In our digital age when commerce continues to migrate online, more and more companies are choosing to capitalize on a marketplace as a business model, building it by their own efforts or using marketplace development services.
Enabling multiple parties to transact with each other, marketplaces can earn companies millions of dollars in fees.
For instance, Etsy’s revenue tripled between 2017 and 2020, with more than 75% of its $1.7 billion revenue generated via the marketplace.
Despite such business opportunities, marketplace development is typically a very costly and time-consuming venture.
Thus, when developing a marketplace from scratch, a team can spend months on coding only, without having an opportunity to prove the solution’s feasibility in practice.
Today, when competition is fiercer than ever and consumer behavior is constantly changing, such tardiness may undermine the marketplace success.
At Itransition, we believe that companies striving to gain maximum value as soon as possible should adopt a more flexible and streamlined approach to marketplace development.
This is where the SaaS software distribution model may come in handy. SaaS is a good option for startups, midsize businesses and even large enterprises, and this article will explain why.
The challenges of building a marketplace from scratch
Developing a custom marketplace may be the best option if a company wants a completely unique product that is tailored to the brand’s identity.
This way, the team can leverage maximum flexibility of the terms of the business model, functionality, and design of the marketplace.
But despite the advantages of this approach, it sometimes may be too slow. Before the marketplace launch, the team may spend several months planning and building its MVP, so experimenting or quick hypothesis testing becomes impossible.
Alternatively, companies can use off-the-shelf marketplace builders. They allow companies to deploy a generic marketplace, gain access to basic trading capabilities, and if needed scale it with various plugins.
Despite the accessibility of this approach, it is also not the fastest one, since the team has to develop interfaces for customers and suppliers, choose and install relevant plugins, conduct software testing and optimize the marketplace for all user segments.
To speed up this process, a no-code SaaS marketplace platform can be used as the foundation.
How SaaS can boost marketplace development
With the SaaS model, companies can access the software remotely by subscription, eliminating the need to install anything on physical devices and pay for the hosting.
The SaaS provider takes responsibility for maintaining the marketplace security and updates, allowing subscribers to focus on business development. This way, companies can quickly launch their marketplaces and see if their business ideas work.
However, this approach to marketplace development has several significant drawbacks. Since many SaaS providers try to serve as many users as possible, such marketplace builders mainly offer generic and limited functionality.
Coupled with poor scalability, this limited capacity may be a problem if you want to add some advanced capabilities.
Fortunately, there is a way to leverage the strengths and overcome the limitations of the SaaS-based model.
Today, there are software providers that offer marketplace APIs which is a new milestone in the evolution of the SaaS marketplace technology.
Using API-based marketplace builders, teams can achieve more flexibility in developing their unique functionality while ignoring the limitations of the marketplace platform.
For example, teams can deploy their own features and user interfaces and integrate the marketplace with corporate software such as a CRM.
At the same time, the provider remains responsible for marketplace maintenance, security, and compliance management, saving the owners a lot in labor expenses.
However, while API-based development is faster and more affordable compared to building a marketplace from scratch, it may be more expensive and slower than using a generic no-code solution.
Ideally, managers should consult ecommerce technology experts and only then choose a specific approach to marketplace development.
Marketplace development can be very profitable but proves to be a complex and costly task at the same time.
To be able to launch an MVP and test it in practice quickly, teams can use off-the-shelf SaaS solutions. If advanced functional flexibility is required, another option is to implement a marketplace API and add the necessary custom capabilities on top of it.