How did the e-marketplace come about? What are the common mistakes made by startups and how do we avoid it? How do we ensure a sustainable community within our marketplace? For those seeking to learn more about marketplaces and their considerations, we talk to Adam Broadway, the founder of MarketplacePlatform.com, to find out more.
Adam shares about how marketplaces are changing cultures and communities all over the world, and how they have started to take over the driver’s seat as the days go by. He also digs into how communities and marketplace dynamics are different between enterprise marketplaces and startup marketplaces, and the different monetisation strategies best suited for each specific type.
Online Marketplaces and The Evolution
Online marketplaces have been around for a long time, when the concept of peer to peer sharing services came about during the digital revolution. As the world progresses towards a highly globalised and interconnected state, so has the state of the e-commerce marketplace. The traditional marketplace model, or the old form of e-commerce, was rooted in the ‘One-to-Many’ model, involving only one seller or stall servicing many buyers and customers, much like the stores in malls. This can be seen in sites such as Shopify and Magento.
The current marketplace model has changed, and follows the concept of the ‘Many-to-Many’ model, inviting many hosts, sellers and buyers and guests into a common space, with an overhead seeing over the operations. Sites such as Upwork, oDesk, eLance, freelancer.com, and Top Talent are merely a few examples of the new marketplace model.These service type marketplaces have revolutionised the ability for us to access very talented people, and expanded the opportunities and options for individuals all across the globe.
This has led to the leveraging of marketplaces becoming a trend, shaking up the traditional e-business models to open up new opportunities, with many seeking their start as e-commerce entrepreneurs. However, Adam warns us of the pitfalls of idealistic thinking and mindsets that many hold.
Beware the Race to the Bottom and the ‘Overnight Multi-Millionaire’
Often on online spaces, there is the idea of The Race to The Bottom: everyone wants the cheapest, fastest, and best product or service out there. Adam discusses that technology can definitely bring you faster, better, cheaper all day long. But when you are connected to human services and products, as well as the quality of service, The Race to the Bottom is not great and will not turn out satisfactory. In the end, the only thing you would receive is sub-par everything.
He cautions new startups and want-to-be entrepreneurs not to be disillusioned by the idea of becoming a multi-schoollionaire (such as Airbnb) overnight by setting up an online marketplace. This idea of mass market when you first enter the online marketplace is dangerous. Current multi-millionaire marketplaces are one-in-a-billion kind of business, and is often a rare phenomenon. Adam advises entrepreneurs and startups to be more strategic in their thinking and their method of approach to avoid The Race to The Bottom.
The Common Obstacles in the Building Process
Opportunistic Thinking: A common trend noted by Adam is the idealistic mindset that new entrepreneurs hold: ‘I have got a good tech team, therefore I can build something and disrupt that industry’. In online marketplaces, it is not about how technologically brilliant you are, but about how good at building a community you are - how much of a subject matter expert you are in the industry that you are aiming to 'disrupt'.
Unaware of Industry: Past marketplaces have failed in disrupting certain industries as they were unaware of the type of community within it: the mindsets, the relationship and business goals, the closeness of the community. Adam cautions to stay realistic; become the subject matter expert, know your audience well and not just think that technology will solve all your problems. This includes customer experience, the most important aspect of building a business: building your brand and brand reputation around awesome customer experience and not just reliant on technology. Engage with the customer base to enhance their experience and your services as well.
One piece of advice is to learn that industry from the inside: get a job within that industry, work from the bottom up for a year or two and understand how it works first, before connecting with the movers and shakers of that industry, then only come up with a plan for a disruptive marketplace technology solution. Technology can only do so much. Ultimately, you are still running a business, so you have to understand the business itself.
Communities of Interest, Communities of Practice
In every marketplace, you need to establish a community and target communities as well. The success of your marketplace depends on the community you target. Communities of Interest are the hobbyist, while the Communities of Practitioners are the ones involving professionals and people whose livelihood depend on that aspect.
In good marketplaces, you have an overlap of both: there are people who want to connect with expert practitioners, seek advice and ask them to train them, and then log their skills back into the marketplace. This symbiotic relationship is best for a successful marketplace, if you seek to make money in that industry and gain future investments. On the other hand, Communities of Interest are very difficult to make money in, as no one is not very invested in it, so you do not get as much of sense of loyalty and belonging in Communities of Interest than compared to Communities of Practitioners, where people are truly invested.
Enterprise and Startup Marketplace Dynamics
Enterprise Marketplaces: This kind of marketplaces are set up by large-scale and established companies. They often have supply and demand taken care of:
channel partners, logistic supply chains (wholesale to retail), business to business, and so forth. Their marketplace already has made opportunity with brand awareness, loyalty and equity, and thus can easily turn on a marketplace.
Startups: This kind of marketplaces do not have the same advantage as enterprises, be it having little budget or no brand loyalty and equity.Thus, setting up a successful marketplace is tougher for entrepreneurs. However, Startups do not have the complications of Enterprise marketplaces, such as bureaucracy, politics, nay saying, amongst other things.
All in all, the different marketplace types have their pros and cons, it merely depends on how you decide to utilise it.
Watch the entire Arcadier Inspire Summit talk by Adam Broadway here