by Guimar Vaca Sittic
Building marketplaces is really hard. The hardest nut to crack is building liquidity: having a critical mass of buyers and sellers. One of the main reasons marketplaces fail is that they don’t live up to the expectations of their buyers, and consequently, of their sellers. Buyers typically not only expect the type of quality of service to be comparable to that of an Amazon or Zappos, but also, they are unaware that the service in a marketplace is provided by a third party rather than by the company itself.
Given these high expectations, marketplaces work hard to improve the quality of their suppliers. Many marketplaces have regular training seasons to do so. Airbnb teaches its hosts how to treat their guests upon arrival, how to promote their home on their website, and how to optimize prices depending on the season, etc. Skillshare trains their teachers how to manage student expectations, how to choose the right venue and select the right schedule for the class, etc. Marketplaces make their suppliers do a lot of work!
People tend to mimic each other. If there are a few sub-par sellers who write lousy descriptions and take low quality photos, then often the supply quality of the marketplace as a whole starts declining as other suppliers think it’s ok to do the same (which is less work than doing a good job). Airbnb realized hosts were really bad at taking high quality photographs of their homes, so they hired professional photographers to raise the bar. Although any user can request to use the photography service for free, even hosts who take pictures by themselves improved their quality significantly by mimicking the work of the pros. It’s crucial to provide guidance to sellers in a marketplace. Airbnb competes against Booking.com and hotel experiences; as such they need to provide a superb experience for renters pre-booking and during their stay.
Building an infrastructure around marketplaces is crucial since it enables new markets to arise. OpenTable and Mindbody created the marketplace at the same time as they created its infrastructure. OpenTable could not operate their marketplace efficiently if restaurants did not have a proper reservation management system, so they created one alongside with the marketplace itself. These are concrete examples in which the infrastructure the marketplace needed was very Read More →