Question from reader:
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I have an idea to create a marketplace site like Lelong. But I am not from an IT background and cannot code.
I want to hire a programmer to create the marketplace for me but a few programmers quoted me USD10,000 – 15,000. I can’t afford this.
I realised that an affordable option might be to partner with a programmer. But I do not know any programmers and I am afraid that the programmer will steal my ideas.
What is your advice on my situation? I really think I can make my idea work, but I am limited by lack of my programming skills.
Let me be frank: you will most likely fail.
Let me explain why.
Outsourcing will only get you started
First, the key success factor in any online marketplace is your technical team.
If you don’t have a technical team, you won’t be able to build a good platform.
Outsourcing the technical part will only help you get started. After that, maintaining the system will be challenging for you. You will need to keep upgrading and updating your system to be in touch with the latest technologies in the e-marketplace.
You need a technical team, not a single programmer
This brings us to the next option, partnering with a programmer.
For a market place, you need to consider the system architecture, databases and other technical aspects.
It takes a team of programmers to create a product like an e-marketplace, not just one programmer.
From the business perspective, you truly do not have any viable resources that could make this idea work.
Online market places are too competitive and unprofitable
Second, the online marketplace industry today is too competitive. Most of these marketplaces trying to cannibalise each other.
They make products cheap and provide generous discounts to encourage sales. Most of the time, they sells the product at below cost, to be the loss leader.
There isn’t any viable business model that could characterize a successful e-marketplace. Ensogo recently closed down though they are a listed company with easier access to funds.
Lazada was lucky. Alibaba bought them out when their funds were running low.
Image from sme.com.my
Most of these e-marketplaces were playing a loss-leadership strategy with no clear business model.
They don’t have a clear business strategy on how they could move into profitability. Instead, they keep raising funds and playing the valuation game. They hope to eventually sell off to the highest bidder.
Don’t start a market place business, do this instead
Despite the gloomy scenario that I have painted, I am not saying that all e-commerce will fail.
Instead, I believe e-commerce has evolved.
Having interacted with the e-commerce marketplace, consumers are now more informed. They understand what they want to buy.
Instead of buying from market places, they now want to buy from specialty e-stores.
Let me give you an analogy.
Shopping malls are favourite places to shop. They offer a variety of things under one roof.
They are a great place for consumers who have no buying experience to learn what it is like.
One they have shopped in malls, they become more informed and sophisticated. They then want something more specialised and perhaps maybe even cheaper products.
The same thing applies for e-commerce marketplaces and online specialty shops.
Consumers who did not know about online shopping learn about e-commerce transactions through marketplaces. After that, they seek to buy from more specialised e-shops.
So today could be exciting times for specialised or focused e-commerce stores. In the next three years, you may see a growth in highly specialised or niched e-commerce stores.
If you want to start selling online, start one of these specialised e-stores. You will have a higher chance of succeeding.
Aim to start small.
You can understand the e-commerce space by starting something small.
This will be easier and cheaper for you. There are many tools and templates, some are free, which you can use to create your own e-store.
That one, I leave it to you to do your own research.
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