An online marketplace allows people to buy and sell goods online and has multiple benefits for both buyers and sellers. It lets buyers view the products of a broader range of sellers at one time to find the product that suits them best. It also allows sellers to reach a wide range of possible customers at one time, more than would likely be available if they were selling on their own website. However, like starting any business, you need to put time and effort into building an online marketplace to ensure its success. This article will provide several tips to help you create a thriving online marketplace, including:
- building a strong brand;
- correctly financing your site;
- making your marketplace attractive and easy to navigate; and
- complying with all legal requirements.
Build a Strong Brand
Firstly, you should build a strong brand for your online marketplace. The best online marketplaces have a clear vision and purpose. Generally, when first starting off, you should limit the types of goods that people can buy or sell to fit with your brand.
If you open your marketplace too wide, people may struggle to understand or differentiate your marketplace from your competitors and may go with more established eCommerce marketplaces. A strong brand will attract buyers and sellers to your eCommerce site to help get it off the ground.
Think About How You Want to Finance Your Site
When you are facilitating transactions, you are not making money by selling products directly. Therefore, you must consider how you want your business to make money.
For instance, you could consider a subscription model, where some users pay to access the marketplace or sell their goods. Alternatively, you could charge a small fee per transaction or every time someone lists a product on your site, which allows you to make money when people buy and sell through your site. You could also consider selling advertising space on your site. If you would like, you could allow people the option to purchase premium selling or advertising space.
Continue reading this article below the formGet Your Documents in Order
You should ensure you have all the legal documents you need for your marketplace to succeed, namely a:
- privacy policy;
- terms and conditions document; and
- website terms of use.
These documents will outline how your marketplace interacts with its buyers and sellers. Additionally, they should set out your roles and responsibilities as a marketplace and what you are and are not responsible for. Likewise, how hands-on you want your marketplace to be and what you want to leave up to your users is up to you.
However, you will have minimum privacy and commercial standards that you should incorporate into your documents. You should ensure that all of these documents are accessible and easy to read.
Make Your Site Attractive and Easy to Navigate
You will need to ensure that your website attracts people. If your marketplace is challenging to navigate or poorly designed, people will likely not take the time and effort to engage with your site. The easier your marketplace is to use, the more people will use it. An eye-catching design will also attract people to your site, making products more attractive for buyers and sellers.
Comply With All Your Legal Obligations
When running a business, even if it is an online business, you will need to pay taxes. To pay tax, you will need to choose a business structure, such as a:
- sole trader;
- partnership; or
- company.
If you are a sole trader or a partnership, you will need to pay income tax on your earnings from the marketplace through your own IRD number. If your marketplace operates as a company, you will deduct a salary from your profits and be taxed on that as an individual.
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Key Takeaways
Running an online marketplace can be a fantastic opportunity. However, ensuring that your marketplace is booming can be a considerable challenge. It is crucial to make sure that your site is as easy-to-use and attractive as possible to draw buyers and sellers to your site. Additionally, your business needs to comply with all New Zealand business laws, privacy laws, and commerce laws. It is also essential to consider how you want your marketplace to be financed to ensure it is financially viable.
If you need help with starting an online marketplace, our experienced eCommerce lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Yes, just because a business is online does not mean that you do not have to pay tax. You will need to pay income tax based on your personal income, and if your business is a company, you will also need to pay company tax.
That depends on what you want from your business. If you do not want extensive personal liability, you may wish to register your business as a company. However, if you do not want to go through the extensive process of setting up a company, you could act as a sole trader.
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