P2P (Peer-to-peer) marketing combines the convenience of online platforms with the advantage that any new customer can also be a provider, making it an incredible opportunity and the reason it’s become one of the most popular online concepts around.

Creating a marketplace website is not difficult. Although many are motivated by the success of Lyft, Airbnb and similar offerings, some pitfalls make developing a successful online business challenging. Let’s consider three principal reasons why some fail in the early stages:

Remember, build a minimum viable platform that solves an actual problem, focus on one vertical, start small and scale gradually.

Your Marketplace Concept Must Address Actual Issues.

Don’t be fooled when people say they love your platform; the crux is that they must actually use it because it solves a real problem. Jeremiah Owyang and Vision Critical, in their report, Sharing is the New Buying: How to Win in the Collaborative Economy, states that consumers use P2P marketplaces for the same reasons they consume any product, namely convenience, better prices and quality. Sharing platforms, for example, don’t negate the inconvenience of collecting and returning low-value items, irrespective of the savings.

Begin With a Narrower Focus.

Once you have an idea to solve a problem, the challenge becomes narrowing your focus. Creating a trusted product is much easier for a specific market section. Lyft does exceptionally well by offering only one type of service, and now that they are established, they may consider scaling. Generally, we advise starting with one niche – you can always change it if it doesn’t work and spend less money in the process.

Your P2P Business Model Must Scale.

Once you’ve found your unique offering, it’s time to consider making your marketplace sustainable. Many startup marketplaces find they have to pivot eventually, leading to user dissatisfaction and even closure, for example, TutorSpree and LooseCubes. The primary reason for the shutdown is typically that investors demand higher profits. 

It does seem that platforms with an on-demand booking model, such as Lyft and Uber, are doing well. In the venture capital world, there are very few winners, like StreetBankFreecycle and CouchSurfing.

The good news is that bootstrapping is also an option for success. Not everyone has to be the next Airbnb or become a massive organization. The collaborative economy lends itself to small, focused P2P platforms for excellent lifestyle businesses. The cost of marketplace software and technology is more affordable than ever.

Marketplace Republic is certainly of the options to consider.