coursera or Udemy
Traditional education is gradually giving way to online education. On the Massive Open Online Courses platforms, not only can the student acquire useful skills like learning a foreign language, but they can also obtain higher education, earning a certified diploma from world-renowned universities.
If you are going to start an eLearning marketplace, you are in the right place and time. We have estimated the basic features in the previous section. But to make a marketplace website specified for online courses, you will also need the following typical functionality:
This section is dedicated to an individual tutor or educational organization that can create or upload their courses to an online platform and monetize them. The features can be as follows:
Course creation: there can be different mechanisms of course creation ranging from uploading media files or SCORM packages, to an online wizard for course building.
Schedule for courses: A planner where a teacher can schedule the courses’ start date, duration, and deadlines for assessments.
Teacher’s dashboard: Statistics on the activity for each course.
Here people who are interested in taking a course can select a course and enroll. Also, this is where they will have all course history stored, communicate with teachers and other students, submit assessments, and get certified. The features include:
List of courses: All courses at the platform.
Course page: Each course should have its own page where students can enroll and get all the course information, submit assignments, find out their scores and write reviews.
Enrollment: Students should be able to enroll and pay for a course.
Student’s dashboard: Current, past, and future courses, earned certificates, and payment history.
4. How much does it cost to build a booking website like Booking.com/Agoda/Airbnb
This type of marketplace connects hosts (landlords/ lessors) on one side and guests (renters/ tenants/ lessees) on the other side.
The lessors get a great opportunity to advertise their property to a large audience, get clients and sustainable revenue without additional marketing efforts. Guests can search and filter through a large database of properties to find a perfect match for their preferences.
Now that there are so many booking platforms that provide competitive prices and have loyal customers, it can be hard to stand out. But a unique concept and high quality of service make magic. Still, you need to start with some basic functions like the ones described above and add typical features to it. Here they are:
This is the portal for property owners who want to list their accommodation and be found by guests. This is where they can set all property attributes, availability, and prices. A list of features includes:
Property listing and management: Adding and editing property details.
Availability calendar: Availability and pricing settings.
Reservations: All information about reserved properties and history of payments.
Dashboard: Performance, earnings, and availability overview.
In this section, people who are looking for accommodation can select and book the appropriate options filtering by price, availability, and attributes.
Bookings: All previous, current and future bookings with payment details.
Property details pages: Each property description page with the possibility to check availability and book.
Cancellation and refund: Possibility to cancel the reservation and apply for a refund.
Maps integration: The display of the property location on the map.
5. How much does it cost to build a freelance jobs marketplace like Upwork or Fiverr
Nowadays, not only individuals and small businesses order tasks from freelancers. Even enterprise-size companies get involved in the search for and hiring of specialists in the online marketplace for freelancers. The main reasons for this are access to a large pool of specialists from all over the world with a variety of skills and experience and an opportunity to cut recruiting expenses. The popularity of freelance platforms will grow in the next decade, so you have a great chance to create a marketplace website for jobs and ride the wave.
The basic functionality was estimated above. So, now let’s enumerate the typical features of a freelance platform and give an approximate estimate in hours and budget:
Job poster section
This is where people who need a job to be done may create their job posts or search for freelancers/errand runners/employees.
Job posting: Job description, required skills, and proposed salary.
Order management: Past and current jobs and their details and status.
Here people looking for a job can find job posts and apply.
Besides basic and typical features, to build a marketplace website that will stand out among competitors, you’ll need to add a touch of uniqueness. Here are some examples of extra features that will enhance your marketplace:
Different monetization and shipping options
Video and 3D photography in product descriptions
Machine Learning (ML) based price or product recommendation
These were approximate costs to create a marketplace website of a definite type. Features have the greatest impact on price, but they are not the only ones. If the cost does not suit your budget, it does not mean that you should reject the idea of launching. Let’s look for a solution together!
For a more precise estimate, send us your requirements.
To start an online marketplace, a founder can try a ready-to-use solution that will minimize the time and cost of development.
We do not mean the use of website-builders like Wix, Sharetribe, or Shopify. These have allowed people who do not have programming skills to construct a general marketplace like millions of already existing in the market. This type is good for idea verification but not for a unique, secure and scalable platform.
Also, we do not mean WordPress, Drupal or Magento. Though they are considered a cheap and easy way to create a website, in reality, they still require technical skills from their owners and may turn into a ‘headache’ because of their inflexibility and extremely vulnerable security.
At Greenice, we work with unique projects that cannot be created with off-the-shelf solutions. But taking into account the startup challenges, we sometimes use ready scripts like ZCart if most of the project is standard.
Why is it better than a canned CMS like WordPress or website-builder like Sharetribe?
ZCart (and similar scripts) is written with Laravel, a modern and reliable PHP framework that we use in many custom projects. It gives us full freedom for remodeling the platform while cutting the development time. We can take the ZCart structure, configure a server and database for it, rebuild existing features according to your business needs, and make necessary integrations; thus making the price much lower.
Disclaimer: This is not a one-size-fits-all solution that will work for all projects. Specifically, ZCart will suit the product marketplace, but may not fit the eLearning or freelance marketplace. With this example, we just wanted to show you that it is always possible to elaborate on any fitting solution.
Other ways to decrease the cost by creating well-thought-out requirements specifications and starting with a minimum viable product (MVP). Let’s talk about them right now.
Steps of the Development Process
One of the most common questions that we receive during the initial call with our future clients is about the development process in our agency. That’s why we will examine it here:
1. Discovery Phase
At this stage, we need to analyze and estimate your project requirements. Only after this inspection, is it possible to say how much it will cost to build an eCommerce website of the specific type.
Software Requirements Specification (SRS) is a document that describes how the system should behave and is illustrated by mockups and wireframes.
This document is a great help and time-saver for estimation and development planning as it describes the system’s purpose, look and feel, and behavior. This document will become the main reference for the team during project development.
There are a bunch of ready templates that you can use to write requirements. If you have difficulties with specification creation, our Business Analyst can help you write an explicit document and draw the wireframes.
Before moving on to the implementation phase, we need to have the design of the future marketplace.
Based on the wireframes and prototypes, it is easier to create a web design. You may hire a web designer yourself or order a design from Greenice. Only after the design is ready, can you move to development.
3. Development Phase
a) Build an MVP
Now that we have all components in one place: requirements specification, and estimate, and design, we can sign the contract and start development.
If your project is in the idea verification stage, we advise starting with a minimum viable product (MVP) that allows launching to the market as soon as possible. Following the concept of the Lean Startup, you should release quickly and examine the initial feedback from users to learn how to improve your product.
The quick launch will save you time and money giving you a chance to make changes, if it makes sense, while the product is still raw or to switch to something new without a big loss.
b) Enhance the product with iterations and scale-up
Agile development allows you to gradually enhance the product after its MVP launch. This is done in small iterations that give you a chance to add new features quickly and to adjust the platform to reflect users’ feedback and special requests.
How to Apply This to Your Business
We gave you the approximate costs for different marketplaces. But of course, each project is unique and should be studied and estimated individually. The more accurate and detailed are the requirements, the more precise the estimation we will provide.
However, development is more than only the creation of features. The development price will also include such tasks as architecture planning, database creation, and functional testing. As the requirements may change during the development process, you need to be prepared for a price and time increase of 10-15%. Additionally, you need to add the cost of design, layout, and testing that depend on the complexity of your project.
You can rely on our profound experience and deep knowledge in the area of marketplace development. We try to stand at the edge of innovation, using the latest technology. We use frameworks and cloud solutions that allow us to speed up the development and minimize project time and cost.
Now that you have full access to the prices and features, we hope that you will confidently make a decision to create an online marketplace of your own that will become a competitive and profitable platform.
Co-author: Pavel Moroz, Business Analysis expert at Greenice. Pavel has vast experience in Business Analysis and requirements creation. His daily duties include communication with customers and developers to understand both sides and to come up with the best solutions. Pavel is a dynamic thinker who will impress you with his ability to come up with unique business solutions.