Marketplace software: How to compare and choose the best solution

Building an online marketplace with existing software has many benefits compared to coding from scratch, which you can read more about in our article on the different ways to develop a marketplace. But comparing dozens of service providers and choosing the right one can be quite a challenge. This article helps you make the right decision.

Using existing online marketplace software is almost always the fastest, easiest, and most cost-efficient way to launch your business.

But there are dozens of solutions out there, and new ones are launched almost every month. The right one allows you to launch your marketplace fast so you can start learning about your audience. The wrong one can set you back months before you realize it doesn't work for your idea.

Comparing software providers carefully is important. After all, they will be offering the technology that powers your entire business, so this choice is one of the most important decisions you'll make.

Finding the best marketplace software for you depends on five key things:

1. The focus of the software
2. Extendability of the software
3. The company's business model
4. Services included in the software
5. The company's references.

This article won't offer you a detailed comparison of all online marketplace software companies and solutions out there. That is because different marketplace types (such as rental marketplaces, services marketplaces, product marketplaces, and reverse and bidding marketplaces) require somewhat different feature sets. An ideal solution for one type might not always be the best marketplace software for another. Your budget, technical skills, and future plans will also play a role in your decision.

Furthermore, such a comparison would be biased since, at Sharetribe, we build marketplace software ourselves.

Instead, we're going to discuss each of the five principles in more detail. Keeping them in mind will help you compare online marketplace software and find the solution that best fits your needs.

No software solution handles all different types of marketplace ideas perfectly. The more focused the software is to your specific online marketplace type, the more likely it is to be a good fit for you.

Different dimensions affect the choice of marketplace software:

• Is your marketplace about selling products or services?
• If it's about products, are they physical or digital?
• Is it consumer-to-consumer (C2C), business-to-consumer (B2C), or business-to-business (B2B)?
• Do you want to build a website or a mobile app?

As an example, Sharetribe is an ideal solution for web or mobile marketplaces in the "sharing economy". That means B2B, B2C, and C2C platforms that deal with rentals (think Airbnb), booking local services (think Handy, Treatwell, or Rover), or product marketplaces (think Etsy or Depop). You can launch a marketplace website without any coding but also build custom functionality or a mobile app with Sharetribe.

For a marketplace where retailers sell their products in large quantities (think Amazon or Alibaba), Izberg can be a good fit. If you are focusing on digital products (think Themeforest), Marketify combined with Easy Digital Downloads might be a good solution for you. If you need an Uber-style ride-hailing app, you might want to take a look at LibreTaxi.

Most online marketplaces do have lots of requirements in common. For example, platforms typically need listings, reviews, and user profiles in their feature set. But there are other features that are more specific to marketplace type. For example, marketplaces dealing with rentals or services will need a booking calendar, while marketplaces focusing on products don't.

So, the criterion for your choice should be that all the necessary features to support your specific marketplace idea and marketplace business model are there.

Building a successful online marketplace platform is a process, not a project. The initial launch of your platform is just the very beginning. After launch, once you get data by talking to your users and looking at your analytics, you should be able to constantly adapt your platform. This means your software solution needs to be easily adaptable.

An off-the-shelf marketplace software tool is often the best solution for validating your idea and building your Minimum Viable Platform. But sooner or later, you will need to build features specific to your concept—your secret sauce that separates you from the competition.

Due to the unique nature of these features, your marketplace software vendor most likely won't offer them out of the box. Building a new platform from scratch at this point is naturally an option, but doing that would take time and money you'd probably be more willing to use on growth. Not to mention you'd essentially be spending most of those resources building the kinds of basic features your Saas-powered platform already has.

That's why it's important to think ahead when you're choosing your online marketplace software. Make sure the vendor offers the possibility to extend the platform to allow you to grow your marketplace without having to start from scratch.

If the vendor's software is source-available or open-source, you're good to go: you can simply take the code, install it on your own server, and start building your customizations. However, this approach also has its downsides. Since marketplace software can be quite complex, it means a steep learning curve for your developers. The platform might also contain features you don't really need, which can slow down customization work due to the unnecessary complexity. Finally, it locks you into using specific technologies instead of allowing your developers to use the language and frameworks they are most comfortable with.

Thus, before moving forward with an open-source solution, be sure to get an opinion on the customizability of the codebase from a developer.

An alternative to this approach is a model that is sometimes called "headless". This means the software architecture is based on an application programming interface (API). This allows your developers to fully customize the workflow and user interface of your platform, integrate any third-party software, or build mobile apps. At the same time, you benefit from the essential marketplace functionality offered by the vendor, like search, payments, messaging, reviews, availability and scheduling, moderation, and analytics tools for the marketplace operator. Sharetribe combines no-code functionality and headless architecture, meaning you can launch your marketplace without coding but later custom-develop unique functionality and self-host your front-end application.

In general, using a solution built specifically for two-sided marketplaces is recommended. There are also more general CMS (like WordPress) or e-commerce (like Magento) solutions that can be converted into marketplaces by using a host of third-party plugins. The benefit of using WordPress or Magento is a large ecosystem of plugins and developers. The downside is that these software solutions contain a lot of overhead: you don't need most of their functionality if you're building an online marketplace. This overhead might not matter much in the beginning, but as you continuously adapt your platform, it becomes a burden and results in sluggish development.

Entering into a partnership with an online marketplace software provider is a major decision. Their technology and services will power your entire business, so you'll want to be sure their interests are aligned with yours.

The best way to understand this is to look into how the software company makes money.

If the company charges a large amount of money upfront—before you have even launched your marketplace—beware. In such a model, the vendor makes money whether you succeed or not. This means their incentive is to create an attractive-sounding software tool with a long list of features. This might mean they're less inclined to offer tools that help you build, sustain, and expand your business.

If the revenue model of the vendor is based on your user count or transaction volume, you're probably in good hands. When your software provider only makes money when you do as well, they have a strong incentive to develop their software tools and services in a way that helps your business succeed. Mutual benefit is typically a good starting point for a partnership.

Does the software provider offer hosting, server monitoring, automatic software updates, and data backups?

If you're not technical, needing to set up the required hosting and backups might be a deal-breaker even if you do get the basic software out of the box. As your user volume grows, making sure your platform works smoothly and securely can require a full-time developer and take a surprisingly big chunk of your monthly budget.

You also want to make sure that your software provider adheres to all the best security practices and handles regulatory compliance. For instance, in September 2019, the payment regulation changed in the European Union, requiring marketplaces to adapt their transaction flow. Starting in 2023, the EU has required marketplaces to report seller information and transaction yearly to tax officials under the new directive DAC7. Prefer software that takes user data protection seriously as more and more countries and economic areas create consumer privacy legislation. It's good to check beforehand that your marketplace software provider will take the responsibility to adapt to possible changes in legislation in the future as well.

Many vendors (like Sharetribe) offer some kind of free trial period. You should use this time before committing to a purchase and test all the aspects of the software thoroughly.

During this time, it's also a good idea to be in touch with the software company's customer service. You will likely communicate with customer support a lot as your platform starts growing, so you want to make sure they answer quickly and to the point and that making yourself understood is easy.

The software company you choose is an important partner, almost comparable to a new team member. If this relationship doesn't work well, your business probably won't either. You should approach the selection process with the same seriousness as you would approach recruiting.

Interview your candidates for marketplace software providers. Ask them how long they have been in business, how big their team is, what is their financial situation, and how many paying customers they have. Note that the number of paying customers is what you're after, not how many marketplaces have been created using the software. Like we discussed earlier, you should be looking for a company that is invested in helping you create a long-term business. Ask them to provide examples of their most successful customers, both in general and in your domain.

You want to find a vendor that is willing to share such information openly. They should be able to demonstrate that they themselves have traction and that others have been able to succeed with them. You need to be able to trust the vendor fully, so they should take these questions seriously and answer them convincingly.

This article lists several different factors that affect the choice of the right software for your particular situation and business idea.

Some are related to the software itself. It should be focused on solving the problems in your specific industry and creating the best possible user experience for your audience. You should also be able to continuously adapt the software when learning from your users while you build features that are unique to your concept. The software you use should empower your growth, not slow you down.

Other factors are more about what the company and their culture are like. Their business model should be aligned with yours so that both parties benefit from building you a successful online marketplace business. They should be able to provide all the required services you need on top of their software offering. They should be reliable, responsive, and easy to communicate with. In short, you should feel they are a trustworthy partner at every stage of your business.

Choosing the right software solution can have a tremendous impact on your success, so it's a process you want to approach carefully. Be sure to talk to several vendors and compare their offerings thoroughly before committing. When you find the perfect technical partner for your marketplace, you've got a huge head start on your competition.