Online marketplaces are great. They are among the most profitable and fastest growing businesses, provide value to both sellers & buyers (and marketplace owners) and thus, frequently disrupt industries (e.g. uber, Airbnb etc). However, they are really difficult to start – the famous chicken & egg problem.
What makes it difficult to create a marketplace?
For a marketplace to function well, you need a large amount of sellers and buyers. In order to attract buyers you need a range of listings (products or services) from (preferably multiple) sellers. To attract those sellers you need to prove that your platform has the demand (enough buyers are waiting for your solution). If you start with no supply and no demand (the most common start) you find yourself in a tricky situation – but there are ways around it!
The playbook for creating a marketplace:
In this playbook I will show you how to attract listings, how to generate traffic, how to make money with the traffic and quick ways to kick-start your IT platform.
Part 1 Listings
The road to success for a marketplace is simple: listings, traffic, money – in this sequence! You need to have listings in order to generate traffic that you can use to make money. Here is my guide to generate listings (get sellers to join your marketplace):
- Proof your demand: you have to show your sellers that you can generate the demand for them by e.g. collecting email addresses through a landing page where you showcase your idea:
- Create a landing page that looks amazing and explains your idea
- Use social media to promote your idea with a great video
- Offer discounts for people signing up pre-launch
- Offer even higher discounts or free products for people sharing your idea on facebook/per email etc.
- Create the perfect business model for your sellers:
- Analyze the current situation of your sellers (how do they make money now, what makes their life difficult, who are they)
- Come up with ideas on how to make their life as easy as possible
- Test the ideas with sellers (e.g. call them (say you are a student if you aren’t ready to pitch the idea), create focus groups, post into forums)
- Limit the required effort to sign up as much as possible:
- Make it free
- Create a simple registration process or even do the registration yourself
- Only ask for the most critical data, use all public information from e.g. their website/facebook account
- Write product/service descriptions for them or make it simple to integrate their existing solutions from e.g. their websites or other platforms
- Write down your value proposition towards sellers, test it with people not directly involved in the project and sharpen it
- Practice your elevator pitch (you have to sound super convincing and that requires practice)
- Create a pitch deck where you outline the benefits for the sellers and for the buyers (sellers need to be convinced that you can deliver) as well as an overview of the process & workflow (what’s the process after a transaction, how do you store data, how can the seller communicate with the buyer)
2. Seller acquisition for a B2C marketplace
- Focus your efforts on a specific category/city/target group in order to reach the critical mass in this area as soon as possible
- Create a list of potential sellers for your platform. Also, check if you know someone who knows someone to make an introduction – use relationships as much as possible
- Try to meet your sellers personally: visit events or trade shows, go to their physical stores if possible
- Cold call sellers and deliver your kick-ass elevator pitch (do not rely on email)
- Have your pitch deck always up-to-date to send it by email after you talked to a seller on the phone
- After you won your first seller, use his/her name as a reference or at least say you have seller that signed up already
As soon as you have a critical mass of listings you need to generate traffic and win customers. This is a critical step. If you do not manage to attract customers soon your sellers will lose trust in you and leave your marketplace.
I will share my tips on how to generate traffic and attract buyers in my next blog post.