How to Build an Online Marketplace Like Etsy: A Step-by-Step Guide

With over 10 years of experience building marketplaces for content creators, freelancers, software consultants, and others, we’ve seen it all — including craft goods marketplaces like Etsy. Based on our diverse experience, we know how to build a competitive marketplace with confidence.

In this article, we break down how to develop a marketplace like Etsy, focusing on:

• How to create an online marketplace like Etsy (core steps)
• Development best practices from our own experience
• Must-have features for a marketplace like Etsy
• Time and cost estimates

Let’s dive into the essentials.

Developing a marketplace like Etsy unfolds in three main stages:

1. Project discovery – this is when you validate your idea and gather all the necessary documentation for your marketplace project.
2. Development – the actual building phase, when your hand-made or vintage goods marketplace becomes a fully functional product.
3. Maintenance and growth – once live, you continuously improve the platform based on user feedback and market demands.

We’ll break these stages down for you in the next sections.

Project discovery steps, specialists involved, and deliverables

The project discovery phase lays the foundation for your marketplace’s success. It ensures that every decision is based on solid research, thorough analysis, and strategic discussions. By spending time on discovery, you not only get a clear, actionable plan for your marketplace but also avoid costly mistakes later. This means smoother development, fewer surprises, and a product that aligns with your business goals.

Discovery can involve multiple steps, but here are the five most essential:

1. Analyze the target audience and competitors

To make your marketplace valuable and competitive, we focus on two key areas:

Target audience analysis
For a marketplace like Etsy, your audience includes people who want to sell unique handmade or vintage items and those looking to buy them. We analyze the target audience through:

• Geography – Where’s the highest demand for these items?
• Demographics – What age group is most likely to use the platform, and what are their interests?
• Psychographics – What values and lifestyles drive the audience’s buying or selling decisions?

Understanding these factors allows us to tailor the marketplace to perfectly fit your users’ needs.

For example, when we worked on the Toddy babysitting marketplace, we expected parents and babysitters to be the main users. However, our analysis showed that babysitting agencies were also quite interested in using the platform, so we adjusted the project accordingly.

Competitor analysis
If you are questioning how to create an online marketplace like Etsy, you probably realize that you will have to compete with platforms like ArtFire, Zibbet, and Folksy. Each offers unique features: ArtFire has a strong artisan community, Zibbet provides multi-channel selling tools, and Folksy focuses on British handmade crafts.

For regional marketplaces, identify where people are already selling their handmade goods. Even if there’s no dedicated platform, competition may come from general marketplaces, online stores, or social media. Knowing your competition helps you offer something better to attract users.

Our competitor analysis highlights both the strengths and weaknesses of rivals. This helps us identify which features are essential for users and which unmet needs your marketplace can fill.

2. Determine the scope of work

Defining the scope of work depends on three main factors:

• Features – Prioritizing features helps us figure out what needs to be built first.
• Infrastructure setup – The infrastructure you choose defines the technical foundation for your marketplace and impacts the project scope, influencing scalability, performance, and security requirements.
• Risks – Identifying potential risks early lets us create a risk management plan and factor it into the project scope.

With these factors in mind, we can estimate the scope of work along with the budget and timeline needed to meet your project goals.

3. Define requirements

Clear project requirements ensure that everyone knows how the marketplace will function and serve as a guide for the development team. We focus on two types of requirements:

• Functional requirements describe what the marketplace does, such as how users will create accounts, how sellers will manage product listings, and so on.
• Non-functional requirements cover how the platform will perform. This includes things like scalability, performance, and security (e.g., handling secure payments even during high traffic periods).

We involve technical specialists, including software architects, developers, and quality assurance (QA engineers) to make sure the project can be successfully built from a technical perspective.

4. Create a proof of concept (PoC)

A proof of concept (PoC) is a small and cheap experiment that lets us:

• Validate your idea implementation
• Test if the selected technical solution performs well
• Identify areas for improvement

A proof of concept is used to test innovative or technically uncertain features before developing the full product. For example, if you’re considering a custom order system that allows buyers to make personalized requests but you’re not sure if it will work as expected, a PoC can verify its feasibility. This way, you can confirm that your approach will function properly in your future marketplace without risking major changes or costs later in the development process.

5. Create documentation and estimate resources

At the end of the discovery phase, we document all our findings and insights as deliverables — practical results that guide the development process. We focus on deliverables that add real value so you won’t waste your budget on unnecessary work.

Typical deliverables include:

• Development plan – A roadmap detailing project goals, scope, tasks, team roles, and timelines
• Feature breakdown – A prioritized list of features to develop, such as vendor profiles, product listings, and payment gateways
• App requirements document – A document outlining the marketplace’s functional and non-functional requirements, user workflows, and technical specifications
• Team composition – A list of roles and responsibilities for each team member involved in the project
• Risk register – A document identifying potential risks, their likelihood, and mitigation plans
• Cost and time estimates – A detailed projection of the budget and timeline based on feature complexity, scalability, and third-party integrations

These are the most common deliverables, but many more can be produced during the discovery phase to help ensure your project’s success.

The following specialists are involved in all processes within the discovery phase described above:

• Business analyst (BA) – Gathers and analyzes business requirements, translating them into clear project goals
• UI/UX designer – Develops the user interface and user experience, focusing on creating intuitive and user-friendly designs
• Technical specialists – those who know how to build a website like Etsy in technical terms – software architects, backend developers, QA engineers, – assess feasibility and outline the architecture to achieve your project’s goals
• Project manager (PM) – Oversees the entire discovery process, ensuring all objectives are met while also managing resources and coordinating specialists involved in the process

Project discovery time & costs

At Clockwise Software, we take from 3 weeks to 2+ months to finish the discovery phase of a marketplace project. The cost varies from $12,000 to $25,000. An array of factors influence the time and cost of a discovery phase:

• Business goals
• Project background
• Project scale & complexity
• Existing deliverables
• Expected results

Depending on the described factors, we offer one of the following discovery packages:

If you want to dive deeper into the discovery phase — its steps, deliverables, timelines, and costs — explore our comprehensive project discovery white paper. We cover 30+ essential deliverables, along with detailed time and cost estimates, and introduce our three tailored discovery packages.

In essence, the discovery phase is your best investment in ensuring a smooth, successful marketplace launch. Skipping it can lead to unforeseen challenges and increased costs. By taking the time to do it right, you not only set up your project for success but also save time and resources in the long run.

Development process steps, features & costs

We break down the marketplace development process into seven key steps:

1. UI/UX design

The UI/UX designer creates an initial design concept based on requirements gathered during the discovery stage. Our goal is to focus on simplicity and scalability, ensuring that the design is both functional and user-friendly. This initial version sets the foundation, and we iterate only to refine the design into its optimal and most efficient form that is ready to be sent to the production stage.

2. Infrastructure setup

A DevOps specialist sets up the robust infrastructure required so the marketplace can handle high traffic volumes and meet diverse user needs. This includes selecting the right cloud services, databases, and servers to ensure scalability, security, and reliable performance.

3. Frontend development

Frontend developers bring the UI/UX design to life, focusing on responsive design and interactive features and making sure that the marketplace functions smoothly.

4. Backend development

Backend developers work on backend architecture that powers the marketplace, including user management, product listings, and transaction processing.

5. Integrations

Integrations with maps, payment gateways, shipping providers, and marketing tools are crucial for providing a seamless user experience and ensuring the platform can compete with established marketplaces focused on vintage and handmade goods.

6. Testing

QA engineers start testing each piece of functionality as soon as it’s developed, helping developers fix bugs before they turn into real problems. They also test the final product before it goes into end users’ hands.

7. Deployment

Finally, we deploy the marketplace to the live environment, making it immediately accessible to users. We monitor the platform closely post-launch to promptly address any issues, ensuring a smooth and successful launch.

Development methodology

We understand your desire to roll out as many features as possible, but that’s not always realistic. To keep development on track while staying adaptable, we break the work into manageable chunks called sprints. These are typically two-week periods during which we focus on a specific set of tasks.

We complete each sprint before moving to the next set of tasks, ensuring that everything is fully finished and functioning. This way, we can maintain a steady pace while staying flexible enough to make adjustments along the way.

Specialists involved

The development stage involves the following key roles:

• Project manager (PM) – Oversees the team’s progress, making sure marketplace development stays on schedule and aligns with the project goals
• UI/UX designer – Designs intuitive and visually appealing interfaces that enhance the user experience
• Frontend developers – Translate UI/UX designs into responsive interfaces that users interact with
• Backend developers – Develop and maintain the server-side infrastructure, databases, and APIs that handle the marketplace’s core functionalities, such as user management and transactions
• QA engineers – Test the marketplace thoroughly to identify and resolve any bugs or issues, ensuring it meets required quality standards
• Software architect – Designs the overall system architecture, ensuring the marketplace is scalable and maintainable
• DevOps specialist – Manages deployment, continuous integration, and monitoring processes to ensure the marketplace runs smoothly and can be updated without downtime

For each marketplace we have developed, the team structure and number of specialists required has been different. For example, when we worked on Creador (a peer to peer marketplace to connect brands with visual content producers), the team consisted of four software engineers, a QA engineer, a UI/UX designer, and a PM. In this case, we prioritized speed, since the client came to us with an established project concept and strict deadlines, and our task was to develop required functionality within four months.

When developing an auto-publishing extension for Eventbrite (an international platform for event management and ticketing) we composed a team of a backend developer, a manual QA engineer, and a PM. Their task was to implement this extension and ensure its flawless performance.

The team structure for your marketplace like Etsy largely depends on four factors:

• Project background
• Goals
• Timeline
• Budget

Based on our experience, we know that each case is unique. Later in the article, we will talk in detail about possible options for cooperating with software development teams.

How to start a website like Etsy: must-have functionality to add

Finally, we have reached the part where we will explain which features should be included in your Etsy-like marketplace. Let’s start from the basics.

In this table, you can see basic features that a marketplace like Etsy should have. They allow all user roles of a two-sided marketplace — sellers, buyers, and administrators — to interact with your marketplace without obstacles.

This is basic functionality for a marketplace similar to Etsy. Depending on your goals, you may want to add additional features to your scope of work.

Value-added services to make your Etsy-like marketplace stand out

When building an Etsy-like marketplace, certain features will help you stand out from typical e-commerce platforms:

Profile

Seller profile storytelling
People buying unique, handmade items often want to connect with sellers. Give your sellers the chance to share their story, their creative process, and what inspires them. This adds a personal touch and helps build trust between buyers and sellers.

Detailed shop policies
Clear shop policies are a must for unique goods. Sellers need to be able to set expectations around things like shipping, returns, and custom orders. This is especially important for handmade or customized products to make sure everything goes smoothly.

Categories

Craft supply and tool categories
Don’t forget about the creators themselves. By offering sections for craft supplies and tools, you can turn sellers into buyers. Sellers often need fabrics, paints, or specialty equipment to produce their goods. Ultimately, adding craft supplies and tools will increase your sales and revenue and add more value to your platform.

Ethical and sustainable product categories
Eco-conscious buyers are on the rise, and they’ll appreciate sellers who highlight sustainable or fair-trade practices in their listings. Offering ethical and sustainable product categories can set your marketplace apart for buyers who prioritize ethical shopping.

Gift cards
Let buyers purchase gift cards so they can introduce their friends and family to your marketplace. This adds an extra layer of flexibility and makes your platform a go-to for gift shopping.

Listings

Extensive product listing customizability
Make sure sellers can offer customizable options, such as different colors and sizes or personalization of items with names or messages. Customization is a big deal when it comes to handmade items, and buyers love getting something truly one-of-a-kind.

Made-to-order and one-of-a-kind listings
Emphasize listings for made-to-order and one-of-a-kind products so buyers know they’re getting something special. This feature will really set your marketplace apart from more traditional online stores.

Support

Support for small businesses
Provide tools and resources to help small independent sellers grow their businesses. Tips on things like product photography, pricing, and marketing can make a big difference. When your sellers succeed, so does your marketplace.

Community and social features
Help build a community by letting buyers add shops to a Favorites list, create collections, and follow sellers they love. This will make your marketplace feel more personal and keep people coming back.

Showcase seller events and markets
Let sellers promote their local events, like craft fairs or pop-up shops, where they’ll be selling in person. This blends the online and offline experience and makes shopping even more personal for buyers.

These features make an Etsy-like marketplace different from your standard e-commerce platform, which usually focuses on mass-produced goods. By putting handmade items, personalized experiences, and community first, you’ll attract a loyal group of creators and buyers. Just keep in mind that building such a tailored platform comes with some technical challenges that may affect the overall cost.

Development time and cost

How much time and money does it take to build a marketplace like Etsy?

We can’t provide an exact answer without knowing your specific plans, but here’s a rough estimate based on our experience from five similar projects:

At our company, the average hourly rate is $50. Therefore, we would charge approximately $150,000 for an Etsy-like marketplace with the features listed above.

Your specific business model might require additional features or, in some cases, fewer features than those listed. Every marketplace has its unique needs, and we can provide a custom estimate based on your exact requirements.

After the discovery phase described above, you’ll have a clear development plan, including a list of all required features and a timeline for their development. Based on this plan, we provide a highly accurate estimate so you’ll know exactly what to expect in terms of development costs.

If you want to know how to estimate the time needed for marketplace development, read our marketplace MVP estimate example; it contains both optimistic and pessimistic scenarios for marketplace development time.

How to start a business like Etsy and make it time- and cost-efficient?

In our 10+ years of experience developing software products, we can share some tips to make marketplace development more time- and cost-efficient:

• Be patient with planning. Thoughtful planning helps save time and money by cutting unnecessary features. When we worked on the Creador app that we mentioned earlier, the original idea was similar to Upwork, packed with features. After discussing core goals with the client and conducting market research, we prioritized key functionality for the first release. This allowed us to reduce the development time from 12,000 to 8,000 hours, making the initial investment more reasonable. We then planned features for later releases, ensuring they would be implemented once product demand was validated.

• Collaborate with developers who possess specific expertise in marketplace development. Whether you work with an external partner or your in-house team, having developers with experience building platforms like Etsy is crucial. Their familiarity with common pitfalls and technical challenges will help you avoid costly mistakes, streamline the development process, and effectively manage risks. By leveraging their expertise, you can save both time and money, ensuring your marketplace is built efficiently and correctly from the start.

• Minimize development of features from scratch. We always recommend that our clients leverage third-party APIs and ready-made templates to reduce the number of custom developed features. For instance, integrating customer support tools like Intercom or Zendesk typically takes around 8 to 16 hours, while developing a custom live chat solution can take anywhere from 100 to 150 hours. By choosing pre-built solutions where appropriate, you can significantly cut development time and costs without sacrificing functionality.

By the end of the development stage, the initial version of your marketplace will be ready for launch. But this is just the beginning. Now, with real users on board, you can gather valuable feedback and continue developing your product based on their needs, ensuring the marketplace’s growth and long-term success.

Maintenance and growth

So, now you know how to make a website like Etsy, but what’s next? After you release the first version of your product, you should:

1. Maintain your product

Maintaining an online marketplace involves not just fixing bugs and technical issues but also optimizing performance, enhancing security, and ensuring scalability. This includes improving page load times, conducting regular security audits, updating protocols, and managing infrastructure to handle increased traffic and user demands.

2. Collect feedback from users

Once you gather and analyze feedback from users, you’ll have a clearer idea of how to improve your platform. Based on this information, we will begin a new development iteration, which may include optimizing marketplace performance or adding new functionalities.

So, what are the advanced features that could elevate your Etsy-like marketplace further?

Advanced features to consider for an Etsy-like marketplace

Let’s see what features you may consider adding to your marketplace in the future:

Location-based features

Handmade items are often best appreciated in person, as buyers can see and feel them before purchasing. Offering location-based features allows customers to find local stores or events where they can experience products firsthand, which can boost sales and increase earnings for the platform.

This not only boosts the visibility of stores but also enhances the overall shopping experience by making it more immersive and personalized.

Personalized recommendations and AI-driven search

Enhancing search functionality with AI can lead to higher sales and customer satisfaction. By personalizing product suggestions based on user behavior and preferences, AI helps buyers find relevant products quickly, reducing search times and increasing the likelihood of a purchase.

This approach can also improve your net promoter score (NPS) and increase the chances of your marketplace being recommended to others.

Advanced functionality for sellers

Providing sellers with tools similar to Etsy’s Pattern feature allows them to create their own branded stores within your platform. This functionality offers sellers valuable analytical and e-commerce tools, empowering them to manage their business more effectively and create a unique shopping experience for their customers.

Advanced functionality can help attract more sellers and enhance the overall marketplace offering.

Augmented reality (AR) integration

AR features enable buyers to visualize products in their own space or try them on virtually. For instance, AR can help users see how a piece of art looks on their wall or how clothing fits them.

This capability can significantly boost conversion rates by providing a more interactive shopping experience, helping buyers make informed decisions.

Integrated shipping solutions

Integrating shipping solutions streamlines the fulfillment process by enabling sellers to manage logistics, print shipping labels, and track deliveries from within the platform.

This integration enhances order management efficiency, reduces manual errors, and provides a better overall experience for both sellers and buyers.

Digital product delivery

Allowing sellers to offer digital downloads, such as patterns or designs, expands the range of products available on your marketplace. This feature caters to buyers looking for virtual products and provides an additional revenue stream for sellers.

Digital product delivery helps diversify the marketplace’s offerings and attracts a wider audience interested in digital goods.

As your marketplace evolves, managing ongoing maintenance and growth becomes crucial to ensuring continued success and optimizing costs.

Maintenance and growth stage time and costs

There are three major factors influencing time and cost estimates for your marketplace improvements:

• Features you are planning to add
• Your development team structure
• Deadlines

If you’re aiming for steady progress without immediate deadlines, a core team including a PM, BA, UI/UX designer, frontend and backend developers, and a QA engineer will cover your essential needs. With this approach, you can expect to invest from $12,000 per month, allowing for an extended development timeline that fits your pace and evolving requirements.

If you plan to scale fast, you will probably need a team consisting of a PM, BA, UI/UX designer, several software engineers, and at least two QA engineers. In this case, prepare to spend at least $48,000 per month.

Challenges of developing an Etsy-like marketplace and how to deal with them

Here is a list of challenges you may face when building a marketplace like Etsy (and ways to overcome them):

Poor user experience

Ensuring a great user experience is crucial for retaining users. Technical issues, slow performance, or difficult navigation can negatively impact the user experience.

Solution: Focus on robust testing and quality assurance processes to identify and address potential issues before launch. Implement user feedback mechanisms and continuously monitor performance to make iterative improvements based on real user experiences.

Engaging a niche audience

Attracting and engaging a niche audience requires specialized features and a deep understanding of user needs. Craft and vintage marketplaces need to cater specifically to users looking for unique, high-quality items.

Solution: Develop features that cater specifically to the interests of your target audience, such as tailored search options and personalized recommendations. Create community building tools to foster engagement and ensure that the platform meets your users’ specific needs.

Shipping and logistics

Managing shipping and logistics for delicate, unique, or high-value items can be complex. Sellers may struggle with packaging, handling costs, and delivery times.

Solution: Integrate shipping solutions and offer guidance on best practices for packaging and logistics. Partner with reliable carriers and provide tools that help sellers efficiently manage their shipping.

Competition

The marketplace for crafted and vintage goods can be highly competitive, with many sellers vying for attention. New platforms need to differentiate themselves and offer unique value to stand out.

Solution: Implement features that help sellers distinguish themselves, such as advanced branding tools and data analytics to identify current marketplace trends. Provide promotional support and insights to help sellers effectively market their products.

Technical risks and platform choice

The tech stack you choose directly impacts your ability to scale the marketplace as demand grows. It’s essential to select a platform that aligns with your audience’s preferences. If the platform isn’t suited to their preferred devices or habits, users may avoid your product, opting for more familiar or comfortable alternatives.

Solution: Carefully evaluate the pros and cons of different platforms based on your target audience and business goals. Opt for scalable and flexible tech solutions to adapt to future needs and mitigate risks associated with platform selection.

Team structure for marketplace development

When it comes to assembling the necessary expertise to develop a marketplace like Etsy, you have three approaches to consider:

Outsource development

Outsourcing your marketplace development to a software development company allows you to hire an experienced team that knows how to create a website like Etsy from scratch. This team handles the entire development process, from initial planning to delivering a fully functional product.

Marketplace founders we’ve worked with have wanted to focus on strategic work without getting distracted by daily development details. That’s why we’ve formed independent teams to manage all technical and operational aspects. Our approach has been highly effective — we provide regular updates, minimize communication, and only involve founders when key decisions require their input.

In-house team

Forming an in-house development team can offer greater control over the project and facilitate closer collaboration. However, if you don’t already have technical staff, be prepared for a potentially lengthy and costly hiring process. While this approach requires significant investment, it can lead to more integrated and responsive development.

If your in-house team lacks expertise, consider consulting services. We sometimes consult in-house teams, using our experience in marketplace development to help them make key technical decisions. With this guidance, teams can continue working independently to build a strong product.

Augment your current team

If you already have an in-house team but lack certain specialized skills or need to speed up development, you can consider opting for a dedicated development team service. This approach allows you to bring in necessary expertise from a software development company. External specialists will work alongside your existing team, providing the skills needed to move forward with development.

The Eventbrite global event management platform needed to roll out an extension for quickly auto-publishing events, but their core team was tied up with other priority tasks. To deal with this, they decided to delegate development of this important feature to Clockwise. We assembled a dedicated team to handle the development fast. We gathered requirements and efficiently built and released the necessary functionality. This collaboration allowed Eventbrite to introduce the feature on time, despite their internal constraints.

The right team structure for marketplace development depends on your resources, expertise, and goals. You can opt for outsourcing, form an in-house team, or consider a dedicated development team. Just make sure the team working on your marketplace has relevant expertise.

How to create an online marketplace like Etsy: Summing up

By following the key steps outlined — starting with thorough project discovery, moving through careful development, and focusing on ongoing maintenance — you can create a competitive platform for handmade and vintage goods. Remember to prioritize essential features, plan carefully to manage time and costs, and stay responsive to user feedback to ensure your marketplace thrives. With the right approach and attention to detail, your platform can successfully carve out its niche in the market.