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What is a Service Marketplace and How to Start One?

4 min read
Service marketplaces are becoming increasingly popular but what are the details you should know before starting one?
What is a service marketplace and what should you consider before starting one

Marketplaces turn out to be a golden opportunity for many entrepreneurs who have found a yet unexplored business niche.

On one hand, service providers take advantage of much greater audience exposure, on the other, customers’ search for goods and services is immensely facilitated.

Although there is no better time to start your marketplace venture, one should not undermine the effort needed to become successful.

Of course, as with any other market, there are different types of marketplaces – goods-centered and services-centered.

In this article, we discuss the latter as it is a bit more innovative and it challenges some of the established norms.

For instance, Airbnb was looked at skeptically at first. Who would dare to trust a complete stranger to sleep in their home?

But before diving into that, let’s cover the basics.

What is an example of a service marketplace?

A service marketplace platform starts, arranges, and concludes the deal made by a service provider and a service seeker in a safe and organized way.

The platform ensures that all parties are content; the money is delivered to the seller, and the customer is happy with the service.

What is a service marketplace and what should you consider before starting one

Contabi uses 3veta’s marketplace builder to ensure a seamless user experience for their users.

The services offered could be targeting regular customers in the case of B2C marketplaces, or could be aimed at professionals and companies – B2B service marketplaces.

To provide the reader with a better explanation, here are five popular service marketplace examples:

  • Uber – Connects drivers to people who need a ride by offering good remuneration and affordable prices at the same time.
  • Zocdoc – Makes access to health professionals much easier as people are allowed to book an appointment with a doctor of their choice, use their insurance, and leave a review about their experience after that.
  • Deliveroo – Facilitates the delivery of food and groceries by connecting customers with restaurants and supermarkets.
  • Upwork – Helps companies recruit the best fit for the available position and, in turn, assists professionals to approach employers and find a job.
  • Freelancer – Eases the process of hiring a freelancer for a temporal job.

The most commonly used business model of B2C and B2B service marketplaces is based on commissions, which means that the platform is taking a small percentage or a fixed fee for every successful sale.

Let’s dive a bit deeper and see how a professional service marketplace system makes money.

How do service marketplaces make money?

The nature of the offered services in the marketplace could be either commoditized or uncommoditized. The former constitutes an already fixed rate that can be described, the latter is when the pricing needs to be further discussed between the asker and the offeror.

In the first case scenario, the service providers may charge per unit like when you book a place to stay, per seat like when you want to go to the cinema or theatre, or per service like when you are renting a car.

The second option requires the service provider to put a price on the request made by the customer or encourages the customer to enter into a conversation with the seller and discuss the pricing together.

What is a service marketplace and what should you consider before starting one

The method of pricing also depends on who would initiate the conversation.

For instance, Upwork offers both. A professional is offering their services and many companies might get in touch with them. But also companies can post a job description and professionals may apply for it.

For the marketplace to stay afloat it has to choose its business model carefully.

As we already explained, there is a commission-based approach that charges sellers per every successful deal.

There are other popular methods as well:

Subscriptions that allow users to access the platform’s services in exchange for a monthly or yearly paid fee (there may be a free trial or not). Usually, this could be a good idea for a freelancer marketplace solution.

And freemium may offer its most basic features without charging, however, to unlock advanced ones, users have to pay.

How do you create a service-based marketplace?

The question of how to launch a marketplace might seem a bit trivial at first.

However, you should not underestimate the work you’ll have to put into establishing trust between you, as the middleman, the customers, and the sellers.

The more technical aspect of creating a service marketplace system is for you to find a third party that would help you with the building of your website i.e. the programming tasks.

💡 Pro tip

Use 3veta to build a service marketplace platform in no time and focus on growing your business.

First, you need to consider the features you’d like your service marketplace to be able to support the successful delivery and purchase of services.

Make sure to engage with your targeted audience early on and carefully analyze what their needs and demands are.

In an interview on Airbnb, Christopher Lukezic says:

What I’ve learned from [the Airbnb founders] is to listen to your users early on and engage them in the process at every step of the way. Don’t just meet them; engage them, converse with them, and prod them to find out what their problems and needs are. People often start companies to solve their own problems, but, over time, all entrepreneurs recognize that to be successful, the product has to be built for a wider array of end users.

By engaging with your potential customers before even starting your own marketplace, you get a better idea of whether the niche you’ve chosen offers steady business prospects and whether your idea is feasible in the long run.

Final words on what is a service marketplace

Marketplaces are definitely here to stay thanks to their ease of work, accessibility, and relatively affordable way of setting up. They could also be applied to almost every field of work.

Even if entrepreneurs (partly) lack the needed programming skills, there are companies like ours that could help them achieve their goals.

The most important step is to have a solid business plan and an idea of how to facilitate the access of customers to goods or services from a particular niche that is steadily in demand.

And if you have already completed this step, let’s get started on your own marketplace together!