What is an online marketplace?

An online marketplace is a type of e-commerce platform where people exchange goods, services, or information.

The online marketplace model keeps growing. Sales on the world's top 100 online marketplaces grew 10% in 2024 alone, reaching $3.8 trillion, up from $3.1 trillion in 2021. Though the term "marketplace" has several economic uses, this article focuses on online marketplaces like Amazon and Airbnb.

In this article, you will learn about the key attributes that define an online marketplace, how the model actually works and makes money, see examples across different niches, and get tips for building your online marketplace fast.

An online marketplace is a digital platform that connects two or more distinct groups of users in exchanges of products, services, or shared resources.

The platform enables these different user groups to transact directly and receive a fee or commission from successful transactions.

If you've ever used Amazon to shop, Upwork to find a freelancer, or Airbnb to book a stay, then you are probably familiar with the marketplace definition.

The key attributes that define an online marketplace include:

• Marketplaces have a multi-sided model with at least two distinct user groups (e.g., buyers and sellers, renters and providers). Etsy, for example, connects roughly 87 million active buyers to millions of independent sellers' shops rather than one central catalog.
• They facilitate transactions between the user groups.
• Customers can take actions like listing, browsing, booking, and purchasing directly on the platform.
• Marketplaces do not usually own the inventory themselves. Uber, for instance, owns none of the cars its drivers use.
• Instead, marketplaces generate revenue from fees charged on the transactions they facilitate, not the sale of owned inventory. Airbnb, for instance, charges hosts a 15.5% service fee per booking instead of earning money from owning any of the listed properties.

Online marketplaces can be grouped differently based on the participants involved and the product or service being exchanged.

Based on participant involvement, we have:

In terms of what product or service is being exchanged, we have:

Several successful businesses have adopted this model, from e-commerce giants like Amazon to thriving startups like Drive Lah.

Here is a list of online marketplaces:

• Product sales: Amazon, eBay, Alibaba, Etsy
• Events: Eventbrite, Atom Tickets, SeatGeek
• Vacation rentals: Airbnb, Tentrr, Vacasa
• Home services: Thumbtack, Dolly, Modsy
• Transportation: Turo, Getaround, Gett
• Fashion: Poshmark, Vinted, Depop
• On-demand services: Uber, Lyft, Doordash
• Groceries: Instacart, Mercato, Grubmarket
• Freelance marketplaces: Upwork, Fiverr, Toptal
• Health & Wellness: Zeel, ResortPass, CoachUp
• Education: Udemy, Coursera, MasterClass
• Childcare: UrbanSitter, KidPass, Wonderschool

Drive lah started as a Singapore-based peer-to-peer car rental marketplace founded by Gaurav Singhal and Dirk-Jan ter Horst.

From an MVP, it grew 10x in a couple of years by acting on user feedback, and raised $3.2 million in pre-series A funding in 2021. Read Drive lah's story.

The Octopus Club started as a peer-to-peer marketplace where parents bought and sold the preloved clothes, toys, and gear their kids had outgrown.

Founder Ana knew the idea would work once strangers started buying from and selling to each other. Read The Octopus Club's story.

Sugarlift started as an online art gallery and marketplace bridging traditional galleries and the digital world.

Founder Wright Harvey launched it without the technical skills to build a marketplace website, and it grew to over 500 artists. Read Sugarlift's story.

In summary, founders have launched online marketplaces across different niches.

They start with an idea based on people's pain points or problems. Then, they solve these needs with an experience that works well for both sides.

The multi-vendor model is the key difference between an online marketplace and a traditional eCommerce store.

An eCommerce store typically has a single seller, while a marketplace connects multiple third-party sellers with buyers.

This multi-vendor approach is why online marketplaces are sometimes called "multi-vendor eCommerce stores." The defining characteristic is the two-sided model that enables exchanges between distinct participant groups.

From this core difference, we can extract several practical distinctions between marketplaces and eCommerce stores:

• Unlike an e-commerce store, a marketplace founder doesn't need to own any product inventory.
• Third-party sellers create and manage inventory, making it much more cost-effective to start.
• Building a marketplace is like launching two businesses simultaneously (for sellers and buyers).
• The processes for launching, growing, and scaling are different, and marketplaces tend to be more challenging businesses to build. At the same time, marketplaces are much more scalable because no inventory is needed to reach new markets.

However, online marketplaces have much more complicated websites and feature requirements.

For instance, marketplace payments are complex, and you must securely split payments between multiple parties. Plus, you must have seller profiles or "storefronts" and two-sided review systems for buyers and sellers to evaluate each other.

If you're looking for helpful resources that dig deeper into the marketplace model, check out our articles on How to create a marketplace and What is a two-sided marketplace.

Every marketplace transaction runs through the same six-part sequence, whether it's Airbnb or a niche B2B parts marketplace, and each part is a build decision as much as a user experience.

1. Listings define your data model. Every provider needs a profile and a way to describe what's for sale, rented, or hired: pricing, availability, and whatever detail a customer needs to decide. Get this schema wrong early, and search, filtering, and everything built on top of it inherit the gap.
2. Search and filtering are the matching engine, and they're what turn a pile of listings into a marketplace. Customers compare options against each other inside your product instead of across five open tabs and a group chat. The more precisely they can narrow by what actually matters in your niche (square footage for storage rental, license type for a freelance marketplace, condition grade for resale), the shorter the distance from browsing to transacting.
3. The transaction has to close on-platform. Dates, quantities, and terms get confirmed in one flow, not over email or a phone call, because a transaction that leaves the platform is one you can't collect a fee on, resolve a dispute for, or learn from. This single requirement is a big part of why marketplace software exists as its own category, rather than everyone getting by with a classifieds board.
4. Payment splitting is infrastructure, not an afterthought. The platform collects from the customer and pays out the provider minus its fee, usually through an embedded payment processor like Stripe Connect rather than manual invoicing. Doing this correctly means handling identity verification, tax forms, chargebacks, and multi-party payouts within financial regulations that vary by country, which is genuinely one of the more expensive parts of a marketplace MVP to get right. It's also the piece Sharetribe builds in, rather than leaving founders to assemble it themselves.
5. Two-sided reviews are your trust infrastructure. Customer and provider rate each other after the transaction, which is what lets strangers transact with confidence in the first place.
6. Disputes need to be resolved inside the product, or the trust model above stops meaning anything. When something goes wrong, customer and provider should be able to work it out inside your marketplace's own process. That's also the mechanism that keeps transactions from leaking off-platform: the more reasons people have to solve problems on-platform, the fewer reasons they have to transact off it.

That's the layer most explanations skip: the build requirements behind each step, not just how it looks to the customer and provider going through it.

Marketplaces make money by charging a fee for facilitating a transaction, not by owning what's being sold.

Commission is the most common approach, though listing fees, subscriptions, lead fees, freemium access, and featured listings all show up depending on what's being exchanged.

Here's how some of the best-known marketplaces make money:

The model is attractive to build because it needs no inventory and gets more valuable to run as it grows through network effects, but it comes with three real hurdles on the way to liquidity: getting both sides to show up at once (the chicken-and-egg problem), keeping supply and demand balanced as you scale (liquidity), and stopping users from taking the deal off-platform to dodge the fee (leakage).

For the full breakdown of all six revenue models, a framework for choosing between them, and how to solve each of these three challenges, see Sharetribe's guide on choosing the right marketplace business model.

Sharetribe has worked with thousands of marketplace founders in 100+ countries. Read real founder stories to see how they got started, or browse a gallery of live marketplaces built with Sharetribe for more examples across niches.

While there are difficulties, building an online marketplace can be hugely rewarding.

At Sharetribe, we've worked with thousands of online marketplaces. More often than not, the ones that succeed follow a version of these five steps:

1. Validate your idea
2. Build a Minimum Viable Product (MVP)
3. Onboard your initial sellers
4. Launch and learn
5. Scale

Let's go through these steps briefly.

Don't jump straight into development. Conduct thorough market research to validate your marketplace concept.

This involves understanding your target audience, their needs, and their competitiveness. Talk to potential buyers and sellers, and refine your value proposition based on their feedback.

Don't try to build a massive, complex marketplace from day one. Start with a lean, minimum viable platform (MVP), a basic version of your marketplace that solves the core problem for both buyers and sellers.

Platforms like Sharetribe allow you to build up a basic marketplace website in just a day without coding. So, you can quickly test your concept with real users and gather valuable feedback before investing heavily in features.

Attracting initial sellers or providers should be the priority over demand or buyers. Having inventory available makes your marketplace instantly more appealing and valuable to buyers when they arrive.

Consider offering incentives like lower commission rates or marketing support to attract sellers initially. Targeting a niche market can also be a good strategy, as it allows you to focus on a specific user base with shared interests.

Once your MVP is ready with sellers, launch your marketplace and start acquiring buyers.

Be sure to monitor user behavior and feedback closely and analyze your data to understand what's working and what needs improvement. Then, use the information to refine your platform and features continuously.

As your user base grows, take advantage of the online marketplace model's natural ability to scale. The platform can handle growing users and transactions without substantial extra infrastructure.

For more comprehensive guidance on all aspects of building a successful online marketplace, check out Sharetribe's article on the complete guide to creating a marketplace.

The online marketplace model has emerged as one of today's most powerful and lucrative business models. While building a two-sided marketplace is challenging, the potential rewards make it a compelling opportunity.

Despite the hurdles, companies like Amazon, Airbnb, Uber, and others have disrupted massive industries and become multi-billion dollar companies with the marketplace model.

The best way to learn is by doing. With the right strategies, platforms like Sharetribe allow you to build an MVP marketplace quickly using a lean, iterative approach.

Plus, aspiring marketplace entrepreneurs can rapidly validate their ideas and start laying the foundations for their own breakthrough marketplace businesses.

The first step is to take action, start building your marketplace today.

An online marketplace is a digital platform that connects two or more distinct groups of users, such as buyers and sellers, to exchange products, services, or shared resources. Key characteristics include: a multi-sided model with at least two user groups, the facilitation of direct transactions between those groups, actions like listing, browsing, booking, and purchasing happening directly on the platform, no ownership of inventory by the marketplace itself, and revenue generated from fees on facilitated transactions rather than from selling owned inventory.

The key difference is the multi-vendor model. An e-commerce store typically has a single seller, while a marketplace connects multiple third-party sellers with buyers. This means marketplace founders don't need to own product inventory, making it more cost-effective to start. However, marketplaces are more complex to build: they require multi-party payment splitting, seller profiles, two-sided review systems, and managing both supply and demand sides simultaneously. Marketplaces are also much more scalable since no inventory is needed to reach new markets.

Online marketplaces can be categorized by participants: C2C (consumer-to-consumer, like eBay), B2C (business-to-consumer, like Amazon), B2B (business-to-business, like Alibaba), or mixed. They can also be categorized by what's exchanged: product marketplaces, digital product marketplaces (like Creative Market), rental marketplaces (like Airbnb), service marketplaces (like Upwork), and ticketing or experience marketplaces (like Eventbrite). Successful marketplaces have been built across all these types, from e-commerce giants to niche startups.

Online marketplaces use six main revenue models: commission (a percentage of each transaction, the most popular), listing fees (fixed fees to post items), subscription fees (recurring access fees), lead fees (fees for qualified leads), freemium access (free core platform with paid premium features), and featured listings and ads (paid visibility). Research on the top 100 global marketplaces shows that commission is by far the most common model, especially for product and service marketplaces, because it aligns incentives and scales naturally with growth.

The three biggest challenges are: the chicken-and-egg problem (needing sellers to attract buyers and vice versa, usually solved by focusing on building supply first), balancing two different businesses simultaneously (maintaining liquidity by satisfying both sides), and preventing platform leakage (where buyers and sellers take transactions off-platform to avoid fees). Solutions include starting small in a focused niche, offering low transaction fees, providing security and trust features, and creating an on-platform experience valuable enough that users won't want to transact elsewhere.