In the modern digital era, online trading has seamlessly integrated itself into the daily lives of countless individuals. People from across the globe, whether buyers or sellers, are keen on harnessing the advantages of e-commerce. However, they must also navigate through hurdles like the complexity of search and the formidable competition posed by established e-commerce powerhouses.
What is a Vertical Marketplace?
Vertical marketplaces, also known as niche marketplaces, are online platforms that focus on providing goods or services within a specific market segment. Unlike large-scale eCommerce platforms like Amazon or eBay, vertical marketplaces cater to a more targeted audience.
These platforms offer products and services that meet the specific needs and interests of their niche user base. They create a personalized shopping experience, allowing users to discover unique and specialized products that may not be readily available on general platforms.
There are numerous vertical marketplaces of varying sizes in the global market. For instance, Houzz is a popular marketplace that specializes in home interior and exterior products. It offers a vast catalog of furniture, decor, and even construction and renovation services for individuals looking to design and furnish their homes. Discogs, on the other hand, is a marketplace created for music collectors and audio enthusiasts. It features a wide range of vinyl records, CDs, and other audio formats, including rare and exclusive recordings.
Advantages of Vertical Marketplaces
Vertical marketplaces provide an opportunity to avoid direct competition with larger e-commerce players. They allow sellers to focus on unique products or services that may appeal to a smaller yet highly targeted and profitable audience.
2. Targeted audience
Niche marketplaces enable sellers to reach a specific target audience interested in their particular products or services. This enables sellers to better understand the needs of their audience and offer products that cater to their specific interests, resulting in more successful sales. These platforms, with their specialized focus, possess deeper expertise in their respective product categories, better understanding the unique needs and preferences of their customers.
3. Specialized capabilities
Due to their understanding of their target market, vertical marketplaces often offer specialized capabilities and enhanced services. These platforms provide a more efficient buying and selling experience, offering features and tools tailored to the specific needs of their customers. This may include advanced product search options, precise filtering of results, comparison of products based on specific characteristics, and user-friendly feedback systems specific to the niche market.
4. Community development
Vertical marketplaces can serve as a platform for building and nurturing a community of like-minded sellers and buyers. This facilitates the exchange of knowledge, experiences, and recommendations, fostering customer loyalty and creating a unique and engaging atmosphere within the marketplace ecosystem.
Drawbacks of Vertical Marketplaces
While vertical marketplaces offer several advantages, it’s important to consider the flaws associated with starting such a business:
Limited target audience and sales potential
Niche marketplaces cater to specific segments, which means that their potential customer base may be smaller compared to general marketplaces. This can affect the overall sales potential of the platform.
Restricted product range and supplier availability
Specializing in specific products or services may result in limited options for the range and diversity of offerings on the marketplace. This could impact the appeal of the platform to potential buyers.
Competition from other retailers
Depending on the chosen niche, vertical marketplaces might face competition not only from other online platforms but also from traditional retailers. This could lead to lower profit margins and require additional efforts to attract and retain customers.
Reliance on suppliers
Vertical marketplaces often depend on a limited number of suppliers for their inventory. This can pose challenges related to inventory management, product quality, and maintaining competitive pricing.
It’s crucial to evaluate and address these peculiarities to ensure the success and sustainability of a niche marketplace.
Volume of Vertical Sites and Development Potential
Niche marketplaces have been gaining significant traction in recent years, driven by the increased demand for specialized products and services. As consumers seek more personalized and unique offerings, niche marketplaces continue to emerge and contribute to the overall growth of the e-commerce industry as a whole.
Forecasts for the development of vertical marketplaces are positive due to several factors:
- Growth of Internet users. In the world, more and more people are starting to buy goods and services online, and this trend continues to intensify. As the number of Internet users increases, so does the demand for various niche products and services.
- Development of e-commerce. E-commerce in Asia continues to develop rapidly, and more and more small and medium-sized entrepreneurs and manufacturers are realizing the benefits of selling on online platforms. Vertical marketplaces are becoming an attractive option for specialty sellers.
- Search for uniqueness and individuality. Consumers are increasingly seeking to find unique products and services that differ from the mass offerings. Vertical marketplaces offer a narrower and more specialized selection of products, which corresponds to this trend.
The volume of the niche marketplace is depends on the specific niche and geographical region:
- The sports nutrition market had a value of $10.7 billion in 2020, with sports supplements accounting for 82.2% of the total revenue share, making it the largest segment within this niche.
- The number of people embracing a technology-enabled, location-independent lifestyle is projected to reach 1 billion by 2035, leading to a high demand for information and services tailored to this audience.
- The home improvement market experienced significant growth, with total spending reaching $762.9 billion in 2020. It is expected to further grow to $1,009.9 billion by 2027, driven by shifting preferences towards energy-efficient and luxurious homes.
- The education industry has witnessed a shift towards digital content, particularly eBooks, due to their lower production costs and increased accessibility for users with disabilities. In 2020, the total spending on educational technology was $89.49 billion, projected to reach $404 billion by 2025.
- The global gaming market was valued at $173.7 billion in 2020 and is expected to reach $314.4 billion by 2026, indicating its continuous growth and popularity.
- The clean beauty market, focused on toxin-free and eco-friendly beauty products, was valued at $5,439.6 million in 2020. It is anticipated to reach $11,558.5 million by 2027, based on increasing consumer interest in sustainable beauty options.
More information about popular niches in East Asia in our article.
How to Launch a Vertical Marketplace and What to Pay Attention to
Research and selection of niches
Even if you have a ready-made niche business (offline or online store) and have no problems choosing a niche, then research data and analytics will help you scale your business. What will help you here:
- Studying demand and competition. Study the demand for different niches, determine existing competition and identify potential for growth and profitability. To determine if a category is trending, enter keywords related to the niche you’re in into Google Trends to track popularity over time and target specific geographic regions.
- Conduct research on your target audience. Determine the characteristics and needs of your target audience to understand what type of product or service may attract more buyers.
- Consider uniqueness and value. Find something unique or valuable to your target audience. Consider factors such as availability, quality, price and innovation.
- Conduct a financial analysis. Estimate the expected costs of creating and maintaining a marketplace, as well as the potential profitability of the niche based on projected sales volumes and profit margins.
- Start with a pilot project. When launching a niche marketplace, it is recommended to start with a small MVP project to test the concept and evaluate the market reaction. Add and expand functionality gradually, testing each change. This path is slower, but it will help create a truly unique online platform at the lowest cost.
Choosing a business model and monetization method
When it comes to creating a vertical marketplace, the choice of business model depends on the goals and characteristics of your business. Let’s explore some popular options:
In this model, your niche marketplace serves as a platform to connect suppliers and other businesses. This is particularly relevant if your niche involves providing products or services for other companies or organizations, or if you offer wholesale purchasing services. Your role will be that of an intermediary, facilitating connections between suppliers and buyers while adding value to both parties.
With this model, your niche marketplace focuses on directly providing services or selling products to end consumers. You will offer unique goods or services tailored to your niche and engage directly with individual customers.
This model entails creating a platform where consumers can list and sell their own goods or services to other consumers. As an intermediary, you will ensure secure and convenient transactions between consumers.
Choosing a monetization method for your marketplace
Here are some common models:
- Commission model. This involves earning a percentage of every sale made on your platform. It’s a popular choice for marketplaces, as you directly benefit from the transactions taking place.
- Advertising model. You can generate revenue by selling advertising space on your marketplace. This model works well if you have a significant user base and can attract advertisers seeking to reach your niche audience.
- Subscription model. With this approach, users pay a recurring fee to access premium features or exclusive content on your platform. This model can provide a steady source of income while offering enhanced value to your audience.
Remember, it’s important to select a monetization model that aligns with your niche and business strategy. You may also consider combining multiple models to increase stability and ensure long-term sustainability for your business.
Choosing a platform and technical aspects of the site
The next step is to select the right platform for your vertical marketplace. You have several options:
- Fully custom solution. Develop your own platform from scratch, tailored to your specific needs.
- Fully managed solution. Utilize a pre-built marketplace platform that comes with the main functionality already integrated.
- Custom development on a ready-made CMS platform. Customize an existing Content Management System (CMS) to create your marketplace.
When choosing a ready-made solution, consider factors such as the speed of setup, how quickly you can understand and launch the main functionality, the cost of the platform, and the opportunities for customization. To simplify your decision-making process, we have compiled a list of basic questions that you can ask developers or agencies in our article “Best Multi-Vendor Marketplace Platforms“.
CS-Cart Capabilities for Creating a Vertical Marketplace
CS-Cart offers a range of powerful features that make it an ideal solution for building a niche marketplace.
Multi-vendor and multi-storefront functionality
With CS-Cart, you can effortlessly integrate multiple vendors onto your marketplace, each with their own dedicated mini-store and customizable design. The multi-storefront capability allows you to create independent online stores within a single platform. Each storefront can have its unique design, product catalog, settings, and administrative access. By managing multiple stores through a consolidated administrative panel, CS-Cart simplifies operations, reduces maintenance efforts, and keeps development costs in check.
Easily personalize the design of your marketplace to align with your brand and meet your specific requirements. Take advantage of a wide array of tools to customize the appearance and layout of your store.
Flexible Product Management
Effortlessly add, edit, and manage products within your marketplace. CS-Cart empowers you to configure various product attributes and variations, as well as establish rules for displaying products on catalog pages.
Efficient Order and Payment Management
Streamline your order management process with CS-Cart’s comprehensive set of tools. Accept payments through multiple payment systems and offer a range of suitable delivery methods. Customize payment and delivery options based on your preferences, product types, and individual vendor requirements.
Advanced Analytics and Reporting
Leverage CS-Cart’s robust analytics and reporting features to gain valuable insights into your store’s performance. Access detailed statistics on sales, visits, and other essential metrics, enabling you to analyze marketplace performance and make well-informed business decisions.
This feature allows you to manage multiple warehouses or distribution points. This is especially useful if you work with suppliers from different regions.
With warehouse in CS-Cart you can:
- Manage inventory in different warehouses. Keeping track of the number of products available in each warehouse allows you to effectively manage inventory and avoid stock-outs.
- Set different prices and settings for each warehouse. Set different prices, markups or discounts for products in each warehouse to flexibly adjust your pricing policy depending on the location of the warehouse or region.
- Organize various delivery logistics. Multiple warehouses allow you to configure different delivery options for each warehouse. You can specify different delivery times, costs, or other parameters depending on the delivery location.
- Redirect orders to the nearest warehouse. Warehouse functionality in CS-Cart automatically identifies the nearest available warehouse for order delivery, which can reduce delivery time and improve the customer experience.
To determine which functionalities to prioritize and where to begin, identify the common challenges faced by sellers on marketplaces. This will help in understanding the key pain points and areas that require improvement.
How to Develop, Compete and Position Your Marketplace
To create a niche marketplace successfully and compete with major players, it is important to consider the following approaches:
Unique Offering. Identify the distinct features and value propositions of your marketplace that will appeal to your target audience. This could include specialized product/service offerings, a unique shopping experience, or innovative features.
Focus on Quality. Prioritize the quality of products/services and customer experience. Maintain high standards that meet the needs of your target audience. Carefully select suppliers and implement effective moderation on the platform.
Partnership and Collaboration. Develop a strategic partnership plan to attract sellers and expand your marketplace’s offerings. Establish relationships with reliable suppliers who can provide unique or exclusive products/services. Implement referral programs and create a space for sellers to share experiences, such as a blog with informative articles.
Innovation and Development. Stay updated with the latest trends and changes in your niche and continuously evolve your marketplace. Utilize cutting-edge technologies and innovations to enhance the functionality and capabilities of your platform. This could include tools like AR features, machine learning for data analysis, intelligent chatbots, and more.
Customer Retention. Implement loyalty programs, special offers, and discounts to encourage customer retention. Provide a positive shopping experience by regularly introducing new products and updates to keep users engaged and interested.
Successful Examples of Vertical Marketplaces from Cart-Power
Doctomarket, the French medical equipment marketplace, caters specifically to a niche audience. Given the high cost of medical equipment and devices, the platform has introduced a convenient installment payment option to make purchases more accessible. The popularity of Buy Now Pay Later (BNPL) options is on the rise in France, with 78% of shoppers willing to switch stores to access installment payments.
By implementing the Alma payment method, Doctomarket not only gains a competitive edge in its niche but also improves its conversion rate. Customers can now enjoy the flexibility of a convenient payment system when placing their orders. Additionally, vendors benefit from an easier process of selling high-value products and equipment.
MATO is more than just a niche vertical marketplace for textile products in Uzbekistan. It brings together retail chains, textile sellers, and even large manufacturers, offering a platform for both wholesale and retail transactions. The idea of creating this specialized marketplace arose when our client’s online store started receiving numerous offers from retailers and manufacturers interested in selling their products. To cater to this demand, we decided to develop a niche marketplace tailored specifically for textile products, providing a trading platform that facilitates both wholesale and retail sales.
We launched the MVP version of MATO with a wide range of functionalities and established convenient partnership opportunities for vendors. Moreover, we incorporated integrations with Uzbekistan’s ecommerce market to ensure seamless and affordable shopping experiences on the platform. Customers can now access a diverse range of textile products while vendors have the opportunity to expand their sales internationally.
Vertical marketplaces are unique platforms that specialize in a narrow segment of the market. During our review, we examined the advantages and disadvantages of such marketplaces, and also provided examples of successful niche marketplaces in various fields.
Getting more insights and dive into ecommerce in Central Asia in “E-commerce in Central Asia: Prospects and Challenges“.
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