RST Software
Editorial Team
Magdalena Jackiewicz
Reviewed by a tech expert

Build vs buy: should you purchase off-the-shelf marketplace software

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Are you planning to create a new e-commerce marketplace but doubting whether to buy off-the-shelf or build your own? The million-dollar dilemma facing marketplaces hinges on navigating licensing fees, scalability concerns, and unique feature needs. This article equips entrepreneurs, investors, and C-suite executives with the insights needed to make the right decision. 

Drawing on findings from a recent study, we'll reveal the key ingredients of a winning B2B marketplace strategy – one that leverages the speed of pre-existing platforms while unlocking the competitive edge of bespoke development. Learn how to optimize costs, achieve a unique value proposition, and ultimately, propel your marketplace to success.

What are the costs of creating a marketplace?

One of the primary considerations in the financial equation is the time investment required for the development process. According to the study commissioned by Nautical Commerce and conducted by Forrester Consulting, nearly two-thirds of respondents reported a time to launch exceeding six months. Time, as they say, is money, and in the realm of marketplace development, prolonged timelines can translate to increased costs.

Moreover, the financial commitment extends to the monetary investment involved in creating a custom solution. A significant finding from the study reveals that 59% of surveyed firms spent $3 million or more on building their marketplace software solutions. The decision to either build the backend in-house or opt for a vendor solution is key here. Respondents' firms with self-built marketplaces were 43% more likely to spend $6 million or more on the build, underscoring the potential financial implications of the development route chosen.

When should you build your own marketplace?

Deciding to go the way of building your own marketplace is a strategic move that requires a subtle understanding of your business goals and constraints. In this section, we'll explore the pros and cons of taking the custom development route, offering insights to help decision-makers navigate this crucial juncture.

Pros of building a marketplace

Creating a bespoke marketplace allows for extensive customization, aligning its every facet with your unique business needs. You have full control over features, ensuring a tailored user experience. Additionally, internalizing the development process provides a deep understanding of the platform, fostering agility in adapting to evolving market demands.

Cons of building a marketplace

However, this path entails considerable challenges, including extended development timelines, higher upfront costs, and potential hurdles in third-party seller integration. The need for specialized skills and ongoing maintenance can also strain internal resources. The decision to build demands a careful evaluation of your business's capacity to weather these challenges and reap the long-term benefits of a custom marketplace platform.

When should you buy third-party marketplace software?

Making the decision of opting for third-party marketplace software involves a meticulous analysis of your business requirements and the strategic goals you aim to achieve. In this section, we'll explore the advantages and disadvantages of purchasing a ready-made marketplace solution, providing insights to support the decision-making process.

Pros of buying a third-party marketplace platform

Opting for a pre-existing marketplace platform offers a streamlined and efficient route to market. The reduced time to launch is a significant advantage, allowing your business to swiftly capitalize on the expanding e-commerce landscape. With established solutions, you benefit from the expertise of seasoned providers, tapping into their knowledge base for a smoother adoption process. The financial aspect is also notable, as off-the-shelf solutions often come with a more predictable cost structure, minimizing the upfront investment compared to custom development.

Cons of buying a third-party marketplace platform

However, there are trade-offs. Customization may be limited, constraining the platform's alignment with your specific business context. The one-size-fits-all nature of third-party solutions might not cater to unique requirements, potentially hindering your ability to differentiate in a competitive market. Additionally, reliance on external providers introduces a degree of dependency, and updates or modifications may be subject to the provider's timeline. Deciding to purchase third-party marketplace software, you must create balance between time to market and the need for a tailored, distinctive platform.

Actually, it not buy vs. build, it’s buy AND build

The dichotomy of ‘buy vs. build’ often oversimplifies the critical choice at hand. A more nuanced approach comes out, revealing that the path to success lies not in an either-or scenario but in a blend of both. It's about recognizing the strategic advantages of a hybrid model – where off-the-shelf solutions seamlessly intertwine with in-house customization.

By opting for this model, you will have to:

Evaluate the strategic advantage of the hybrid approach

In adopting a hybrid approach, decision-makers strategically apply the 'buy and build' paradigm. This combination leverages the efficiency of third-party marketplace platforms as a robust foundation. The advantage lies in the flexibility to incrementally build upon this purchased core, aligning the platform with evolving business needs. The study by Nautical Commerce, reinforces the importance of this approach, showcasing how marketplaces affect outcomes across people, processes, and technology.

Look for flexible off-the-shelf solutions

Seeking flexible off-the-shelf solutions becomes essential in the 'buy and build' approach. Businesses can expedite their market entry by using ready-made solutions, tapping into established platforms for a swift launch. The key lies in selecting versatile off-the-shelf solutions that facilitate seamless integration of unique, in-house features. This maneuver accelerates time-to-market and allows businesses to harness the efficiency of established solutions while adjusting them to their distinctive needs.

Analyze cost-effectiveness of available third-party marketplace platforms

A close analysis reveals that a hybrid approach optimizes expenses. By leveraging existing solutions, businesses sidestep the costs associated with reinventing the wheel. The previously mentioned study emphasizes this, showcasing how vendor-supported marketplaces were a more cost-effective choice. The 'buy and build' paradigm comes off not only as a strategic advantage in development, but as a smart financial decision, agreeing with the overarching goals of revenue growth and customer expansion.

Aim for getting a competitive edge

In chasing that competitive edge, the 'buy and build' paradigm serves as a catalyst for innovation. Custom development atop purchased software becomes the driving force, enabling businesses to stand out and outpace competitors. By encouraging a departure from the binary choice, decision-makers unlock the potential of purchasing as the foundation for proprietary features. This approach, validated by the Nautical Commerce study, fosters innovation and positions businesses strategically in the dynamic marketplace landscape.

Focus on proper resource allocation

Emphasizing the significance of proper allocation of funds, decision-makers should prioritize the development of features that confer the most significant competitive advantage or align closely with the core business value proposition. The study's findings stress the impact on outcomes across the organization, affirming that strategic resource allocation enhances efficiency and helps meet the overarching business goals.

Plan for solid risk management

The 'buy and build' model serves as a proper risk mitigation strategy. By combining purchase with development, businesses can reduce the dangers associated with both approaches. This hybrid method contributes to success across various business results, positioning executives to tackle challenges effectively, ensuring a resilient and adaptive marketplace strategy.

Future-proof your marketplace

Future-proofing your marketplace is the ultimate goal of the adaptable 'buy and build' model. A hybrid strategy inherently positions businesses to handle future changes in technology or business models with ease. The flexibility to pivot and scale demonstrates the resilience embedded in this approach. Businesses can confidently steer their marketplace towards longevity, evolving in tandem with the ever-changing currents of the digital marketplace ecosystem.

Need help? RST are your trusted marketplace technology consultants

Our exploration of the 'buy and build' model has uncovered a strategic approach that discards the binary choice of off-the-shelf or custom solutions. By fusing the efficiency of ready-made platforms with the power of in-house customization, businesses can take advantage of multiple benefits. From optimizing expenses to fostering innovation, the hybrid strategy proves to be a catalyst for success.

At RST Software, we understand the nuances of this approach well, which makes us a reliable and capable partner for organizations poised to create their own marketplace. Our commitment to providing flexible, off-the-shelf solutions ensures a swift market entry, while our expertise in tailoring these solutions to unique business needs aligns with the 'buy and build' philosophy.

Ready to start your digital transformation and create your own marketplace? Reach out to us today and discover how the 'buy and build' paradigm can thrust your business towards success.

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