The growing preference among customers for renting over buying products and services is driving up demand for online rental marketplace businesses. It all began with Airbnb, a peer-to-peer service that provided consumers with a chance to locate inexpensive housing and experience various cultures firsthand.
Following that, there has been a rush of websites offering rental alternatives for anything from home and office furniture, textbooks, construction equipment, vacation gear, clothing, and musical instruments.
The sudden rise of several niche-based rental marketplaces over the years is what has caused the widespread buzz.
From $15 billion in 2014, the sharing economy (as it is generally called) is predicted to reach $335 billion in 2025.
The ease and money that consumers may save on rental marketplaces are what made them so well-known.
Luxury goods and extravagances are not accessible to everyone. People may now connect with peers from across the world to save and make money together thanks to the expansion and popularity of the sharing economy.
It is surely a profitable concept to create an online rental marketplace given the overwhelming impact of this business in today’s digital era. However, the drawbacks it carries with it cause some of these marketplaces to collapse miserably.
This blog tells you the challenges of the online rental marketplace business and ways to overcome them.
5 Challenges in Rental Marketplace to Overcome in 2023
The online rental marketplace is quite competitive, and customers always have the choice to go to another company if one does not satisfy their needs. There are various more difficulties that business owners must overcome when launching an online rental marketplace. The following is a list of those issues and profitable solutions:
Supply and Usage
For renting a product, the typical order value is rather low. Suppliers must exert twice as much work in a rental marketplace as they would in a purchase-based one since they must handle logistics and delivery.
In the end, they only receive little rewards after putting in a lot of effort. The results are poorer as a result of the providers’ decreased interest and engagement. In addition, rental goods are not frequently used.
When taken as a whole, these factors provide a significant barrier for rental marketplaces, forcing them to pursue the hiring of paid demand-side tenants. Paid outlets do not ensure repeat business, which is even more unsettling.
As a result, every transaction in a rental marketplace should allow providers to get rewards. Suppliers might opt to work with industries that have more frequent usage and orders with greater order values. Only a few categories, nevertheless, satisfy those demands.
Product Discovery & Search
There will undoubtedly be a wide range of products and selling strategies present when several independent vendors are together in one location. The same applies to buyers as well.
Building Rental B2B marketplace software that makes it as simple and quick for consumers and sellers to connect is thus necessary.
There are two ways to do that:
For on-demand goods and services that are more or less consistent and don’t have an excessive number of possibilities, this can be a decent approach. Compare, for instance, cab and delivery services to the artwork on Etsy or the lodging on Airbnb.
Additionally, customers of on-demand services are frequently impatient, making them willing to give up part of their freedom of choice in exchange for efficiency and cost savings. “as long as it’s swift and safe, I don’t care what driver with what automobile is going to offer me a trip.”
Therefore, the most common solution for the centralized approach is a location-based search:
- Geolocation (Uber)
- Zip Code (Instacart, Zeek).
In contrast to the centralized strategy, the decentralized one gives the customer the freedom to choose for themselves the most crucial search criteria. With a wide range of filters and practical search options, your marketplace platform should make searching easier in this situation.
The strategy works well for extremely diverse goods and services with virtually infinite alternatives.
For instance, tourists may have quite varied tastes when looking for lodging. Others may be searching for something really particular, like a treehouse, while some may be motivated by closeness to specific destinations.
The same is true with independent contractors. You could be searching for someone with a certain set of abilities to do challenging work, or you might just need someone who speaks reasonable German to interpret a paper.
Decentralized searching and matching, therefore, involve:
- Use several criteria while searching like location, price range, facilities, etc.
- Personalization – when an online service personalizes material shown to you, according to your preferences, based on your prior searches and transactions, etc.
- Recommendation engines – recommendations that “you might also enjoy” based on your prior website behavior and other relevant criteria.
There are several difficulties involved with running a rental business. None of these, however, are as serious as the worry that customers would damage rented goods.
Owners of rental marketplaces might choose between two remedies for this issue:
Customers might be charged a fixed sum or a small percentage of the product price as a security deposit by marketplace users(buyers). Any compensation if the products are damaged will be subtracted from this deposit. Security deposits are better suited for renting out inexpensive items like dresses, party supplies, furniture, and bicycles, as well as small equipment like this.
To cover their goods, business owners might collaborate with an insurance company. Vendors may also pay a modest fee to them, which will be included in the cost of their insurance.
Numerous rental organizations, particularly those with peer-to-peer business models, have also marketed product insurance as a value-add. Automobiles, recreational vehicles, lorries, construction machinery, and other expensive rental goods are better suited for product insurance.
Several rental markets combine security deposits with insurance to protect rented goods.
Keeping the Platform Secure
In fact, a data security breach might spell the end for your marketplace company. Consequently, you must make investments to secure the data of your consumers.
A significant problem for the Internet industry is data security. Seller’s private data, including credit card and bank account details, can be accessed by hackers. Additionally, they have access to client data including phone numbers and addresses. Identity theft and fraud may result from this.
This is the major challenge faced by the rental marketplace owner who starts their marketplace from scratch or script marketplace. The reason is they have to maintain their database and their marketplace website at the same time.
The better solution for keeping your marketplace secure is to opt for a SaaS rental marketplace platform. You don’t need to worry about security since the platform provider will keep your database secured.
Establishing Trust and Security
The success of a marketplace may be made or broken by trust alone, even though other elements also play a role. In the days before Airbnb, few people would have been interested in hosting strangers in their homes. But these days, everyone does it since prominent global marketplaces have incorporated security procedures that were initially introduced.
The three methods for building trust are as follows:
- Upfront Assessment
Given the restrictions associated with the enormous volume of items, it is not practical for many types of markets. However, proprietors of marketplaces continue to develop novel ways to validate the products and services offered on their marketplace websites.
- External enforcement
It has to do with the steps and procedures marketplace operators take to prevent fraudsters from accessing the system and to control the conduct of current users.
Take the necessary precautions, such as validating users’ IDs, offering payment protection, and giving insurance against bad transactions, to keep users’ behavior in mind.
To gain your consumers’ confidence and goodwill, make sure you take all precautions to avoid damaging your reputation.
Many business owners lack a go-to-market strategy. They are unsure of how to reach out to their target market with their new internet platform. Their platform also has a weak social media presence and a lack of trust necessary for effective company operations.
In such a case, despite poorly thought-out marketing efforts, the platforms don’t endure for more than a year or two.
The following are some of the marketing tactics:
- Pre-launch marketing campaigns are essential for any business to have a successful launch. The launch date of your online platform can be promoted by setting up a “coming soon” web page.
- Marketing is most frequently confused with branding. For instance, some businesses concentrate only on marketing, which is sometimes regarded as pushy selling that customers don’t necessarily enjoy, rather than using branding to carry out covert advertising.
- New businesses frequently employ the technique of outsourcing their marketing. By sending press releases or asking well-known bloggers to write evaluations about your business, you may increase awareness of it and establish credibility.
- Paid advertising on sites like Facebook, LinkedIn, and Google is yet another choice for entrepreneurs. But while creating the adverts, copyrighting needs to be given top priority if you want to convert.
Apart from these, you can overcome the above-listed challenges by selecting the right online rental marketplace platform vendor.
I hope the readers of this blog find answers to many problems that new businesses in the Online Rental Marketplace industry are facing. Every rental marketplace business operates according to its unique business strategy and preferably has a particular set of difficulties.
Regarding the costs, they have to be chosen in accordance with the state of the marketplace. The most crucial aspect of your marketplace is that it should inspire confidence in its users.
Building a reliable and safe online rental marketplace requires making the proper platform selections and adopting the necessary security measures.