Updated: Nov 6, 2019
New-age marketplace models are fascinating, especially for their scale potential and impact if done right. Done consciously, the effect can be positive; otherwise, it might negatively disrupt an ecosystem.
That’s why marketplaces are ecosystem businesses.
We are living in an era of marketplaces, or should I say - we have always been living with markets forever. The persona and delivery of marketplaces might have changed, but they exist since the early days of human civilization.
Three pieces I want to touch base on in this blog are around:
The marketplace as a community venture
Marketplace platforms as nothing but new avatars of middle-men
Building marketplaces for social good
The marketplace as a community venture
It is a platform that connects those looking to provide a product or service (sellers) with those looking to buy that product or service (buyers). So, at its crux, it’s just a middle layer connecting the community of sellers to buyers.
I am intentionally using the word "community" here because producers and sellers don’t exist in isolation, and if as a platform you leverage them collectively than individually, you can reduce the CAC (cost of customer acquisition) and improve the producers and buyers engagement on your platform, and hence reduce attrition.
For any 2-sided marketplace platform, the seller community is the key to success. They are not just the users of your rig, but they are also the most critical partner and stakeholders in your business. So, the seller community is the most significant contributor to your marketplace. Hence, I call them the soul.
Hence, a marketplace should have the laser-sharp focus to engage its seller community, which means tracking engagement is equally as important as promoting community engagement.
“If we wanted people to invest in Udemy, we had to invest in them,” Eliza Davidson, Udemy.
There are few resources on building marketplaces keeping the community
at the center of the platform design:
New avatar of middle-men?
In its previous avatar, the platform used to be the man - or as we know “middle-man” or in many cases, “middle-men.” We see middle-men as a very controversial term and whenever you visualize the middle-men (no matter where you come from) - you imagine an older man who is probably very corrupt and mean 😛
Now, we call this middle-men as marketplaces - we have been able to make the middle-men age SEXY. So, what problems these middle-men or these modern marketplaces solve.
Six problems that middleman solve
(and what middlemen need to do to be a valued partner):
1. Solve the problem of distance - physical, temporal and social reach - a need to bridge the gap
2. Solving the problem of quality - middleman act as a certifier
3. The issue of accountability - related to services
4. The question of risk - managing the unpredictable fluctuation in demand (see a lot in on-demand services) - risk pooling - reputation systems
5. The problem of information overload - curating the content/personalization
6. The issue of self-advocacy - role as an insulator
Marketplaces for social good
Though the most crucial puzzle that I have been looking to solve is can we build markets for education, employability, agriculture, healthcare, and supply chain that we have built-in for last-mile delivery, lifestyle and e-commerce like Amazon, Tokopedia (in Indonesia), Lyft, Airbnb, Udemy, Go-Jek and Grab.
I am continually looking for solutions, and I am incredibly optimistic about the application of marketplaces pieces in agriculture - farm to plate or farm to SMEs/MSMEs, education (like Udemy), healthcare - knocking off the middleman and make the whole supply chain more efficient.
I highly recommend and challenge you, if you are an entrepreneur, look at more prominent and more impactful problems to solve using the marketplace approach and build and foster communities at both ends of your marketplace.