5 Keys To Rule Your Marketplace

I’ve talked to a couple of founders lately who are operating or developing their marketplaces. I was surprised to see that they didn’t know or hadn’t figured out yet some basic principles.

Even though edge cases and exceptions exist (We’re currently experiencing a counter-intuitive yet successful approach in one of our portfolio companies), here are 5 keys to rule your marketplace:

Liquidity: The best marketplaces allow you to fill your initial needs within minutes, whether you’re looking for a place to stay (Airbnb), a driver (Uber), a student to work (Weslash), a place for your event (Event Corner), or storage for your stuff (Costockage), a vet for your pet (Barkibu). You don’t want to disappoint your customers. Make sure that you provide them with:

  • A lot of relevant results

  • A qualified supply that can be quickly filtered

  • A fast & seamless end-to-end process

And if you can’t provide them with a end-to-end process, at least make sure that your customers can get in touch with their suppliers within few hours, if not minutes or seconds… Also, it’s better not to cover an area than to create frustration among your customers because they can’t find what they’re looking for in their area.

Supply: Supply is the key. More supply = More demand, more conversion, better retention, more word of mouth… Also more SEO… it’s as simple as that. More supply serves the purpose of liquidity stated above. Suppliers are dealing with an opportunity while customers are dealing with a pain. You can’t screw up with a customer’s request, not even once, while a supplier can wait for an inquiry to come. Your marketplace will become a walking dead if it can’t serve its customers.

And if you’re struggling to find customers while your supply is kind of full, then take off your pink panties and tinted glasses, it’s either because there is no product-market fit or because you’re not putting enough efforts into acquiring customers.

Concentration: Once you start rolling out your marketing-acquisition-growth hacking efforts in order to reach and acquire customers, you must put a lot of effort (and money) into this. You need to concentrate the demand in order to make your marketplace rolling with a certain velocity and liquidity. To grow steadily is kind of stupid because it will take you too much time to attain the tipping point !

Tipping point: At some point, every marketplace reaches a tipping point after which things grow way faster and even exponentially. If one person tells you about a service, you probably won’t remember it. If two persons reach out to you about it, you will start noticing, if three persons do, you will remember, talk about it (social proof) and probably use it ! For every marketplace you need to reach that tipping point, it’s a question of density. Find it, measure it, and apply the results when you expand to other geographies and markets.

Level of saturation: Once you’ve reached your tipping point, you need to figure out the level of saturation from which the ratio efforts/benefits in terms of acquisition starts decreasing. This is when your first priority shift from customer acquisition to customer success and market consolidation in a certain area.

At that point, you’ve already started to expand in other areas, to increase the notoriety of your brand, to improve the overall customer/supplier experience, to solve most of the bottlenecks within your marketplace…

Finally… Don’t forget that COPY # DUPLICATE. When you launch and duplicate into new cities and countries, be careful about the cultural differences and specificities of each new area ! Don’t go blind and all-in when you expand.

Cheers :)