Peer-to-peer marketplaces: Complete guide
Peer-to-peer rental, products, and services have tremendous business potential. Developing a peer-to-peer marketplace is also easier than ever. Here's all you need to succeed in peer-to-peer marketplaces.
Table of Contents
- What are peer-to-peer marketplaces?
- Benefits & challenges of peer-to-peer marketplaces
- Essential features for peer-to-peer marketplaces
- Developing a peer-to-peer marketplace in four steps
- Peer-to-peer marketplace examples
- Time to get started
What are peer-to-peer marketplaces?
Peer-to-peer rental sites like Airbnb, product-selling platforms like Etsy, and ride-hailing apps like Uber have one thing in common: they are all P2P marketplaces.
Peer-to-peer (P2P) marketplaces – especially peer-to-peer rental – are exploding in popularity.
It’s easy to see why. For aspiring entrepreneurs, marketplace businesses are an attractive business model. They are a way to start a scalable, game-changing business with limited resources.
But before we get to discussing the opportunities in more detail, it's important to define what type of business we're talking about.
A peer-to-peer marketplace is a website that connects people who own a product or offer a service with people who want to buy or rent it. Airbnb is a classic example.
The role of the website is to help these two groups of people find each other. The site also handles payments and helps build trust between the parties.
Peer-to-peer marketplaces don’t need to own or provide any of the products or services offered on their platforms. This makes them relatively inexpensive to start.
In addition to Airbnb, famous examples include the product-selling website Etsy and ride-hailing app Uber. Almost any product or service can be sold through a P2P platform. Our clients have used Sharetribe to build sites for everything from selling automotive parts to private swimming pool rentals.
Let's look at three marketplace types and examples more closely: peer-to-peer rentals, product-selling, and services.
Peer-to-peer rental lets consumers rent items from other consumers. Famous examples include Airbnb, Turo, and Vrbo. These platforms help consumers find each other, trust one another, and make secure payments.
Opportunities for these kinds of marketplaces are everywhere. For example, Sharetribe customers have built sites for swimming pools, cars, sporting equipment, and much more.
You can find some inspiration on peer-to-peer rental marketplaces in our Customer Gallery, where you can browse marketplaces by type and sales model.
Opportunities for peer-to-peer rental marketplaces are everywhere.
Etsy is an example of a tremendously successful peer-to-peer product marketplace. On Etsy, anyone can sell handmade items to other consumers – the marketplace helps connect buyers and sellers and facilitates their transactions.
Secondhand sites like Poshmark are another common example. And as marketplace technology is becoming more and more accessible, many have started thriving businesses by focusing on serving a clearly defined niche. For example, our customer Wheelprice is the world's largest P2P and B2C marketplace for automotive parts. Lumikha is a fast-growing marketplace by cosplayers, for cosplayers.
Our customer gallery has a whole slew of inspiring peer-to-peer product marketplace examples.
Peer-to-peer service marketplaces connect consumers who want to buy services from other consumers. Uber and Lyft are famous examples, but the opportunities are endless!
How about a marketplace for finding a local tour guide on your next vacation? A website where home cooks can sell the extra food they make in their neighborhood? A platform where hobbyists can offer live online classes in their specific skills?
Check out some more P2P service marketplace examples in our Customer Gallery.
As you can see, almost any niche and industry can be fertile ground for a thriving peer-to-peer marketplace. In addition, the marketplace model can bring some significant benefits to a business. The next chapter discusses those – and some key challenges founders need to solve.
Benefits & challenges of peer-to-peer marketplaces
There are many benefits to the peer-to-peer business models, but also challenges entrepreneurs need to solve.
There are many reasons why a peer-to-peer marketplace can be a tremendously successful business. Let's look more closely at four key benefits:
- You don't need to own inventory.
- P2P network effects present powerful growth opportunities.
- Marketplace builders are fast and affordable to launch with.
We'll also discuss four key challenges a founder needs to tackle:
- Finding the right problem to solve.
- Finding product-market fit.
- Finding the right business model.
- Building trust.
No inventory needed
One of the primary advantages of marketplaces is that setting up one is relatively fast and inexpensive.
In most industries, investing in inventory is the biggest startup expense. But marketplace businesses don’t have to pay for inventory; suppliers create it for them.
Consider a marketplace like Airbnb. They’re now the biggest travel business in the world, and they don’t own a single hotel. Instead, they operate a peer-to-peer rental model: they have millions of listings on their platform, enthusiastically provided by hosts worldwide.
A peer to peer marketplace can be fast and inexpensive to set up.
P2P marketplaces focusing on products are services are similar: building a website like Etsy doesn't require manufacturing products. Uber doesn't own cars.
Not investing a five-figure sum in platform technology or inventory makes it much easier to start a business. Instead, founders get to spend their budget on growing their marketplace.
Peer-to-peer marketplaces have the chance to enjoy powerful built-in network effects. Businesses with network effects often scale much quicker than those without. If each new user increases the overall value of the platform, then the business has network effects.
Network effects represent a significant growth lever for your businesses. More customers mean more demand, which brings in more suppliers. More suppliers mean more selection, which creates a better customer experience and brings in more customers.
Done right, this creates a flywheel effect, where the marketplace grows exponentially through the power of network effects.
Powerful peer-to-peer marketplace builders
For a long time, the primary barrier to developing a peer-to-peer marketplace was the complexity of building a site that could handle both buyers and sellers. Development was extremely expensive and time-consuming and required a team of highly-skilled developers. Especially platforms focusing on peer-to-peer rentals or services were a challenge.
But technology has advanced rapidly. You no longer need to code a platform from scratch. At Sharetribe, for example, we make software solutions that help entrepreneurs launch their peer-to-peer marketplaces faster. Sharetribe Go is ideal for founders who want to launch fast without coding, and Sharetribe Flex suits people who want to develop a unique marketplace on top of APIs.
In addition to using dedicated software, there are many alternatives that fit all skill levels and budgets. If you decide to use marketplace software, we also have articles that help you compare Sharetribe alternatives.
Challenges of the peer-to-peer marketplace model
There are a few common challenges that you might face in your entrepreneurial journey. Here are the biggest challenges and our recommendations for solving them.
Solving the wrong problem
Before making significant time and financial commitments, it’s important you validate your idea. Focus on launching the first version of your marketplace as soon as possible. Get feedback from early users to develop your marketplace further.
Finding product-market fit
Another common challenge is finding the right niche. At first, it makes sense to focus on a small niche and vertical. While it’s great to dream big, in reality, the lack of focus can hamper your business, especially in the early days. Focus on finding product-market fit, and then scale to other markets and categories.
Identifying the right business model
There are a few different options for choosing your marketplace business model. Focus on finding a sustainable model that will scale with the business. Make sure your marketplace pricing works for your sellers, customers, and your business.
Focus on launching the first version of your marketplace as soon as possible.
At first, the idea of sleeping in a stranger’s apartment seemed terrifying. But now, millions of people stay in Airbnbs across the globe every night. As consumers, we implicitly trust the brands we know. But as a new business, you won’t have that level of brand strength; it’s something that needs to be built over time. Fortunately, there are strategies you can employ to build marketplace trust.
As you develop your peer-to-peer business, be sure to watch out for these challenges. But be confident in your ability to deal with them. There are things you can do to mitigate the risks when you build your business with an iterative mindset. Understanding the essentials you need – and building upon them step by step – helps you build a profitable business without taking on too much risk.
Essential features for peer-to-peer marketplaces
Whether your marketplace focuses on peer-to-peer rental, products, or services, these essentials build a solid foundation for your business.
P2P sites demand a distinct set of features compared to other eCommerce businesses. That's why generic online store builders like Shopify, Magento, or WooCommerce rarely work for marketplaces. And developing a peer-to-peer marketplace from scratch can set you back several months and tens of thousands of dollars.
The good news is that the essential marketplace website features form a solid foundation for your business – whether your idea is about peer-to-peer rentals, products, or services. That's why dedicated marketplace builders can offer an affordable way to get started.
Here are features that the majority of peer-to-peer platforms need from day ne:
Profiles are an essential component in building trust between customers and providers. Users will share information about themselves on their profile: their name, picture, and location. Some platforms might verify phone numbers and identities, but these typically aren’t shared with other users.
A listing page allows providers to showcase what they’re offering, and commonly includes pictures, videos, pricing, a text description, and reviews. The more complete and professional a listing page a seller has, the better they will typically perform on the platform.
Website navigation and search
Your marketplace needs navigation to ensure users can find what they’re looking for on your platform. Typically, customers will either search for a product or navigate to a particular category.
Keyword searches work well for marketplaces dealing with shippable products or online services, whereas peer-to-peer rental marketplaces like Airbnb will also require a location search.
Alternatively, customers can navigate by categories that you define. You’ll need to determine how to categorize your listings best; most sites have a hierarchical structure, with main categories and subcategories.
Creating a frictionless payment experience is one of the biggest ways to build trust in your marketplace business.
With your own payment system, it’s possible to delay payments or hold funds in escrow until a service has been fulfilled. This model is appropriate when the customer is booking something in advance; an equipment rental, or a day at a private pool.
Online payments are a heavily regulated field, and the legislation can differ greatly from country to country. One of the biggest benefits of peer-to-peer marketplace builders is that they offer in-built payment processing. This will save you both the time of building a payment integration from scratch and the trouble of maintaining and updating your payment system to comply with regulatory changes.
Frictionless payments build trust in your marketplace.
Reviews are essential for building trust between users, especially on a P2P marketplace. They give customers confidence in the product or service, and offer providers assurances the sellers will treat their belongings well. After the transaction is completed, reach out to both groups to ask for a review.
Your customers and providers need to be able to communicate. This is achieved through a messaging service that supports multiple conversations. The communication platform should also be used to send notifications about new requests, transactions, and reviews.
Behind every successful peer-to-peer marketplace is daily monitoring and management. As a marketplace admin, you'll want to be able to moderate user-generated content like profiles and listings, control user access, see your transaction processes, send notifications, and so on. Powerful admin tools let you ensure your marketplace user experience works smoothly for your users. They also let you track user behavior and develop ways to improve your platform.
Additional features for rental, service, and product businesses
In addition to the essentials listed above, there are other features you might want to consider, depending on the needs of your users:
- Booking management and availability calendars if you’re dealing with peer-to-peer rentals or services.
- Integrated maps if your marketplace is location-based and your users need to meet face-to-face.
- Shipping might be required if your marketplace deals with peer-to-peer product selling.
- Identify verification protocols are useful for trust-intensive markets, like peer-to-peer apartment rentals, babysitting, or the like.
Both Sharetribe Go and Sharetribe Flex support all of these features (and more) out of the box. Here's where you can find out more.
Developing a peer-to-peer marketplace in four steps
How to build a site and launch it fast, and improve your business as you go.
Building a successful peer-to-marketplace business doesn’t have to be a months-long, expensive project.
Instead, treat it as a process of learning and iteration.
Great businesses take time to build. In a nutshell, there are five four steps to getting your marketplace up and running. We ’ll cover them briefly here, but for a more detailed breakdown of each step, check out our complete guide to marketplace website development.
Find and validate your idea
All great businesses start with a great idea, But at first, it can be difficult to tell whether your idea is a good one or not. You might think it’s great, and the potential users you interview might also think so. Who wouldn't want to see more peer-to-peer rentals and second-hand purchases in the world?
But what really matters is whether people will like it enough to pay to use it.
At their core, successful businesses solve problems for their customers. Often, founders start companies in response to their own problems. The idea for Airbnb came when the founders were having trouble making rent.
Our advice: launch fast, and launch cheap.
Marketplaces have to offer a solution to the problems of both prospective customers and prospective sellers.
For example, for a peer-to-peer rental business, you need to identify an asset that:
- many people own
- is underused or idle much of the time
- could be rented instead of bought.
A great example is expensive items to buy and/or maintain. People who already own them are likely willing to cover some of the costs by renting rather than letting the asset sit idle. And customers may want to rent the asset when they need it, rather than make an expensive investment to own it.
Once your idea passes this test, validate it with potential users. Talk to them and challenge your assumptions. But ultimately, you won’t truly know if you're solving a real problem until you launch your marketplace business.
Our advice is to launch fast, and launch cheap.
The most valuable insights come from live users who are paying to use your service.
As an inspiring example of this approach, check out the story of Raphaëlle de Monteynard, founder of Swimmy. She had the idea for a peer-to-peer rental marketplace that lets people share private swimming pools. To get started, she did extensive research on the market. Soon, she realized the best thing she can do is to launch her business quickly for the summer season and give it a try.
“Everything doesn’t have to be perfect when you start a business. The most important thing is to learn if your idea will work, and you don’t need a lot for that,” she says.
Today, Swimmy has over 45,000 users.
Failing to validate a business idea is one of the most common mistakes founders make. It’s all too easy to get excited and throw yourself into building a platform. But before you do that, make sure people are actually interested in using your platform. If your idea fails, it’ll fail fast. You’ll have time to pivot to a new idea, and you won’t have wasted months and thousands of dollars developing a complex website that nobody wants to use. But if you see signs of initial traction, it’s go-time.
Find the right business model
As you’re building your marketplace, it’s important to think through your business model. At first, it might make sense to keep costs low to attract more users, but ultimately, the revenue model must finance the operations of the business.
The majority of peer-to-peer marketplaces use commission-based models. With this model, the business takes a commission on every transaction made on the platform; either as a percentage cut or as a fixed fee. A big benefit of the model is it works regardless of marketplace type, whether your idea is about services, products, or peer-to-peer rental. The most successful marketplaces—Airbnb, Etsy, Uber—all built their businesses on a commission structure.
Check out this guide for information on other marketplace business models.
Benefits of commission-based models
Commission-based models are popular for a reason: they make it easy to recruit providers, and they’re very powerful as the business scales.
Providers aren't charged until they get value from the marketplace. This makes it easy to bring providers on board; it doesn’t cost them anything to get started, and they only pay if they successfully make a sale.
The majority of P2P marketplaces use commission-based models.
The commission model scales well. The marketplace receives a commission on every transaction, so as the business grows, so does revenue.
Drawbacks of commission-based models
While the commission-based model is a good fit for many, there are some drawbacks to note.
One issue is platform leakage. If your website doesn’t provide value in line with your commission structure, users will take business off your platform, meaning you miss out on the commission. There are strategies to mitigate this, but generally, you want your value proposition to be so strong that your users see no reason to leave your marketplace.
Another challenge is building a payment structure that can apply a commission structure to all transactions that take place. And does so in a way that complies with global online payment regulations. This is difficult to build on your own, so marketplace software with pre-built payment integrations is a big help.
Build your MVP
A Minimum Viable Product, or MVP, is the earliest iteration of your platform that you share with customers. While launching quickly, don’t rush – it’s important to offer even your earliest users a great experience.
Before you launch an MVP, your marketplace should be functional. Users should be able to accomplish the basic goal of what your marketplace promises to do. The essential features outlined in the previous chapter form a solid foundation for your MVP.
There are a lot of different approaches to marketplace development, but at this stage, focus on an approach that helps you build as fast as possible. Invest most of your time and initial budget on growing your audience, building your brand, and learning about your users.
Build your MVP with Sharetribe Go
If you’re looking to launch your MVP quickly, Sharetribe Go could be a great option for you. You can set your peer-to-peer rental, product, or service marketplace up in minutes, and all the essential features you need to get your business up and running come included.
You don’t need to code anything, and technical details like hosting, maintenance, and updates are taken care of for you. You can use Go to launch your marketplace in less than a day and start learning from early users.
Learn from your early audience & grow
Once your MVP is ready, it’s time to launch.
While it’s tempting to jump in at the deep end, your launch should be a thoughtful process. Marketplaces are challenging businesses to build. You need to develop both supply and demand – no easy feat.
Begin by recruiting an initial group of providers to seed your marketplace with. Finding the right vendors can be challenging, and how you recruit them depends on the business you’re in. To start, contact providers on other marketplaces, search on Google, and reach out to forums and Facebook Groups.
At the early stages, it's ok to do things that don't scale.
At this stage, it’s fine to do things that don’t scale – the first hundred or so providers are the lifeblood of your platform. Make sure your new providers are comfortable using your platform, understand the benefits you offer, and see the potential in the marketplace.
As you approach your launch date, consider doing a product launch before your big marketing launch. This lets you onboard a small initial group of users on the platform to iron out any bugs before your big launch.
Post-launch, establish the key marketplace metrics for your platform, and track them over time. As the saying goes, what gets measured gets managed. You should intentionally track metrics that offer a true insight into the traction of your marketplace.
As you scale, conduct growth experiments to determine the optimal ways to build your business. Peer-to-peer marketplaces can grow slowly; it took Airbnb four years to see real traction. It’s critical to experiment with different growth channels and perfect your strategy for each.
Take your peer-to-peer marketplace to the next level with Sharetribe Flex
Once your marketplace grows, you have more resources to develop it further. You’ve also learned a lot about your audience and know what kinds of custom features and additional tools bring the biggest boost to user experience – and the biggest ROI for you.
Sharetribe Flex is an API-based, headless marketplace solution that is ideal for entrepreneurs who want to take their businesses to the next level. It offers all essential features off the shelf and gives marketplace owners the ability to custom-develop a unique user interface on web or mobile on top of the Flex-powered backend.
You can also build custom features and add integrations to third-party tools like marketing and email software. And yet, you won’t have to invest in building the marketplace essentials, and updates, maintenance, and security compliance are handled for you as well.
Peer-to-peer marketplace examples
Some of our favourite examples of peer-to-peer businesses powered by Sharetribe Go and Sharetribe Flex.
We're proud to power over 1,000 marketplaces around the world. Here are a few inspiring examples of peer-to-peer businesses – you can find more Sharetribe examples and inspiration in our customer gallery and customer stories.
Peer-to-peer rental marketplaces
Rental platforms allow people to rent out tangible physical resources that belong to others. Some of our favorites include:
Peer-to-peer product marketplaces
Product marketplaces let people buy products from independent sellers. Popular platforms include:
From The People
From the People is an Indigenous-owned and operated marketplace for Indigenous goods. The company was quickly founded to help businesses transition to online sales as the pandemic hit. Powered by Sharetribe Flex.
swap-studio lets users swap items–clothing, furniture, and more–with strangers on the Internet. They’re building a community of like-minded people working towards a future with less waste. Powered by Sharetribe Flex.
Peer-to-peer service marketplaces
Services between consumers foster connection and allow peers to learn from one another.
Searching for a tutor for your child is difficult. Tutor Koala solves this problem by offering an accessible, convenient, and safe platform for parents can easily find specific tutors. Powered by Sharetribe Flex.
Time to get started
It’s never been easier to build a peer-to-peer marketplace business than it is today. There’s so much upside to the model, with unlimited potential for creativity and growth.
By taking time to validate your idea, find the right business model, and build a platform packed with powerful features, you’ll be well on your way to success. Keep an open mind — stay committed to learning and iterating, and always listen to your users.
We’ve worked with peer-to-peer marketplaces for over a decade, and there are more than 1,000 marketplaces built on Sharetribe infrastructure doing great things all around the world. If you're interested in hearing more, our expert support team will be happy to help.
Let's get started!