3. Strategies for scaling your marketplace
Building a marketplace is, as we all know, a difficult and time-consuming task. However, the true challenge awaits after that. That is, to scale the market. Scaling entails selecting the best strategy for allocating and optimizing capital in order to expand the company. Scaling is one of the business tactics. There is no other choice if you want to achieve long-term success.
This article will discuss some successful and insightful ways to scaling a marketplace.
Emphasize the hardest side first
Any marketplace must produce two sides for itself: supply and demand. Determine which of these two is more difficult for your market. If you can get enough of that side onboard, getting the other side would be 2-10X easier.
Gain Traction in A Target Niche
What is your preferred specialty? Even if you want to create a global marketplace, you must start small. This is the essence of traction. It is the pace at which your business model will generate monetizable revenue from its customers. In terms of marketplaces, that is what happens when the website will draw both people in need of resources (buyers) and service providers (sellers).
It is also known as a “network effect,” and it is accomplished by narrowing the focus. To achieve this effect and develop your business, you must identify the behaviors that your customers are currently engaging in and that will generate income for you in the future.
To assess these types of behaviors, examine your clients’ actions, speak with prospective buyers, and examine how they communicate with your marketplace. For example, ask them to try your product and inform you what is preventing them from purchasing it or what features would boost their user experience.
Finding the little niche would also make you face less competition. It will also assist you in refining the brand’s branding and exclusive value proposition while lowering the risks. However, you should not limit yourself to a narrow area. If your niche is too small, your sellers would have no use for a marketplace. They already know their clients on an intimate level. There are exceptions, particularly if you can provide a unique feature that they won’t find somewhere else.
To figure out what fits best for you, do a rigorous business review and study the actions of your ideal seller. Remember to consider the optimal delivery model, commission policy, and market size as well. It will assist you in staying focused on the correct metrics while measuring the success of your marketplace in the future.
Here are few pointers to help you get traction with your marketplace startup:
- One niche at a time: It is preferable to focus on one niche at a time and establish yourself as an expert in that field. This strategy helps you to start with less competition and focus your ads on a single consumer group.
- Determine the key traction indicators.: Track actionable metrics to assess how much traction you have gained and the benefit it has brought to your business. Monthly recurring income, the overall number of customers and partners, user growth over time, and retention rate are some examples of key metrics.
Investing in Technology
Where it comes to scaling a business, technology makes it simpler and more affordable for entrepreneurs. If you spend your time and resources strategically in technology, you will achieve huge scalability with less manpower.
Businesses today do not operate on a single system; instead, system automation is a critical component of most businesses’ scalability. An entrepreneur can improve his or her productivity by implementing a variety of systems. The below are a few widely used automation systems that you can implement to help your business grow.
- Customer Relationship Management (CRM): Improves user data while still increasing team coordination (especially between marketing and sales teams).
- Improved and effective manufacturing equipment (for manufacturing companies): To improve production performance and fulfill demand.
- Stock Management Software: This software is used to keep track of inventory quantities, purchases, shipments, and deliveries.
- Accounting and financing software: They offer reliable and precise reports, enabling you to better use the information to make financial decisions.
- Human Resources Management System (HRMS): It enables you to handle employees, automate manual processes, and organize knowledge based on the requirements.
- Digital marketing tools allow marketers to develop, evaluate, and assess the efficacy of their marketing campaigns.
Guard Your Reputation
What we don’t say is that there should be no space for critique, but rather that it should be encouraged. If your marketplace expands, you must assist buyers and sellers in developing faith in your website. Remember that sellers and customers on your platform can never meet, so focus on your platform for transparency and dependability. Here’s how you can earn people’s confidence and improve your reputation:
- Secure transactions: Convince sellers and buyers that your platform is safe by using strong encryption and security plugins. Try making it easier for sellers and buyers to communicate on the website while keeping their email addresses and phone numbers private. They will gain complete faith and confidence in your network as a result of this.
- Users & sellers must be verified: Create guidelines for the marketplace’s sellers. You should avoid attracting and allowing just about everyone. You may use social media accounts, ID verification, email, phone number authentication, or background checks to validate your identity. You may also use tiered pricing tactics to keep your sellers on their toes and ensuring that the consistency of your product does not degrade over time.
- Testimonials: Encourage buyers and sellers to leave feedback about their experiences with your platform, seller’s service, and merchandise. According to research, consumer feedback will drive more traffic to your platform and boost your credibility.
- Refunds and Returns: Include specific details on refunds and returns to ensure that both vendors and consumers recognize their obligations. A good return and refund policy would also give all consumers trust in the marketplace’s credibility.
Make It Seamless For Your Sellers
Marketplaces, by definition, have two key users: sellers and buyers. You must, however, align your goals, which starts with how you focus your resources. Focusing on the demand that is driving consumers makes sense. Nonetheless, analysis suggests that focusing on consumers is not a realistic strategy. Higher vendor retention rates equate to higher sales, according to these reports. Stripe data shows that one seller retention equals ten times the growth in your marketplace.
As a result, the win-win relationship you establish with your sellers would be instrumental in the growth of your marketplace. According to Forrester Research, the most lucrative marketplaces offer revenue-generating opportunities and value-added offerings to keep their vendors coming in. It has more comprehensive security features, faster and more accurate payouts, flawless onboarding, and much more. You can also assist the sellers in providing essential services to their clients.
Rover, a dog-sitting marketplace, discovered that shoppers often requested sitters (sellers) for additional facilities such as boarding, doggy daycare, drop-in calls, and even more. They improved seller satisfaction, conversions, and growth by giving these sitters more ways to earn money.
Concentrate your efforts on single markets initially
When they first launch, marketplaces are likely to have little capital. With this in mind, it is prudent not to overspend on targeting different markets. Instead, concentrate on developing a single or a few markets. Before you expand, you must ensure that your business efforts in smaller and vertical markets are successful. Location is also important; for example, if your marketplace links farmers with buyers and you only reach out to coastal cities, it will fail. When you limit your focus, you will have more time and hands to provide personalization in your service. It can be advantageous by providing consumers with a one-of-a-kind experience can boost trust in your brand.
Promote Your Online Marketplace
There are numerous successful methods for marketing your marketplace:
It is important to promote the online marketplace. Although word of mouth, referral services, and affiliate marketing are rumored to be the best, try various channels and see what works best for you. This does not mean you can consider all of them at once, but rather adopt the Bullseye framework: brainstorm new campaign strategies that are applicable to your niche, evaluate the most interesting ones for at least a month, at once or in parallel, before you find the most successful for your particular brand. To get you started, here are some ideas for marketing your marketplace:
- Affiliate marketing
- Offline Ads
- Offline Events
- Search Engine Optimization (SEO)
- Email Marketing
- Public Relations
- Search Engine Marketing (SEM)
- Speaking Engagements
- Engineering as Marketing
- Trade shows
- Community building
- Content marketing
- Target market blogs
- Social and Display Ads
- Unconventional PR
- Viral marketing
- Business Development
- Existing platforms
What are some of the non-obvious key metrics you need to track as you grow?
Although it is evident that you will be monitoring success as you work to broaden the market, it is not always clear which metrics need the most focus. Absolute statistics can not provide you with the best idea of where to target your attention, but keep a few non-obvious metrics in mind.
- Category of the first activity: The term “category of first activity” refers to the category in which a person first made a transaction. Many marketplace managers consider the relative size and viability of each category, but the importance of the consumers who pass through each category is arguably more significant.
- Conversion rate: The percentage of listed goods that are sold is referred to as the “conversion rate.” The term “sold” can mean different things in different ways, but it is essentially a calculation of how much of the site’s stock is being transacted upon. It is essential to understand the conversion rate at the granular stage. This would serve to ensure that you have the proper supply and demand equilibrium. A high conversion rate indicates a lack of supply; a low conversion rate indicates a lack of demand. Either option would result in dissatisfied customers. The trick is to look at each area individually and change the marketplace conditions to get the optimal rate, rather than looking at the average conversion rate, which may hide underlying issues.
- The concentration of sellers: While a marketplace may often easily scale supply by attracting large “power sellers,” this may not be ideal in the long run because these big fish can crowd out smaller sellers and make it impossible for first-timers to achieve the success needed to get them back. Buyers often tend to negotiate with smaller sellers, which might have drawn them to your marketplace in the first place. That is why it is important to keep track of what percentage of your supply and what percentage of your sales are due to large power sellers. Don’t sacrifice the market’s long-term health for quick supply in the short term.
Focus on one single feature at a time
Making a significant entrance by emphasizing one feature can be successful. Provide people with a specific aspect of your business solution. Then present the other options.
For example, when it first launched in 2007, Flipkart only sold books. After gaining a user base and establishing itself as a brand, it began to sell other products. It is now one of India’s largest online stores.
Build your community
One of the most effective ways to scale your online marketplace is to build and sustain a committed community.
Here’s how you should go about it:
- Interview members of the society and influential people: Clients value useful interviews with business influencers. For example, you might share stories about how people make money through your marketplace, as well as ideas and case studies from your platform’s most successful users.
- Organize remote gatherings: Events are a perfect way to get people together who have similar interests. They have excellent opportunities for people to share their views and best practices. Airbnb, for example, organizes meetups to bring together people from various countries that use their service. The activities range from sharing hospitality tips to hosting parties for community members.
- Create good alliances: Partnerships are a win-win approach for growing a group and attracting new clients. They will also assist you in increasing brand awareness in emerging markets.
Set constraints, raise the excitement
Setting a daily price limit or a purchase time limit creates a lot of buzz among consumers. It instills “FOMO” (fear of missing out) in them, causing them to compete for purchases.
FOMO is often triggered by exclusivity. People enjoy putting their hands on things that only a few people have access to. You should make a deal to an exclusive customer and see the magic happen!
On July 11, 2017, Amazon held 30 hours of flash sales in 13 countries, resulting in a 60% boost in sales. The combination of limited stocks and a ticking sales clock worked well for them.
Develop an ecosystem
Consider add-on goods, services, and experiences that provide sellers with a deeper connection to your marketplace. These are extremely powerful methods of differentiating the marketplace’s sale experience from that of other platforms, as well as attracting providers/sellers to your platform.
The first approach is to create and/or sell these supplementary goods and services yourself. Uber, for example, links its drivers with unique leasing and lending opportunities. And eligible drivers (those who completed 200 trips in the previous month) can now use the Uber Fuel Card to get gas discounts (issued by MasterCard)
The second solution is to provide funding for third-party sites that sprout up around your platform. Marketplaces have a huge potential to develop into a marketplace, complete with an ecosystem of value-added services and startups.
Shopify, a SaaS provider of e-commerce stores for small and medium-sized businesses, has done an outstanding job of identifying and formalizing the role that third-party developers play in increasing Shopify’s total benefit to sellers. Sellers can find third-party tools for selling, marketing, inventory tracking, customer service, delivery, reporting/analytics, and more in the Shopify Applications Store.
Obtain high-value users
Determine the company’s high-value customers and target them first. They would have an effect on other people. In the end, you’ll have a huge user base. Tinder’s marketing lead, for example, personally visited many campuses and persuaded the girls to join their platform. She then visited their male fraternities. They entered after seeing a couple of familiar faces on the app.
Reach both sides at the same time
Since establishing both buyer and seller groups at the beginning is a challenging task, check for opportunities where you can reach them both at once. Simply put, look for a consumer community that will double as both the buyers and sellers.
For example, Etsy used this technique after noticing that the customers most likely to purchase handmade products are often those who market them. They targeted this consumer community and avoided the chicken-or-egg conundrum.