Building a marketplace startup is tough. The core problem of early stage marketplaces is that they are facing two rather unique sets of challenges. On the one hand they need to attract users that offer products and services on their platform – traditionally labeled the supply side. And on the other hand they need to attract consumers of those products and services – the demand side. In this article, we’ll take a look at some of the strategies new marketplaces can use to attract both supply and demand and create a liquid, thriving marketplace.
Choosing a Niche
The online retail giant Amazon began life selling books. There’s no indication that Jeff Bezos or Amazon’s early team had a special affinity for selling books. Rather, they saw a section of the market, or niche, that wasn’t well serviced by existing options. They were able to build around selling books and eventually expand into other products and the “everything store” that they are today.
Like with Amazon’s choice of books, the niche you choose for your marketplace should be something you can excel at. Choose a niche too broad and you’ll face competition, too small and you may never find traction. While your startup’s niche doesn’t have to be something you’re passionate about, it certainly helps. Knowing the market and knowing how at least one side of your marketplace, either supply or demand, thinks about things will definitely help.
Do Things That Don’t Scale
The early days of a marketplace are tough. Without users on both sides you’ll have few if any transactions. Famously, AirBnB got its start by its founders renting out their own couch. Uber’s founders were drivers on the platform for some time in the company’s early days. As a founder of a marketplace startup you will have to take on these types of rolls. Find something you can do in the niche and offer services – be the liquidity on your platform.
Similarly, if your startup is struggling to attract users you need to go out and find them. Find where people who are likely users meet and talk to them. Tell them what you’re working on, get feedback, and build on that. This process takes time but building a core of passionate, engaged, users will have major rewards down the road.
Offer Something Unique
This builds upon choosing the right niche but takes it a step further. If your marketplace can offer users something new then it is on the right track. BoatEasy, a marketplace for boat owners and marine service providers, provides an easy way for boat owners to comparison shop for service for their boat. By both facilitating transactions on the marketplace and making life easier for existing users the marketplace has seen significant growth.
Finding a service that your marketplace can offer to users, whether it’s bookings management for suppliers, insurance for purchasers, or secure payments, is a great way to get people to use your platform. Once people become aware of your marketplace, it may take a little coaxing to get them to actually use it and offering one of these services may be the tipping point that gets them aboard.
There is no single asset for a marketplace startup better than a passionate community using their platform. The arts and crafts marketplace Etsy fostered a community of like minded creators offering hand made products on their platform. Building a community, while difficult to accomplish, is one of the best routes to long term engagement on your platform.
Growing a community from scratch is tough, almost as hard as building a marketplace. So as a founder you might be looking for a shortcut. That’s where doing things that don’t scale and joining existing communities comes in. Join Facebook groups, web forums, go to local meetups. Become a part of the existing community and show them what your marketplace platform has to offer.
There is no easy route to building a two-sided marketplace. It can take years before a marketplace has enough liquidity to fulfill transactions. And even longer until it is profitable. However, marketplaces have a certain enduring quality to them that once established users just keep coming back and more users find them and use them. It is what makes them so attractive to founders and investors. For founders, it is just a matter of getting over those initial growing pains and getting their marketplace off the ground.