What is a Service Marketplace Platform and How to Start One?

The success of Uber and Airbnb inspired a large number of entrepreneurs to come up with their versions of service marketplaces. All the success stories in the segment adopted different niches and business models. While each offered something unique to the customers, they managed to keep the term, ‘service’, intact in their business models. Be it Uber, Airbnb, Upwork, Thumbtack, TaskRabbit, or Freelancer, each of these service marketplaces solved some unique problems for their target audiences.

If you too are thinking about solving any such problem through your unique service marketplace idea, this article will help you to understand the basics, types of marketplace, and different approaches you can adopt to build a competitive online platform.

The concept of online service marketplaces

An online service marketplace acts as an aggregator of different services their service providers. Most of the popular service marketplaces today aggregate, arrange, and finish-up the purchase and offering of services between service seekers and service providers. If you are a service provider, you can find people who need your services, and if you are a service seeker, you can find people who can help you.

The services may range from human skills and expert consultation to recurring contracts based on the type of service marketplace. The marketplace simply arranges the communication between the two parties and facilitates their transactions. In return, it makes money from the commission as one of the primary revenue channels.

• Uber: Connects a passenger with a cab driver (niched)
• Upwork: Connects a service seeker with Freelancer (niched)
• Airbnb: Connects a house owner with a paying guest (niched)
• TaskRabbit/Thumbtack: Connect service-seekers with service providers (multiple types of services)

In short, different types of marketplace are gradually becoming a standard way to ask for an expert’s help. Be it a software developer, content writer, plumber, cab driver, electrician, beautician, trainer, wedding planner, caterer, or decorator, service marketplaces can connect you to the right kind of individuals/businesses on-demand.

What is the state of the service marketplace in 2020?

The eCommerce ventures have done a good job over the past decade, disrupting the way consumers purchase goods, but there hasn’t been much of the disruption in the services segment yet. If we ignore the big names like Uber and Airbnb, there isn’t any big global success yet.

You would be surprised to know that services make 69% of the national consumer spending in the USA. Unfortunately, the overall service marketplaces have been able to direct only 7% of that to the internet-based alternatives, such as Uber, Airbnb, Thumbtack, Fiver, TaskRabbit, and Upwork. Although we are already witnessing significant growth in the segment, the service marketplaces have not grown as fast as product marketplaces for the following limitations:

• Purely data and information: Service marketplaces do not sell products. Instead, they rely on leads, data, and information to connect the right people. The technological solutions we need to manage the service-based interactions are more complex. It’s even trickier to capture the right kind of information and map it to the right kind of service provider.

Take Thumbtack for instance. When a user places a service request, the platform asks the user to answer a few questions to collect as much data and refine the match with the right service providers. If the user makes any mistake while answering the questions, it affects the way the matching algorithm connects him/her to right service providers. The platform purely depends on information and data to work. Therefore, if you want to build even a simple Thumbtack clone, designing the matching algorithm is not going to be an easy job.

• Quality control is relative: Quality control in services is subjective to more volatile circumstances. Unlike products, you cannot simply check and mark ‘ok tested’ to a service provider’s service. What’s working for one customer might not work for others. Even the parameters for reviews, ratings, and recommendations differ from service to service and customer to customer.
• Highly unorganized sector: The overall service sector is vastly unorganized. Not all freelancers or small service providers can use technological solutions to serve on the online service marketplaces. The particular segment demands businesses to educate their target audience about the new behavior, which is a complex and expensive undertaking.
• Complete digitization is not possible: Many kinds of services require real-world interactions. Unlike product marketplaces, it is not possible to accommodate everything digitally on the service marketplace. Most of the service deliveries require real-world dealings, which limits the extent up to which you can disaggregate some parts of a purchase digitally.

Despite all these challenges, the experts believe that the segment is brimming with potential, and it’s going to bud a new age of service marketplaces very soon. The first phase of the eCommerce industry was product marketplace, which the likes of Amazon, Alibaba, Walmart, and eBay have already re-invented. The next disruption is going to be in the service economy, and it has already begun with the likes of Uber and Airbnb. More than 125 million people in the US are already working in the services-based industries.

Based on our understanding of American consumer behavior and their affinity towards digital alternatives, it wouldn’t be a surprise to see these people soon joining the league with online service marketplaces. The consumer service market in the US alone is worth over $9.7 trillion. It is waiting for something like Amazon, eBay, or Walmart to drive the same kind of digital transformation in the service segments, too.

How to build a service marketplace platform economically?

Marketplace software makes your entire platform and the business process as well. The overall platform is an assembly of different eCommerce solutions working in sync to facilitate everything from listing services to adding service providers, listing services, placing a booking request, matching algorithm, managing commission, and online transactions, etc.

There are different ways to build your service marketplace platform. You can develop it from scratch by yourself, by outsourcing your project, or by hiring an in-house development team. However, the development from scratch is not an economical undertaking. Although you get a chance to design every requirement strategically from the beginning, it’s a very expensive and time-consuming process.

Alternatively, you can purchase a ready-made, open-source, service marketplace script and setup your platform in a few hours. Various vendors in the market sell such solutions as clone scripts. For example, Thumbtack clone, TaskRabbit clone, Fiverr clone, Uber Clone, Airbnb clone, and so on. Based on your preferred business model, you can use any compatible clone script to set up your platform. One piece of advice would be looking for a clone script with open-source code access. With open-source code access, you can also customize the default codebase to add/remove features in the future.

To conclude

Based on your preference, requirements, budget, and time-constraint, either of the approaches is best to build your service marketplace. If you have a requirement that none of the ready-made scripts can fulfill, you can ask for customizations on top. If customizations are not possible, you may go for development from scratch, though it is highly unlikely. With some thorough research, it is possible to find some good scripts for most of the requirements. If you were lucky to find a good script, you would be saving thousands of dollars in development. Good luck!

Author

I am a professional blogger, guest writer, Influencer & an eCommerce expert. Currently associated with ShopyGen as a content marketing strategist. I also report on the latest happenings and trends associated with the eCommerce industry.

Follow me on Twitter @Jessicabruc (https://twitter.com/Jessicabruc)