Building a marketplace? Here are 3 strategies that work
The success of Airbnb and Uber has proven that the online marketplace model is very scalable, and can be applied to many areas of business. Imitation is the sincerest form of flattery, and the start-up community is notorious in taking it to the extreme. There is a gold rush to replicate business models that work in one industry, into every other sector, leading to an astronomical number of start-ups calling themselves the Uber / AirBnB of X (easyCar Club is the AirBnB for cars by the way).
Marketplaces can solve problems in many industries, and there are important lessons to learn from past successes (and failures).
In order to build a successful marketplace, the most important hurdle to overcome is getting both buyers and sellers into the platform (a.k.a. solving the chicken and egg problem). This requires devising an effective strategy for building quality supply and kick starting the virtuous cycle of growing supply and demand.
It is especially challenging for peer-to-peer (P2P) marketplaces, because they don’t necessarily have control over the quality of listings. A key aspect that supports the development of trust and reputation needed to convince the buyer to switch from their existing, professional alternative.
Experience suggests three key strategies that can help make the P2P marketplace both sustainable and scalable in the long-run.
- Focus on niche: At the launch of a marketplace, there must be some users who really need it. Not people who could see themselves using it one day, but those who want it urgently. Usually this initial group of users is small – for the simple reason that if there was something that large numbers of people urgently needed, it would probably already exist.
- Offer a 10x better product: Entrepreneurs like to think about their products as unique and innovative, but there’s always an incumbent marketplace (even if it’s Gumtree), and its network effects often outweigh many product improvements. You stand a chance however, if you build a product that’s better than the incumbent’s by an order of magnitude. This has been the key to Uber’s success against the taxi industry.
- Do things that don’t scale: Many novice founders believe that start-ups either take off or don’t. You build something, make it available, and if you’ve made a mousetrap, people beat a path to your door. The assumption is: if they don’t, the market must not exist. The most common non-scalable thing startups have to do initially is to recruit users manually. At easyCar Club, we used to own and operate several cars for rent ourselves – tackling the top side of the virtuous cycle.
easyCar Club is the UK’s largest P2P car rental marketplace, and part of the easyGroup family of companies, along with easyJet, easyBus and easyHotel. Our renters hire cars locally for 20-30% less. Our top car owners earn up to £250 per month, and help the environment – every shared car removes 12 cars from the roads. This June we’ve launched easyCar Pool, a transport marketplace that helps car owners save money, while using the car, by sharing their journeys with passengers going in the same direction.