How Much Does It Cost to Build an E-Commerce Marketplace App?

E-commerce is as old as time. Digital marketplaces are shooting up like mushrooms. Amazon pampered us with the convenience of online shopping, and there’s no way back. Now is the right time to ride the crest of the wave. 

Online sales of physical goods in the US totaled $504.6 billion in 2018 and are predicted to exceed $735 billion in 2023. The achievements of leading marketplace platforms are indisputable. eBay’s mobile application has already been downloaded more than 100 million times.

Let’s imagine you decide to develop an app for an intermediary e-marketplace like eBay or Amazon where you coordinate interactions between sellers and buyers. How much would it cost to create? The cost of developing a shopping app depends on its features.

We’ll help you figure out a plan that will most likely bring you revenue. Only after that will we tell you the price. Let’s start with SWOT analysis. Before that, you can check out a prototype we created of a marketplace app with 3D Touch interactions to let users preview games.

how much does it cost to build an app like Etsy?

[3D Touch and Apple Pay for a shopping app, designed by Yalantis. Check it out on Dribbble.]

To learn more, check out our article on how Apple Pay works.

Analyze the market

Analysis of competitors can be focused on a particular country, a particular continent, or on the global competition. There isn’t much point in trying to compete directly with e-commerce giants like Amazon. It’s generally better to build a marketplace app with several key features and a simple but attractive user interface and then see how it works for your business. This is why in our example analysis we decided to concentrate on niche e-marketplace solutions.

Using SWOT analysis, you can come up with a list of features that will make your app successful and profitable. We tried to concentrate on major factors that predict an app’s success or failure.

SWOT-Analysis-of-a-Marketplace-App

As you can see, a unique selection of goods, an innovative technology, and customer loyalty programs can allow you to make the most of your shopping application. The next step after analyzing the market is creating a product definition and value proposition.

Define your product

The benefit your app delivers to customers will determine whether people hit the buy button. There are four effective types of benefits: best quality, best quality-to-price ratio, luxury and aspiration, and must-have. To understand your value proposition, answer the following questions:

1. What product or service is my company selling?

2. What is the end benefit of using it?

3. Who is the target customer for this product or service?

4. What makes my offering unique?

On the mobile commerce landscape, it’s hard to be different because all major product features are pretty much the same between apps. But you can always win by offering added value or something that’s attractive to particular buyers. This can be free shipping, next-day shipping, bonuses with a purchase, a money-back guarantee, discounted prices, customizability, free product listings for sellers, etc.

The following shot shows a merchant dashboard we designed and published on Dribbble.

shopping app for customers animation

[Animation for adding a new item, designed by Yalantis. Check it out on Dribbble.]

Create a list of features to increase KPIs

Before you settle on a particular type of app, you need to establish your priorities and determine what you expect from your app. This is when you have to consider different KPIs, or key performance indicators. Choosing which indicators are the priority will allow you to define the design and major features of your marketplace app.

One of the most important KPIs for apps is lifetime value. Three other significant types of KPIs are retention rate, user engagement metrics, and revenue.

1. Retention rate – How many clients use your app again and again?

Push notifications that deliver targeted and context-aware messages are great for increasing user retention. Push notifications can remind customers when they have items sitting in their shopping carts. You can send a notification reminding a user to complete a purchase or offering a discount.

2. User engagement metrics – How much value do users find in the app?

Engagement is the level of user involvement with a product. User engagement is measured by concrete user behavior metrics, making it trustworthy and reliable. User engagement metrics include:

Session length – how much time a user spends in your app

Number of active users – how many people use your app over a given period of time

Conversion rate – the percentage of visits that result in goal conversions or e-commerce transactions

We can list at least three features that increase user engagement with a shopping app:

1) Style boards. Creating looks and expressing styles with style boards and collections is fun and engaging. Style boards can potentially lead users to make a purchase. That’s how the legendary Polyvore app once managed to win fashionmongers’ hearts. 

Polyvore offered users the opportunity to create beautiful collages of fashion items they found in the app and share their creations with the fashion community. While searching for items to complete their style boards, users could come across items they would actually want to buy. Boasting millions of monthly visits and a well-known app, Polyvore earned its money with the help of affiliate links and sponsorships. 

However, in 2018, SSENSE acquired the platform and soon shut it down. It turned out that the reason why SSENSE was interested in buying Polyvore was nothing but Polyvore’s traffic: if you go to polyvore.com, you’ll now be redirected to the ssense.com home page. 

But there are alternatives to Polyvore such as Urstyle, Shoplook.io., TrendMe, and Bantoa. Their functionality is pretty similar, aiming to please fashion lovers.

2) Trendsetter badges. You can reward your users with badges based on their engagement. For example, you can give a badge when a user collects a certain number of points by gaining followers, inviting friends, liking products, and buying goods. For some users, the desire to become a trendsetter can be so tempting that they’ll even buy points to get the trendsetter badge.

3) Virtual try-ons. By letting users try on glasses, jewelry, clothes, and even makeup with the help of augmented reality, you can dramatically increase user engagement. We all like to ask friends or family if they like our look. That’s why users will appreciate built-in social sharing functionality allowing them to post a picture in their AR specs or jeans. Tools such as Virtual Dressing Room, L'Oreal Makeup Genius, Glasses by Warby Parker, and Lologem are good examples for your inspiration.


Trying-on-jewelry-in-the-Lologem-Virtual-App

[Trying on jewelry in the Lologem Virtual App]

3. Revenue – How much money does your app make?

There are two possible revenue models for an m-commerce app: 

1) Affiliate revenue model – The app receives commission for referring customers to other websites or apps. 

2) Transaction fee revenue model – The app receives commission from every transaction.

A transaction fee is the most profitable revenue model for e-commerce apps that function as intermediary digital marketplaces. This revenue model comes in a basic and a more complicated form. In the basic form, an app receives commission for enabling or executing a transaction. Revenue is based on the volume of transactions made. 

More complicated models can include several different fees:

Insertion fee – a small non-refundable fee for listing an item

Promotional fee – a fee to list items higher on the page to attract more attention

Commission – a fee that the seller has to pay at the end of the auction

A transaction fee revenue model is the most convenient for an e-marketplace app. But you can always combine it with elements of other models to make sure your revenue doesn’t drop rapidly if one strategy is temporarily less profitable than others.

The best way to increase revenue in any shopping app is by providing tangible rewards like gift cards and discounts. You can let users collect points that they can redeem for discounts on products. eBay, for example, uses so-called eBay Bucks – rewards similar to gift cards. Bucks expire, and this motivates customers to use them. In addition, people who redeem eBay Bucks most often pay more than they have in Bucks to get what they really want. They’re also less likely to negotiate a lower price on items bought with Bucks because they’re not spending “their” money.

To learn more, check out our article about the most important KPIs for mobile apps.

Learn about the cost of app development

Now we’ve finally come to the point where we estimate the cost of developing online stores. We made you read about SWOT analysis, product definition, and KPIs to help you take the right approach to eCommerce marketplace development. After all, we develop apps every day at Yalantis and know that without thorough planning and evaluation there’s little to no chance to succeed on the highly competitive mobile commerce market.  

In our estimate, we considered Android app design and development along with API design and development. The cost of your app will depend directly on the number of hours developers spend working on it, but the hourly rate will depend on the particular company. We calculated the development time for an e-marketplace app.

How-much--it-costs-to-build-an-e-marketplace-app
 

Yalantis recommendations 

Considering all potential risks and opportunities, we recommend the following approach to develop an app for a niche marketplace:

1. Create a basic app and test it to get initial feedback. Concentrate on these key elements to start: a simple and memorable UI, a recognizable logo, essential filters, a clean layout, and a user-friendly and secure checkout with a shopping cart.  Once you’ve established which features are most desirable and profitable, expand them.

2. Optimize for search engines to keep essential information easily available. SEO is equally important for search inside of the app (optimizing search results with the help of filters) and on the internet. Make sure to provide a clear and detailed description of your app and optimize your App Store keywords.

3. Engage customers with a loyalty program and keep it simple: customers prefer to get discounts with few steps.

4. Work on your customer support. Include a detailed form for complaints and suggestions and be prepared to respond promptly.

If you take into account all the above-mentioned info on how to create a marketplace app, you’ll be able to build a competitive solution. Want to acquaint yourself with our experience developing marketplace software? Take a look at a mobile solution our mobile and web development company built for an automotive online marketplace.  

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