Why to convert your marketplace in a white-label service and how to make it happen?

Oct 8, 2020·12 min read

Launching white-label services is a great additional revenue stream for almost any type of digital business. In this article, we focus on white-label marketplaces: what are the benefits of such side business, how to build one, how much does it cost to launch a service, etc.

Contents:

Let’s assume you own an online marketplace. It attracts both sellers and buyers, and it generates some revenue. But it isn’t growing. You’ve reached a plateau, and you’re looking for an idea to scale your business and increase your revenue.

There are a few possible strategies: 

  • Horizontal growth
    If you originally launched a multi-vendor marketplace with a focus on a narrow niche, you can expand to other industries, or other niches within the same industry. For example, if your initial offering was on-demand babysitting services, you can scale by offering all kinds of on-demand home services like cleaning, cooking, and plumbing.
    Why will this work? You already have an active base of clients who pay for some service (such as babysitting). These people know and trust your platform and will be glad to use it to request spring cleaning, for example. Meanwhile, service providers will be interested in the relevant audience you provide and will therefore be willing to join your platform. Even if you’re unable to sell more babysitting services in your region, you can cover the demand for other home-based services and increase your revenue. 
  • Geographic expansion
    If you’ve achieved success in your town, region, or country, the next step might be to expand to other regions.
    Why will this work? First of all, you already have the technology, so launching in a new city or country won’t be that expensive. Also, your experience in marketing and sales will help you avoid many mistakes. Finally, if your brand is established locally, expansion will be smoother. 
  • Launching a white-label marketplace service
    Starting a white-label marketplace business means selling your technology to other entrepreneurs who want to start their own marketplace platforms.
    Why will this work? This is the decade of new online marketplaces. There are many startup founders with unique ideas, but these founders often lack the budgets to develop custom platforms. However, they’re ready to pay for an entry-level solution to prove their concepts. This solution can be yours!

How to scale your marketplace business

In this article, we focus on a white-label marketplace service as an additional revenue source for your company and an alternative way to scale a multi-vendor business. 

We’ll answer the following questions:

What exactly is a white-label online marketplace?

What technology is behind a white-label marketplace and what improvements does your system need to be offered as a white-label product?

What is the approximate time and cost of converting an existing marketplace into a white-label solution?

We also review the tough competition and nuances of providing a white-label platform.

What is a white-label online marketplace?

You’re probably familiar with white-label grocery products. They work like this: Company X produces yogurt and sells it to retailers A, B, and C. The retailers give this yogurt their own branding and sell it in their own stores. 

Retailers A, B, and C have their own brands, but they don’t own any means of production. They just cooperate with white-label companies, rebrand those companies’ products, and sell those products under their own brands. 

Today, the white-label concept has entered the software market as well. 

Let’s say company Y creates a pre-order app for the hospitality industry. Street food vendor A from New York, cafe B from Adelaide, and restaurant C from Singapore each purchase a license, rebrand the application, and provide pre-order services to their customers. 

This business model can work with absolutely any type of application, including an online marketplace. 

How can you benefit from providing white-label online marketplace services?

A white-label app is developed by one company and then sold to other companies for rebranding and their own use. 

In the case of an online marketplace, you can sell your platform to other entrepreneurs who can customize it, rebrand it, and start their own businesses on top of your technology. But what are the benefits for you?

  • Long-term additional revenue
    Customers subscribe to white-label software products. Depending on the set of features and additional services you’re ready to offer, you can charge between $200 and $1500 to each customer. Sometimes, it’s reasonable to charge even more — everything depends on the value you can provide. 
  • Your own community of multi-vendor marketplace entrepreneurs
    If you own a white-label marketplace, you’ll get a chance to talk to other startup founders personally. Along with networking, you can listen to their expectations and gather ideas. A community is valuable for improving both your initial marketplace business and your white-label product. 
  • Competitive advantage in the industry
    If you work in a market, you know it perfectly. Moreover, you understand your target audience because you were part of this audience some time ago. You understand the struggles of people just starting their own businesses and know how to solve them. This brings you trust, satisfied customers, positive reviews, and even more customers. 

What about marketplace competition?

We know what you’re thinking about now: Why would I give away my technology and support my potential competitors?

At first sight, providing white-label software to entrepreneurs seems like creating competition to your initial marketplace business. But in fact, there’s nothing to fear. 

  • You’re an established brand with your own community
    White-label solutions are commonly used to quickly and affordably prove a concept. For businesses at the concept stage, established brands are usually hard to beat due to the habits of their existing user bases. Properly managing your community will ensure your customers stay with you even if new brands enter the market with similar products or services.
  • Everyone looks for a niche with low competition
    In the modern world, your offer must be specific to attract customers and be successful. Amazon clones selling everything to everyone don’t work anymore. New marketplaces try to find their own blue oceans and target specific niches. What are the chances that your audience will overlap with that of another marketplace?
  • You work in a different market
    Today, globalization is no longer a trend. Customers prefer local brands and service providers who speak the same language and share opinions and values. Marketplaces don’t aim to work globally but rather target specific regions. As a white-label marketplace software provider, your customers will likely be from different parts of the world, in which case you won’t have to compete. 
  • You define the limits
    You decide what features appear in your white-label product. You can release only basic functionality while keeping your advanced features exclusively for your own marketplace business. However, slowing down your customers isn’t the best idea if you want to make this branch of your business successful. It’s better to focus on developing a unique offer that’s hard for newcomers to beat. 

The paradox of customer success

For most companies, customer success is the main priority, and it directly impacts a white-label marketplace business as well. With a white-label product, however, successful customers tend to leave. 

As we mentioned above, a white-label solution is commonly used to build an MVP, prove a concept, and raise money to build a full-featured custom product. 

This means successful customers will leave you as soon as they have enough money to start developing a custom app. However, that’s not an excuse to deliver low-quality service and slow down customers’ growth. Whether your customer’s lifetime is two years or two months, you should strive to provide the best service possible. 

How to acquire new customers for your white-label service

Hundreds of marketplace ideas are born every day, and they all need to be tested. Your goal is to make your white-label product the number one option for such experiments so you ensure a stable flow of new customers and therefore revenue.  

On the other hand, you can keep working with customers even after their businesses reach the limits of what your white-label app can offer. You can do this by offering paid membership in a marketplace owners community, providing technical consulting, or becoming the intermediary between your customers and a software development agency.  

Why do entrepreneurs prefer white-label marketplaces?

Think back to your first steps in the online marketplace industry. It definitely wasn’t a cakewalk. Today’s marketplace startup founders face the same problems you did. 

  • Lack of technical knowledge
    Launching a digital solution requires a technical background that many founders lack. In most cases, a founder doesn’t have a technical partner or an in-house team to launch and support an application. So white-label marketplace software is the perfect choice. It gives founders all the technology and technical support they need to kick-start their businesses.
  • Limited budget
    As startup founders usually count on their own savings first, they can’t afford to invest a large sum in initial product development. So they look for marketplace constructors or marketplace clones, but these often don’t satisfy their needs due to poor quality, lack of customization, and zero support. In this case, a white-label online marketplace offers a smart balance of functionality and price. 
  • Need for professional advice
    A white-label marketplace is about the platform as well as the community. On such a platform, dozens of customers have likely already taken their first steps, overcome specific challenges, and developed unique growth strategies. Marketplace founders are often willing to join the club of like-minded entrepreneurs and exchange industry experience.

Problems you can solve for marketplace founders

Entrepreneurs have completely different reasons to choose a white label solution, but in most cases, they aim to test their startup idea with minimal time, money, and other resources. Naturally, many ideas will fail, and that’s completely okay. But the easier the testing process, the more people will dare to try. 

How to start your own white-label marketplace service

A white-label B2B marketplace is a beneficial business. And since you already own a marketplace, you’re halfway there. In the next section, we discuss the steps needed to convert your existing online platform into a SaaS marketplace. 

Step 1. Create a customizable design

A white-label application is designed to be branded. So the first step in converting your traditional online marketplace software into a white-label product is adjusting the interface. 

Your customers won’t agree to share the same design with dozens of other platforms. They’ll come with their own logos, corporate colors, and preferred fonts. Most likely, they’ll want a specific style for all buttons, and they won’t agree with your initial placement of elements. How can you satisfy them all?

Make your white-label app design customizable and flexible. Predict changes your customers might request and implement them in your design. 

You can go deeper into this topic with a detailed article on UX Planet about design systems for white-label apps

Additionally, you can check out a concept our team recently created for a white-label restaurant application.

Need a hand with making your marketplace design brandable and flexible? Share a link to your online platform and we’ll consult with you about the next steps.

Step 2. Think of ways to earn money from your white-label marketplace software

Your new application has to become a new source of revenue for your business. So think carefully about how you’re going to monetize it. You have a few options:

  • One-time payments
    A user pays for a license once and can use your product as long as you support it. 
  • Subscriptions
    Charge a monthly or yearly fee for use of your platform.
  • Commission
    The higher your clients’ revenue, the more you earn.
  • Paid consultations
    Users may request a consultation with a business or technical professional to solve their problems, and these consultations can be paid hourly.
  • Paid features
    Provide basic functionality for free or for a monthly fee and charge extra for additional functionality.

Along with these classic monetization strategies, you can opt for some not so obvious ones:

  • Mentorship for marketplace startup founders
    Community interactions are valuable, but many founders appreciate personal mentorship more. If you have useful insights to share, don’t hesitate to provide paid mentorship options.
  • Selling the code behind your marketplace software
    When customers reach the limits of a platform, they usually decide to go with custom app development. But instead of building an application from scratch, a customer may be ready to pay for your code and build new features on top of it. 
  • Paid exit support
    When moving to an app developed from scratch, your customers may lose access to many assets including client databases and order histories. You can offer database exporting as part of exit support along with consulting and other technical support.
  • Being an intermediary between customers and a development agency
    When your customers decide to opt for custom marketplace development, they may look for proven contractors. At this stage, you can connect customers with your development agency and receive financial benefits from their cooperation.

How to monetize a white-label marketplace

There’s no perfect monetization model for an online white-label marketplace. However, a smart combination of these strategies may prove successful. Also, think out of the box and look for less obvious monetization strategies. 

Step 3. Add multi-tenancy support

Multi-tenancy is the ability of a single app instance to serve multiple customers, or tenants. In a multi-tenant app, a single back end is responsible for the functionality of many apps. You can connect this back end to multiple front ends, or user interfaces. As a result, many applications that may look completely different can use the same server. 

Multi-tenancy is at the heart of any white-label software. It enables you to create as many tenants as needed, customize their front ends, and connect them to the existing back end. 

Choose your cloud service provider

Amazon Web Services (AWS) is the absolute leader in cloud services, covering 32.2% of the market. Its closest competitor, Microsoft Azure, has 17.6% of the market, and third place is occupied by Google Cloud with a 6% market share. You can find more cloud market statistics as of February 2020 on ParkMyCloud.

Our comparison of top cloud services providers including AWS, Azure, Google Cloud, DigitalOcean, and Heroku will give you a better understanding of the available ecosystems. 

These providers offer more or less the same services for comparable prices. We recommend opting for AWS because it offers a large ecosystem for multi-tenancy software. AWS Lambda is the central technology for creating a white-label architecture. It can be supported by AWS API Gateway, DynamoDB, AWS S3, AWS Cognito, AWS CloudFormation, AWS CloudFront, AWS Systems Manager, AWS Identity and Access Management, etc. Amazon offers a variety of services to match the needs of any white-label project. 

Implementing multi-tenancy in an existing project is a task for a software architect with a proven background in cloud services. 

The main responsibility of this architect is to learn the architecture of your project inside and out, decompose it, and divide it into functional components. Then every component should be rewritten to enable multi-tenancy. 

As a result, all tenants will have custom front ends, databases reserved for their projects, and access to the shared marketplace back end.

Our team helped a freelancer marketplace implement multi-tenancy, and the marketplace is now operating as a white-label service. We'll publish a case study of this project soon.  

Step 4. Develop a seamless onboarding process

Let’s say a customer opts for white-label marketplace software because they don’t have the technical expertise needed to build a product from scratch. They also prefer to keep their distance from all technical matters and focus on their business. 

How can you satisfy such a customer?

With a smooth and well-organized onboarding process. Here are the main components of such a process:

  • Welcome email
    First of all, don’t hesitate to thank users for choosing your service. Predict their frustrations and doubts and address them in the first email. After customers sign up, make sure they receive basic information about the next steps in launching their own marketplaces. 
  • Detailed step-by-step tutorial
    Create a video or PDF tutorial to guide your customers through the setup process. Provide detailed answers to frequently asked questions and make sure there’s a possibility to contact support in case of additional questions. Also, update and clarify your instructions based on users’ questions to reduce the setup time. 
  • Hints and achievements
    Provide hints throughout the setup process to make it easier. Also, congratulate users when they accomplish goals (signing up the first 10 service providers, processing 100 transactions, etc.). You can motivate them to achieve more with badges, custom certificates, or branded physical goods.
  • Knowledge base, blog, and educational emails
    Along with teaching your customers how to use your white-label platform, you can educate them in other spheres related to their businesses. Provide valuable insights and give ideas on how customers can improve their companies. Make your customers’ success one of your KPIs, as it increases customer loyalty and, as a result, your revenue. 
  • On-demand consulting
    Some people prefer personal consultations instead searching for answers in endless software documentation. Depending on the payment plan your customer chooses, personal support may be included or you can charge additionally for it. Just make sure you have a professional that knows your product inside and out and can consult customers via audio or video calls or live chat.

Starting to use your white-label marketplace application should be easy. So leave all the difficult technical stuff behind the scenes and provide user-friendly onboarding. 

Step 5. On-demand features development

No two businesses are the same. When it comes to marketplaces, each has a specific goal, a unique background, and distinct needs. It’s not always possible to develop a business with a standard set of tools. Sometimes, specific functionality is needed, and in many cases, your customers will be ready to pay for it. 

Think of possible scenarios and pricing for your on-demand development services. For example, you can set a fixed hourly rate for your technical team and charge customers depending on how much time you invest in creating the requested custom solution. 

Note that providing on-demand services requires you to have a few developers on your team who are ready to take on tasks immediately. Alternatively, you can cooperate with a software development outsourcing company to hire the specialists you need only when there’s a job for them to do. 

Development time and costs

At this point, you have an online marketplace platform and want to make it a source of revenue for your company. How much will you need to invest?

At Clockwise Software, we’ve worked on similar projects, so we’ll provide numbers based on our experience. 

First of all, let’s consider development time. Converting an online marketplace into a white-label service takes 2 to 3 months with one software architect on board. 

The cost starts at $20,000. 

Along with handling the actual programming, we can offer a discovery phase, business consulting, and design services. This means you can contact us with a raw idea and we’ll work with you to bring it to the market. 

Want to discuss your possible white-label business?

Leave a request and we’ll schedule a short call with our business development manager. 

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