A practical guide to building a two-sided marketplace — the chicken-and-egg problem, core features, payment flows, trust systems, and why most marketplaces fail before they find liquidity.
What is a marketplace platform? A marketplace platform is a web application that connects buyers and sellers (or service providers and customers), facilitating transactions between them. Unlike traditional e-commerce where one company sells products, a marketplace enables multiple sellers to list and sell through a single platform. Key challenges include: solving the chicken-and-egg problem (getting initial supply and demand), payment processing and escrow, trust and review systems, search and discovery, and achieving marketplace liquidity.
Most marketplace ideas die before they ever hit the real problem. People obsess over features, design, and tech stacks — and completely ignore the one thing that determines whether a marketplace lives or dies: liquidity.
A marketplace without enough supply and demand is just a website with empty listings. And getting both sides to show up at the same time, in the same place, for the same thing — that's the actual challenge. Everything else is plumbing.
We've built several marketplace platforms at Hunchbite. Some succeeded. Some didn't. The ones that failed almost always failed for the same reason: they tried to build a complete platform before proving anyone cared.
Every marketplace needs two sides: supply (sellers, providers, hosts) and demand (buyers, customers, guests). Neither side will show up without the other.
Sellers won't list if there are no buyers. Buyers won't browse if there are no listings. This is the chicken-and-egg problem, and it has killed more marketplace startups than bad code ever will.
1. Constrain your market ruthlessly
Don't launch a "marketplace for services." Launch a marketplace for freelance graphic designers in Bangalore. Or for vintage furniture in Brooklyn. Or for home chefs delivering lunch in a single neighbourhood.
Uber didn't start with "ride-hailing globally." It started with black cars in San Francisco. Airbnb started with air mattresses during a conference. The constraint is what makes liquidity achievable.
2. Seed one side manually
Pick the harder side (usually supply) and fill it yourself. Go to existing sellers on Craigslist, Facebook groups, Instagram, or other platforms and manually onboard them. Scrape listings if you need to. The first 50–100 listings don't need to come organically — they need to exist.
3. Be the seller initially
Some successful marketplaces started by being a seller themselves. Provide the service yourself, prove demand exists, then open it up to other providers. This is slower but eliminates the cold-start problem entirely.
4. Single-player mode
Give one side a reason to use the platform even without the other side. Yelp worked because restaurants got free business pages (useful even without customer transactions). OpenTable gave restaurants reservation software (useful standalone).
Here's where most marketplace founders go wrong — they try to build a fully-featured platform for launch. You need far less than you think.
Build these after you've proven people will use the marketplace at all. Read our guide on what you actually need in an MVP — the same principles apply.
Payments in a marketplace are fundamentally different from regular e-commerce. You're not collecting money for yourself — you're collecting money on behalf of sellers, taking a cut, and distributing the rest. This is called split payments, and it's regulated.
Stripe Connect exists specifically for marketplace payments. It handles:
There are three Stripe Connect models:
| Model | How it works | Best for |
|---|---|---|
| Standard | Sellers create their own Stripe accounts | Established sellers, less platform control |
| Express | Streamlined onboarding, platform has more control | Most marketplaces — good balance |
| Custom | Full control over everything | Large platforms with custom payment UX |
For most marketplace MVPs, Express is the right choice. It handles compliance, lets you control the experience, and doesn't require you to become a payment processor yourself.
Razorpay Route offers similar split-payment functionality for the Indian market, with UPI support and INR payouts. If your marketplace operates primarily in India, this is often simpler than Stripe for domestic transactions.
For service marketplaces, escrow is critical. The flow:
This protects buyers from non-delivery and sellers from chargebacks. Build this from day one if your marketplace involves services or high-value goods.
People don't buy from strangers on the internet unless they trust the platform. Your trust system is as important as your payment system.
Start simple: a manual process where you mediate disputes via email. Don't build a complex ticket system for launch. You won't have enough disputes to justify automation until you're processing hundreds of transactions per month.
Here's what we typically recommend:
| Layer | Technology | Why |
|---|---|---|
| Frontend | Next.js | SSR for SEO (listings need to be discoverable), fast, great developer experience |
| Backend | Node.js (Express/Fastify) or Next.js API routes | JavaScript end-to-end, large ecosystem |
| Database | PostgreSQL | Relational data (users, listings, transactions, reviews) needs relational database |
| Search | Meilisearch or Algolia | Product/listing search needs to be fast and tolerant of typos |
| Payments | Stripe Connect | Split payments, escrow, seller onboarding |
| File storage | Cloudinary or AWS S3 | Listing images, user avatars |
| Real-time | Socket.io or Pusher | In-platform messaging |
| Hosting | Vercel (frontend) + Railway or AWS (backend) | Managed, scalable, affordable |
For a detailed cost breakdown of building a web application like this, see our cost-to-build guide.
Be honest with yourself about what you actually need.
Our honest advice: start with Sharetribe or a similar tool if your model is standard. Build custom when you've proven demand and know exactly what you need.
The #1 killer. You don't need a mobile app, AI recommendations, and a seller analytics dashboard before your first transaction. You need listings, payments, and enough trust for someone to click "buy."
No amount of technology fixes an empty marketplace. Spend 80% of your early effort on getting supply and demand, and 20% on the platform.
Marketplaces typically charge a percentage commission (10–20% is common). But the right model depends on your category. High-value, low-frequency transactions (real estate, vehicles) might work better with listing fees. Low-value, high-frequency transactions (food delivery) need small commissions but high volume.
Test your pricing model before you build complex billing logic.
"A marketplace for everything" is a marketplace for no one. Constraint creates density. Density creates liquidity. Liquidity creates value.
Most marketplace founders think about the buyer experience and treat sellers as an afterthought. Sellers are your product. If listing is painful, if payouts are slow, if communication is broken — your best sellers will leave.
Real numbers, not marketing ranges:
| Scope | Timeline | Cost (India, quality studio) |
|---|---|---|
| MVP (listings, search, payments, messaging, reviews) | 8–12 weeks | ₹12–25 lakhs ($15K–$30K) |
| V1 (MVP + seller dashboard, advanced search, notifications, dispute resolution) | 14–20 weeks | ₹25–50 lakhs ($30K–$60K) |
| Full platform (mobile apps, analytics, ML recommendations, API for partners) | 6–12 months | ₹50 lakhs–1.5 crore ($60K–$180K) |
These are real ranges for a quality build with a competent team. If someone quotes significantly less, ask what they're cutting. If someone quotes significantly more, ask what they're adding.
Building a marketplace is as much a business problem as a technical one. Before you write a line of code:
If you've validated demand and you're ready to build, let's talk about your marketplace. We've built platforms ranging from service marketplaces to niche product marketplaces — and we'll be honest about whether you need a custom build or an off-the-shelf tool.
If this guide resonated with your situation, let's talk. We offer a free 30-minute discovery call — no pitch, just honest advice on your specific project.
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