MVP for Two-sided Marketplace: Common Hurdles and How to Build a Solid Platform

Your marketplace creation journey starts here! Learn how to overcome the challenges of building an MVP for a two-sided marketplace and set your platform up for success from day one.

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by Agustin Perkins


Venturing into the world of two-sided marketplaces? Then it's time to find out what it takes to build a robust platform to quickly grab the attention of your target audience, and deliver a memorable user experience. 

Leveraging NaNLABS' 10+ years of experience, in this article we'll discuss the most common business challenges and explain how to set your two-sided marketplace MVP for success. 

So, get ready to kickstart your marketplace journey on the right foot! Learn from our team's real-world examples and nail your marketplace development on the first try.

Table of contents

That marketplace idea you've been polishing? It’s time to bring your platform to life! From ideation to launch, we can design, architect and code your MVP into reality in 3 months or less.

What exactly is a two-sided marketplace? 

A two-sided marketplace is a business model where a platform connects two distinct user groups, such as buyers and sellers, facilitating interactions and transactions between them. 

Popular examples include Amazon and eBay in e-commerce, Uber and Lyft in transportation, and Airbnb in accommodation services. These platforms generate value by providing a medium for buyers and sellers to engage but also offer many other benefits, such as:

  • Trust and Transparency: Two-sided marketplaces make trading safer for both buyers and sellers, enhancing trust and transparency through ratings, reviews, and other reputation systems.

  • Greater Reach: These solutions present an expanded audience and market for sellers while helping buyers access a more diverse range of products or services.

  • The Network Effect: Such platforms experience what we know as the "network effect", where the value of a platform increases as more users join. Growth in one type of user attracts more participants from the other, which drives the platform's expansion.

  • Increased Efficiency: Two-sided marketplaces help streamline the buying and selling process, making transactions safer, faster, and reducing associated costs.

  • Multiple Revenue Streams: As a business, the platform can benefit from several revenue streams, such as transaction fees and commissions, subscriptions, and even advertising.

The typical challenges of building a two-sided marketplace 

Crafting a two-sided marketplace platform brings its own set of challenges for business owners and software developers. You've got to meet the needs and expectations of two different user groups while making sure everything flows smoothly in every transaction. Here are some of the main hurdles you can expect:

Trust and Safety

Since the marketplace involves financial transactions between two strangers, it's key to make both sides feel safe when using the platform. This means establishing secure payment methods, but also developing features to support user verification, ratings and reviews, and dispute resolution processes. And let's not forget about creating easily accessible customer support channels.  

User Experience

Trading on a marketplace requires users to deal with multiple functions such as inventory management, scheduling, payment processing, and others. All of which could be intimidating for new users, hindering adoption. As a result, you must have a deep understanding of users' expectations and behaviors, and of how they interact with each other to get the user experience (UX) just right. 

Supply and Demand

Building a user base and getting the right proportion of buyers and sellers is one of the primary challenges for new two-sided marketplaces. In addition to your own marketing strategies, such as offering incentives for early users, your platform will need to impress the audience enough to generate word-of-mouth referrals and gain traction. 

Regulatory Compliance

As with any solution, it's essential to ensure compliance with legislation regarding consumer protection, tax regulations, and data privacy (e.g. GDPR and CCPA), in all jurisdictions where it operates. That includes implementing features like data encryption, anonymization, and user consent mechanisms, and employing techniques such as role-based access control (RBAC) or attribute-based access control (ABAC) to enforce security policies.

Scalability and Performance.

Marketplaces can grow quite rapidly and face demand fluctuations, which means they require a robust, scalable architecture to ensure fast loading times and smooth transactions even during traffic spikes. Customers must feel that they can rely on your platform at all times, so thorough testing and performance monitoring should also be a priority to spot and solve issues before they reach users.

Setting your marketplace up for success

The challenges we've just mentioned already include some pretty important insights for building a killer marketplace. But based on our 10+ years of experience in the field, our recommendation is to first test the market's waters by launching an MVP.  

Check out our top five tips to help you nail your two-sided marketplace MVP development process.

1. Do Your Research

The MVP discovery phase is the moment to do your homework and get clear on who your audience is and what they're looking for. A thorough market research will help ensure that there's enough demand from both of your target user groups, while surveys and interviews can teach you a lot about the ideal product-market fit

2. Stay Lean

There will be a time to take your platform from MVP to a full-scale product, but for now it's important to keep things simple. Understand which features are essential to meet your user's needs and validate your concept, and leave the bells and whistles for a later stage. We recommend developing your features in order of priority. This helps you control your MVP development costs and avoid running out of money before building the most critical elements of the platform. 

3. Customize Your UX

On top of narrowing your MVP project's scope, the next priority would be creating a seamless user experience. Think highly tailored features and flows, specially designed for your kind of buyer and seller, and the services or goods they trade. Your research should have allowed you to identify what each group values most when using a two-sided marketplace, so build with those elements in mind. This means also trying to anticipate any possible frustrations, and extensively testing the platform to identify and address usability issues. 

4. Keep an Eye on Your Metrics

Game-changing insights can be drawn from the regular operation of your platform if you know where to look for them. From the very beginning, you should be keeping a close eye on several key metrics such as user acquisition, retention, and transaction volume. Using analytics tools will help you understand user behavior and identify areas for improvement before they even mention it. 

5. Iterate Based on Feedback

Instead of perfecting the details of your platform, focus on quickly building and launching a solid MVP to start gathering real-world feedback from early users. Continuously iterate and improve your solution based on the user's insights, the metrics you've been following, and any new market trends.

NaNLABS's top examples of two-sided marketplace development 

How we helped HyreCar migrate and scale its two-sided marketplace 

HyreCar, a dynamic car-sharing marketplace based in the US, sought NaNLABS' expertise in building two-sided marketplaces to address their growing pains. Our task was to migrate their system from a monolithic architecture to a microservice-oriented one and improve velocity, while keeping the platform up and running.

Despite initial apprehensions due to past experiences with team augmentation, our approach quickly dissolved their concerns regarding time zone disparities and language barriers.

Leveraging Agile methodologies, we swiftly integrated with their staff and steered HyreCar's platform towards a microservice architecture. Despite the challenge of keeping things running during the switch, our extensive experience with distributed systems, event-driven architecture, and functional programming ensured that it all went smoothly.

HyreCar’s operations remained uninterrupted throughout our collaboration, which resulted in enhanced scalability, accelerated product development, reduced defects in production, and a long-term partnership that went beyond the completion of this initial project.

MVP for two-sided marketplace: how a custom-built web app increased our client's organic traffic by 10x

NaNLABS collaborated with a groundbreaking vacation real estate company to help them develop a two-sided marketplace aimed at transforming how the industry operates. Initially tasked with creating a progressive web app (PWA) MVP, we augmented their team and crafted a fully functioning solution with great UX/UI and a solid, bug-free back end in only 90 days. 

Impressed by our performance, the client engaged us for further enhancements on their marketplace platform, cementing our partnership.

Our Agile approach once again ensured a timely delivery and improvements that were in perfect alignment with the user feedback they had gathered. Prioritizing user-friendliness and SEO optimization, our mobile-first PWA catered to diverse user personas and seamlessly blended rational decision-making with emotional appeal.

Utilizing tools like Figma, React.js, and Redux the NaNLABS crew seamlessly executed their vision. Within three months of its launch, this final version of their PWA had already landed the following results:  

  • 10x more organic traffic; 

  • 3x more listings across more than 30 US states;

  • An exponential increase in property manager proposals.

MVP for two-sided marketplace: bonus tips for staying ahead of the curve

If you want to start your marketplace development right and build a strong brand from the get-go, we have some extra advice that will make all the difference.

1. Make it simple to use and easy to love

Even the most keen early adopters will quickly lose interest once they notice a steep learning curve to use a new product. To stimulate early adoption, you must simplify user onboarding as much as possible. Our suggestion is to minimize the steps required to complete key initial actions such as signing up, creating listings, and validating your profile. 

2. Play it extra safe

Nothing can kill a digital platform faster than a security breach, especially if it requires users to share sensitive data, such as a credit card number. To avoid this scenario, your best bet would be to have cybersecurity experts as part of your development team and to establish periodic security audits and vulnerability assessments from the very beginning. This is important even at an MVP stage since it's the best way to proactively identify and mitigate any potential security risks. 

3. Work with the pros

There are no two ways about it: two-sided marketplaces are not simple to build and time is of the essence when launching a new product. So if you want excellent results at a high speed, you'll need a crew with plenty of experience in building the kind of solution you're working on. A seasoned MVP development team, like the one we have at NaNLABS, will quickly get the ball rolling and regularly check in with you to see that your expectations are met. But it will also independently design and implement the ideal strategies at each step of the way, to keep your project moving at a high pace. 

That marketplace idea you've been polishing? It’s time to bring your platform to life! From ideation to launch, we can design, architect and code your MVP into reality in 3 months or less.

Frequently Asked Questions About Two-Sided Marketplaces

  • What are two-sided marketplaces?

    Two-sided marketplaces are platforms that connect two distinct user groups, facilitating transactions or interactions between them.

  • How do you market a two-sided marketplace?

    Marketing a two-sided marketplace involves targeting both user groups simultaneously. Strategies include building awareness through targeted advertising, offering incentives to one group to attract the other, and ensuring a seamless user experience to encourage retention and word-of-mouth referrals.

  • What are the benefits of two-sided marketplaces?

    The benefits of two-sided marketplaces include an increased network effect, expanded opportunities for buyers and sellers, streamlined transactions, and the potential for rapid growth. These platforms often create a win-win scenario for both user groups involved.

  • How do you monetize a two-sided marketplace?

    Monetizing a two-sided marketplace can be achieved through transaction fees, subscription plans, advertising, and other models.

  • What are the biggest two-sided marketplaces?

    Some of the biggest two-sided marketplaces include platforms like Airbnb, Uber, Amazon, and Upwork.

  • How do you build an MVP marketplace?

    Building an MVP marketplace involves identifying essential features for both user groups, creating a basic, functional version of the platform, and testing it in the market to gather feedback.

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