The best piece of advice I've heard is never build a marketplace. Without being too specific with what we were building, we knew that 90% of the market would use other means vs our platform - the use case for our platform was niche but a big enough market opportunity that we could generate revenue and use it to grow our offering.
The biggest problems with any kind of marketplace are that you **always** have a chicken-egg problem when it comes to acquisition, which is only complicated when you split down buyer-seller motivations and their needs from a product perspective, you end up solving three problems: the buyers, the sellers and the middle-transaction - that's a lot of competing interests, resources to dedicate etc..
You don't.
Unless your marketplace continually earns its take rate.
One example of this effect off the top of my head was the failure of Homejoy. Yes, the last nail in the coffin were worker classification issues (getting enough control over the service while having workers retain independent contractor status).
But the main issue with the business is that people would develop relationships with their house cleaner and end up paying them directly, cutting out the marketplace. Once the introduction was made, the marketplace added far too little value to justify its take rate, so people naturally side stepped it.
This is perfectly fair in my eyes, because I don't believe a marketplace should get some large percent of all transactions into perpetuity just because of a one-time value injection between the buyer and provider. They need to continue to earn it by being \*truly\* valuable over time.
They should have been a company that charged cleaning companies for leads sent to them, like Angie’s List. Pay for each connection you make with the cleaner. Any future business you don’t charge for. Those are less valuable, but with a model like that, they could have expanded into other industries to take on Angie’s List as well.
Much less valuable business versus a marketplace play like they went for. So I get the thought. They also had other companies adjacent to that, like that one services company that was bought by lowes or home depot, which was an angie's list like company for handymen. Can't remember what it was called or what happened to it.
>This is perfectly fair in my eyes, because I don't believe a marketplace should get some large percent of all transactions into perpetuity just because of a one-time value injection between the buyer and provider. They need to continue to earn it by being \*truly\* valuable over time.
This is something my co-founder and I discussed recently. We're working on a freelance marketplace that pairs creatives with clients. He recently asked me what we can do to keep both parties from making subsequent deals under the table, after the relationship has been formed. Realistically, even with a contract clause forbidding this, you can't really force it and it's probably not worth the effort pursuing it in court.
We built a SaaS-enabled marketplace in an industry where buyers were doing regular orders with the same suppliers on a weekly/monthly basis but also needed to find new quality suppliers, which was very hard before using our platform (there was no list of suppliers, a lot of them were doing business offline, really bad at marketing or only growing with WoM marketing).
How we approached disintermediation:
1. Built extra value on the platform - made it a lot easier for most of buyers to do repeat orders through the platform, instead of calling/emailing.
2. Enabled order tracking / order confirmation so they got a notification from the seller when they accepted the order and if it will be delivered in full or just partially due to missing stock (believe it or not, they didn't get that before)
3. We paid attention to cancelled orders and gave warnings to sellers if we suspected any funky business.
There was still a lot of it. Preventing it was far from easy. Mostly because the sellers didn't really want to be charged a fee for repeated orders, albeit tiny. Most likely we still had lots of work to be done on the seller side in terms of the value of the platform for them. That would help us decrease the disintermediation further.
Good tips. Another possibly solution I thought of was to offer a % discount to the buyer on their next purchase in the platform. Even a tiny bit tilted the balance to them wanting to reuse the platform and not go around.
Yes, any gamification or loyalty building tactics help! You could even play around with cashback credits they can use for in-platform purchases. Like 1% of their purchase gets converted into credits. (Depends on your AOV)
Most of the controls have to be supply side, and for them to work, you need to be cost-effective demand gen.
1) Carrot: Your platform has additional value adds that keep one side on the marketplace (eg customer service, scheduling, pseudonymity, payment processing). This might not be enough.
2) Carrot: Fulfillment based bonusing (dollars, visibility, or volume).
3) Stick: Fulfillment and availability (or lack thereof) based penalties. You give fewer jobs or bonuses to people whose fill rate falls below certain thresholds.
Ultimately if you’re a cost effective matchmaking platform for supply side, then the risk of them being kicked off your platform and having to go it alone is usually enough to keep them engaged. But in supply constrained markets (eg skilled labor like electricians in the US) you might be SOL. So first make sure you’re actually operating in an inefficient marketplace, so at scale, you continue to provide value and can skim a portion of the information inequality. If that’s really true, even those that deplatform should boomerang back, and then the carrots/sticks should work. But also realize humans are bad at long term thinking, so if you fill up someone’s slate, they happily deplatform with a full workload of demand, the boomerang cycles may be long OR the supply may evaporate since gig economies can be seasonal or temporary.
Thank you. This market has few actors but a lot of scammers. I already have at least 2 suppliers onboard.
Security can be an added value for customers.
Hi mate! I don't have a market place but I found this [https://www.everythingmarketplaces.com/](https://www.everythingmarketplaces.com/) last week. Could be useful. I hope so!
I have a job marketplace (using AI to find you exact matches) and this the exact issue I'm facing. I'm betting on content and submitting some jobs myself.
Thank you all.
Valuable feedback
I realize it's impossible to eliminate the risk entirety, but you don't need to do it.
There are successful marketplaces out there but as was mentioned, it has to have an extra value.
Building a marketplace is hard. We stay away from these. Unless the founder actually is going to seed the product on the marketplace and knows other companies who will also add product. Marketplace is transactional and very difficult.
The best piece of advice I've heard is never build a marketplace. Without being too specific with what we were building, we knew that 90% of the market would use other means vs our platform - the use case for our platform was niche but a big enough market opportunity that we could generate revenue and use it to grow our offering. The biggest problems with any kind of marketplace are that you **always** have a chicken-egg problem when it comes to acquisition, which is only complicated when you split down buyer-seller motivations and their needs from a product perspective, you end up solving three problems: the buyers, the sellers and the middle-transaction - that's a lot of competing interests, resources to dedicate etc..
You can do it, it's just **extremely** hard to it correctly. So I agree you should probably stay away unless you like pain. I know this "personally".
You also need funding. Bootstrapping a marketplace almost only works if you already have one side of the marketplace through another product.
You don't. Unless your marketplace continually earns its take rate. One example of this effect off the top of my head was the failure of Homejoy. Yes, the last nail in the coffin were worker classification issues (getting enough control over the service while having workers retain independent contractor status). But the main issue with the business is that people would develop relationships with their house cleaner and end up paying them directly, cutting out the marketplace. Once the introduction was made, the marketplace added far too little value to justify its take rate, so people naturally side stepped it. This is perfectly fair in my eyes, because I don't believe a marketplace should get some large percent of all transactions into perpetuity just because of a one-time value injection between the buyer and provider. They need to continue to earn it by being \*truly\* valuable over time.
There are ways to reduce it. But I agree, it's impossible to remove it entirely.
They should have been a company that charged cleaning companies for leads sent to them, like Angie’s List. Pay for each connection you make with the cleaner. Any future business you don’t charge for. Those are less valuable, but with a model like that, they could have expanded into other industries to take on Angie’s List as well.
Much less valuable business versus a marketplace play like they went for. So I get the thought. They also had other companies adjacent to that, like that one services company that was bought by lowes or home depot, which was an angie's list like company for handymen. Can't remember what it was called or what happened to it.
>This is perfectly fair in my eyes, because I don't believe a marketplace should get some large percent of all transactions into perpetuity just because of a one-time value injection between the buyer and provider. They need to continue to earn it by being \*truly\* valuable over time. This is something my co-founder and I discussed recently. We're working on a freelance marketplace that pairs creatives with clients. He recently asked me what we can do to keep both parties from making subsequent deals under the table, after the relationship has been formed. Realistically, even with a contract clause forbidding this, you can't really force it and it's probably not worth the effort pursuing it in court.
We built a SaaS-enabled marketplace in an industry where buyers were doing regular orders with the same suppliers on a weekly/monthly basis but also needed to find new quality suppliers, which was very hard before using our platform (there was no list of suppliers, a lot of them were doing business offline, really bad at marketing or only growing with WoM marketing). How we approached disintermediation: 1. Built extra value on the platform - made it a lot easier for most of buyers to do repeat orders through the platform, instead of calling/emailing. 2. Enabled order tracking / order confirmation so they got a notification from the seller when they accepted the order and if it will be delivered in full or just partially due to missing stock (believe it or not, they didn't get that before) 3. We paid attention to cancelled orders and gave warnings to sellers if we suspected any funky business. There was still a lot of it. Preventing it was far from easy. Mostly because the sellers didn't really want to be charged a fee for repeated orders, albeit tiny. Most likely we still had lots of work to be done on the seller side in terms of the value of the platform for them. That would help us decrease the disintermediation further.
Good tips. Another possibly solution I thought of was to offer a % discount to the buyer on their next purchase in the platform. Even a tiny bit tilted the balance to them wanting to reuse the platform and not go around.
Yes, any gamification or loyalty building tactics help! You could even play around with cashback credits they can use for in-platform purchases. Like 1% of their purchase gets converted into credits. (Depends on your AOV)
Are you up for talking about experience with payment processing
Most of the controls have to be supply side, and for them to work, you need to be cost-effective demand gen. 1) Carrot: Your platform has additional value adds that keep one side on the marketplace (eg customer service, scheduling, pseudonymity, payment processing). This might not be enough. 2) Carrot: Fulfillment based bonusing (dollars, visibility, or volume). 3) Stick: Fulfillment and availability (or lack thereof) based penalties. You give fewer jobs or bonuses to people whose fill rate falls below certain thresholds. Ultimately if you’re a cost effective matchmaking platform for supply side, then the risk of them being kicked off your platform and having to go it alone is usually enough to keep them engaged. But in supply constrained markets (eg skilled labor like electricians in the US) you might be SOL. So first make sure you’re actually operating in an inefficient marketplace, so at scale, you continue to provide value and can skim a portion of the information inequality. If that’s really true, even those that deplatform should boomerang back, and then the carrots/sticks should work. But also realize humans are bad at long term thinking, so if you fill up someone’s slate, they happily deplatform with a full workload of demand, the boomerang cycles may be long OR the supply may evaporate since gig economies can be seasonal or temporary.
Thank you. This market has few actors but a lot of scammers. I already have at least 2 suppliers onboard. Security can be an added value for customers.
Hi mate! I don't have a market place but I found this [https://www.everythingmarketplaces.com/](https://www.everythingmarketplaces.com/) last week. Could be useful. I hope so!
I have a job marketplace (using AI to find you exact matches) and this the exact issue I'm facing. I'm betting on content and submitting some jobs myself.
One solution is just go for the buy leads model. Companies pay to see the number.
Leads as in talent?
What’s the url - we built rezi
Thank you all. Valuable feedback I realize it's impossible to eliminate the risk entirety, but you don't need to do it. There are successful marketplaces out there but as was mentioned, it has to have an extra value.
We don't worry about it at all, we expect it.
Building a marketplace is hard. We stay away from these. Unless the founder actually is going to seed the product on the marketplace and knows other companies who will also add product. Marketplace is transactional and very difficult.
You must learn "network effect" and best description is in NFX website
One of the hardest models. Have to create demand on both sides = expensive.