Build vs Buy vs Integrate: Choosing the Right Path for Your Marketplace

In 2017, I led the Product and Development teams at a rent-anything marketplace. We were innovative, pushing boundaries with ambitious goals as we launched our mobile app in 2018. But, we were bootstrapped, with such a limited budget that I took a construction job to cover my own wage for the first year. Years later, I will have managed a total budget of $11 million on our Product Development.

When you're doing the classic evaluation, Build, Buy, or Integrate, the main factor is typically cost. There are immediate costs and future growing costs. In nearly every case, each side has pros and cons.

I’ll do my best to explain the perspective from both that bootstrapped scrappy startup vs a funded company where you have a financial responsibility to spend the budget diligently. Each phase of your company’s growth will incorporate different variables into the equation and be unique to your marketplace.

In this three-part series, we will explore each part of the formula for your product development strategy. We will use actual examples from those who’ve done it best or my personal experiences working with over 20 marketplaces.

Manual First, Automate When It’s a Problem

How do you know what to automate and how to automate something you don’t completely understand? In my experience, it is typically shorthanded or has gaps in the requirements, scope, or budget when implementing automation first.

We adopted the philosophy of learning, learning how to do something manually for as long as possible until it is a growing pain for the company. This will provide us with enough lessons and insights to act precisely on what we need to automate with proprietary development tools or integrate a third-party tool.

An important note: Your internal teams, Ops, Marketing, etc., may start shouting at your management cadence so that you can automate their problem.

It was a rent-anything marketplace with a combined total of over 500 categories and subcategories, and towards 2020, over 500,000 items were published in North America. We had an entire Merchandising Team dedicated to manually approving every listing, editing mistakes, and assigning internal positive and negative keywords for our custom elastic search tool. At the peak, the team was about 15 people.

Now, the question is, what tool can be implemented to save time, reduce headcount, or create efficiency? How much money could be saved by this solution? How many hours would be re-introduced from those team members into another area of the business? Our backend Admin was a robust platform that we were continuously improving:

• Cloning Items or Groups of Items
• Keywords (Positive and Negative)
• Reporting
• Logistics & Routing Manager
• Notification Manager
• Login As User (Support Only)
• Merchandising Storefront

Every one of those functions was a manual task for a person for our first two years. Once we reached that growing pain point, we introduced automation. We were funded at this point in 2020, which allowed us to custom-build our backend, tailored to our requirements and work style.

After we let the automation “baked” for a handful of months, we recorded $341,925 in wage savings and forecasted over $2M in savings by the end of the following year.

By this time, I was leading with a Product Development budget of $11M and access to excellent talent on both design, product, and engineering. We were in a position to build our proprietary tools after forecasting monthly fees from third-party vendors.

Build: The Etsy Marketplace

What’s the short-term and long-term vision for your marketplace? What are the unique aspects of your business that require tailored functionality to bring it to life? In Etsy’s case, being founded in 2005, the founders felt like there were no existing templates or out-of-the-box platforms (PaaS) that could handle the use case.

It reportedly took Etsy nearly 3-months to develop their initial niche marketplace. Fastforward to 2007, Etsy miracuously scaled to 450,000 registered sellers and over $25M in revenue.

Etsy’s Story

Etsy was founded in 2005 as a marketplace designed to connect buyers with handmade and vintage items. Unlike typical e-commerce platforms, Etsy created a space where independent creators could sell their unique products.

The founders built Etsy with a mission to enable small, creative entrepreneurs to reach a global audience. By prioritizing handcrafted and artistic products, Etsy tapped into a niche market and built a strong community of loyal sellers and buyers.

User-Focused Approach to Building

Etsy’s decision to custom-build their platform from the ground up allowed them to create a marketplace that wasn’t just about selling products but also about fostering a creative community. Features like seller shops, personalized storefronts, and seller-to-buyer communication were crucial to creating a distinct marketplace experience, which helped Etsy stand out from other e-commerce platforms.

This bespoke approach allowed them to scale over time and accommodate millions of users while maintaining the core value of supporting small business owners. The founders focused on the target personas, who would become the power users, the champions of Etsy and drive their initial revenue growth.

Important Mentions For Custom-Built Marketplaces

Etsy’s success highlights the importance of building a platform that aligns with your mission and the specific needs of your marketplace. By creating custom features that served their unique seller base, Etsy was able to create a marketplace that was more than just a transaction platform—it became a community.

This shows that while building from scratch may require significant resources, it offers the flexibility and control necessary to create a highly tailored marketplace experience.

&Open: Strategic Partnership With Onport

&Open is a global gifting platform that specializes in sustainable and thoughtful gifts for brands like Airbnb, Etsy, and Peloton. &Open began as an e-commerce venture, Makers & Brothers, but transitioned into a full marketplace model when they realized the potential of scalable, corporate gifting. In 2022, they launched &Open On-Demand, a marketplace powered by Onport.

Strategic Alliance For Functionality

“We needed a solution that allowed us to work with vendors worldwide, and Onport has absolutely addressed that need. Onport supported our go-live date and allowed us to quickly onboard many different vendors across various geographies quickly." Jonathan Legge, Co-Founder at &Open refers in the case study built with Onport.

The &Open team were able to identify the potential limitations of conquering the market in their early days and were able to find a solution to that problem through low friction onboarding supply through importing SKUs from Shopify stores into their marketplace storefront while maintaining a strong variety of options for users across geographies.

Grow Together, Benefit Together

One of Open's noteworthy mentions is how they were able to work with Onport to identify seemingly unique requirements for their business model and collaborate with Onport’s engineering team to work towards introducing new functionality into the Onport suite - “The regularly updated features have been integral to how &Open works with Onport; the ability to make feature requests and adapt existing features has been great and really beneficial for our business” Jonathan Legge adds.

Forward Thinking: Scaling Together

&Open has been strategic from day 0, and have forecasted strong growth in the near future and potentially entering new categories. They wanted to be confident that Onport is the platform partner that they can grow and scale with, without limitations or extraordinary fees.

Jonathan Legge further comments that “looking to the future, we’re keen to build upon the existing features and learn more about Onport’s ongoing developments and how &Open can implement Onport’s different features. Cross-bordering and rationalizing our shipping is definitely of interest. We’re also interested in looking at more complex integrations beyond classic retail.”

LandTrust: Platform Partner

Founded in 2019 by Nic De Castro, LandTrust was created as a marketplace to connect outdoor enthusiasts with private landowners, providing access to millions of acres of private land for activities like hunting, fishing, and bird-watching.

De Castro recognized the challenges outdoor lovers faced when trying to gain permission to use private lands for recreational purposes, and he aimed to solve this by building a trusted marketplace that facilitated these connections easily and securely.

Leveraging Expert Tools & Staying Focused

Nic was able to determine the North Star metric and vision of LandTrust early on into his journey. “If we’d had to raise the money from investors to build a marketplace platform by ourselves, I’m not sure where we’d be today.

The marketplace technology isn’t what makes LandTrust valuable: it’s the relationships we’re building between outdoor enthusiasts and landowners.” One of the most valuable aspects of the partnership with Sharetribe is that Nic’s team isn’t responsible for upkeep and maintenance of the infrastructure of the marketplace, that rests on Sharetribe’s continuous improvements to the platform.

Starting with a platform partner takes the pressure off of designing and custom developing an entire MVP (Minimum Viable Product) or robust MLP (Minimum Lovable Product) and allows you to focus on your engagement, community, and KPIs (Key Performance Indicators).

With the known goal to incrementally customize that solution, as if it were as simple as adding lego blocks to the marketplace tech. Morphing it into exactly what the business and users need over time.

Conclusion: Which Path Is Right for You?

As you weigh the Build, Buy, or Integrate decision for your marketplace, consider factors like cost, time-to-market, and your long-term vision. Whether you’re bootstrapped or funded, each approach offers its own set of advantages.

Going down the path of creating a marketplace because it is the latest trend will not work. Marketplaces are notoriously difficult to start and gain real traction. You need dedication, a budget, and the willingness to become methodical over each step towards concurring your market.

That is why I wrote this article on behalf of Marketplace Studio with Onport, to help shed some insights based on our real-world experience going custom first, spending $11M when you can get the same horsepower for a faction of the cost with partners such as Onport.

Let's schedule a coffee and discuss your strategies to become the new gold standard for your industry. Hello@marketplacestudio.io.