Building an online Marketplace — How to avoid a roller coaster ride

Building an online Marketplace — How to avoid a roller coaster ride

E commerce changed the world as we know it. Anyone can sell or buy products and services online quite easily. They are free website builders and platforms like shopify that can make a soccer mum sell her cookies online. The bad news most of these cookie and cutter built websites close within 18 months or less.

I developed an eCommerce store for a friend of mine, his company was based in New York. It was one of the largest independent seller of phones and phone accessories at the time. This site was complex but very fun, and his sense of humor made the effort worth while. We pioneered similar / related products though we manually coded it. Today, we don’t have the same problem. His company was eventually bought by First Ascent. When I thought it was a complex project, I worked on another platform for selling ladders. The not so fun aspect about ladders, is that different shipping providers like Fedex, UPS limit you on the dimensions, so we had to code a shipping module to select the provider based on customer product choices — easier said than done.

Today, technology has vastly improved and most of these tasks are easier to accomplish but every business is unique and can throw a few hooks in the air before it boomerangs back in your face.

Let’s cut to the mustard.

Technology Stack

Like I mentioned earlier they are several free tools out there, and website builders, and they work for the most part, but I wouldn’t trust them any further can I can throw a bitcoin, if my intention is to make more than a few coins selling online.

For the most part I highly recommend WooCommerce available on WordPress, Drupal’s Ubercart and Drupal Commerce. Their power lies in their open source nature and large community base. Each has its own set of unique challenges and advantages but you are making a safe bet. Magento is also good. They are some several bad ones out there, like OSComerce however I won’t dwell on that.

If you have the budget, and an I.T. department you can even write your custom code and spend the next 5 years debugging it.

Hosting

Stay away from the cloud. Let’s first remember there’s no cloud. They lied to you. The cloud is expensive but like they say, a fool and his money. There’s nothing wrong with paying a premium but why should you pay for a premium when you have better alternatives. For hosting I recommend Lunar pages, blue host, siteground , avoid godaddy like the dreaded flu.

Distribution Model

Here I will use an example of a store that sells African crafts. I planned to sell African crafts, but shelved the idea after finding out the quality of the crafts in my home country wasn’t up to scratch. Hold your horses here for a minute, not all of them are bad, but I can’t ink my name on inferior products. For this venture to work, I would to have a network of artisans who can send me pictures of their products and prices. You have to bear in mind most of them are not highly educated, but thankfully the advent of social media, most especially whatsapp has helped a great deal. Most of these people can comfortably use smart phones. This would enable me to have real time inventory, you don’t want a situation where a user orders for something and it’s not available. Another distribution model is where you setup a multi store facility, where each vendor manages their own inventory. Very easy to implement tech wise but in the real world you are literally opening a can of worms.

Online Fraud

Unfortunately even roses have thorns. When you enter the online murky waters, you have to be prepared to deal with the under world of fraudsters. Here, I recommend not using paypal as you will be faced severe penalties for charge backs. Selecting your payment gateway is key to avoiding these goons, however this depends on so many factors. Some good payment processors have good algorithms to detect fraud but they are no guarantees. If you are dealing with luxury goods, or you have good margins you can absorb some of this, however the majority of online stores have paper thin margins and these fraudsters can easily run you into the ground.For a small business a $900 chargeback can be the proverbial straw that breaks it’s back.

Security

Hackers are always lurking in the shadows. With a good security strategy that includes regular patch upgrades, firewalls, daily backups and a version control system you can keep the pigs at bay.

Reviews

It’s important to have a review system, not the fake reviews that dot the internet.

Drop Shipping

One of the strategies some people use is drop shipping. It’s possible to use this strategy but it only works for a few use case scenarios, and you are most likely to get burned.

Competition

The market is saturated but opportunities exist abound. Even the large online retailers have horrible technology, a flawed user experience, these are advantages only an eagle perched eye strategist can harness. If you have zero competition, that means there’s no market need. The existing competition can be disrupted, as long you keep your eyes on the prize.

Business Model

In a nutshell, while all these factors are critical in your success, at the end of the day, you have to have a robust business model, that ensures you are not spending a lot of time doing a lot of donkey work. Remember we are talking an online store not a duuka (physical shop), if your business processes mirror the duuka style, the clock is ticking, and very soon your online store will join the thousands of closed web fronts. You need to have a well oiled machine similar to the dabbawallahs. Failure to realize this you are squaring a circle and dotting the tee while crossing the eye.

The future

Luckily, the market will never be saturated as long as you follow common sense procedures. There’s a lot of wriggle room but at the end of the day, it’s no joy ride, but it can be a fun one. As long as you have inventory, good margins, unique selling points, knowledge on how to acquire customers, E commerce provides one of the best methods to sell products at a fraction of the cost. Thankfully the big players make several mistakes, because they don’t understand the game or they are too big to change. They have invested millions in bad technology and they are not sure whether making the switch will provide them any leg room, they stick to their 1970 technology, because it’s working it’s what they know, they don’t want to train employees a new technology whose promises are not clear. After burning $3 million in crap software like SAP, some CTO told me, we are damned if we change and damned if we don’t. I didn’t fall off the turnip truck last fall, so I can understand the pains.

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