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An online marketplace is a website where buyers and sellers (or businesses and their customers) can meet to carry out transactions online. Businesses can display their goods or detail their services on the marketplace, and customers can browse and find one that suits their needs. As a marketplace operator, you can profit from such a venture if you plan your business successfully. However, before you start, there are various legal and financial aspects that you need to consider. Therefore, this article will provide six legal tips for building a successful online marketplace in New Zealand.

1. Assess Success

Before you begin building your online marketplace, you need to assess its viability and success. You need to determine whether there is a demand for the kind of online marketplace you want to create and whether you have the financial means to keep it afloat. You do not need a starting inventory for an online marketplace, but you do need to attract buyers and sellers. At this first stage, determine how you are going to do this.

For instance, you may offer a free trial period of your marketplace’s services to attract new sellers who want to list your platform.

2. Identify What You Are Offering

At this early stage, you also need to identify what services your online marketplace will offer. Do you:

  • offer payment options through your website?;
  • provide a premium service for users who can choose to pay more?;
  • promote listings for an advertising fee?; or
  • offer a booking and ordering service through your platform?

You may also decide to only offer your online marketplace for a specific niche. For example, Etsy, a global online marketplace, only allows users to sell their own handcrafted or vintage goods. This strategy can draw in niche customers to fulfil a unique need they have.

Define what it is you offer early, as this will determine what legal aspects you need to consider later on. Consequently, you will detail this in your marketplace terms and conditions.

3. Choose an Appropriate Business Structure

Next, you need to ensure you choose a business structure that works for your online marketplace. Depending on what structure you choose, you can:

  • spread responsibility;
  • minimise risk; and
  • reduce your liability if something goes wrong.

If you structure your business running your online marketplace as a company, you are not usually personally liable for its debts.

4. Register Important Intellectual Property

Intellectual property rights protect your business’ essential ideas and their expressions. Users of your online marketplace will use your intellectual property throughout their dealings, such as your:

  • business’ name;
  • logo; or
  • words and descriptions.

Your branding for your online marketplace is an important business asset that brings value to your enterprise. Therefore, to avoid intellectual property issues in the future, you should:

  • register any critical intellectual property rights; and
  • grant your users a licence to use your intellectual property with appropriate conditions.

For instance, you would register your business’ name and logo as trade marks in New Zealand. If you operate a global marketplace, you should register trade marks in other countries as well.

This way, you can pursue both users and competitors that attempt to infringe on your intellectual property rights.

5. Choose Payment Options That Work for You

You need to make a profit from your online marketplace, and as part of that, you can determine from what fees you charge your users. Consider how you want to structure payment, whether it be through:

  • a subscription fee;
  • a commission fee;
  • a listing fee; or
  • other payment structure.

Additionally, if you want to offer a payment service, you need to look into what payment portals will suit your website. These services charge fees depending on what you need, so do your research to determine which one is appropriate for you. There are also security concerns with payment portals that you need to ensure you manage.

6. Draft Important Policies and Documents

Finally, once you have planned how your online marketplace business model is going to operate, you need to draft important legal documents and policies to both:

  • comply with your legal obligations; and
  • inform your users of their rights and responsibilities.

The table below sets out three key documents you need as an online marketplace owner.

Privacy Policy

This document details how your online marketplace website handles users’ personal information and complies with the Privacy Act.

Website Terms of Use

This document details the rules for users interacting with your site. In addition, it can contain clauses detailing your intellectual property rights and prohibited user conduct.

Marketplace Terms and Conditions

This document binds your buyers and sellers and sets out your role as the marketplace platform in their contractual relationship during a purchase. Additionally, you want to ensure you limit your responsibility in these transactions with this document and include other necessary legal disclaimers.

It is a good idea to seek a lawyer to draft these documents for you or look over what you have written. There are some complex legal concepts within these policies that you need to make sure you cover to protect your marketplace business.

Key Takeaways

Building an online marketplace can be a successful venture for your marketplace business. However, you need to make sure you plan accordingly and consider all vital legal aspects of marketplace development before launching. This way, you can limit the risk of problems arising in the future. If you would like more information or help with the legal aspects of launching your online marketplace, contact LegalVision’s eCommerce lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is an online marketplace?

The online marketplace model refers to a website where people can list products or services, and other users can browse and buy from those options. TradeMe is an example of an online marketplace in New Zealand.

Do I need marketplace terms and conditions?

If you are an online marketplace owner, then you should have marketplace terms and conditions. These limit your liability in numerous legal situations and set out your role in the contractual relationships between users on your platform. Further, a successful marketplace has robust terms and conditions.

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