12/31/2016
The 2-sided Marketplace and What you Should Know
Erin Thompson Erin Thompson

A two-sided marketplace is an economic platform consisting of two user groups, usually a buyer and a seller that provide each other with products and/or services. In simpler words, a two-sided marketplace is where you connect the buyers with the sellers acting as a middleman by creating a unique medium that is accessible and easier to interact with compared to the conventional methods of buying and selling.

One of the first questions you need to ask yourself is who do you need to target first? Then, how do you demonstrate your value and keep this audience around for the long haul?

In most cases, building up supply early on is more challenging than generating demand. In order to attract quality supply you have to ensure your value proposition is strong enough to persuade new customers to try the platform and then deliver on what is promised.

The idea of the marketplace may seem like an easy opportunity at first but when you dive deeper into the concept, there are a few things to think about.  Here we have come up with a few top points to consider for those people looking to create a successful two-sided business startup.

Come up with something truly unique

Since the idea of a marketplace has gone mainstream many people are trying to jump in and follow the path of success but very few are able to achieve it due to fact that their ideas are very common. eBay and Amazon are a prime example of the marketplace as the idea they came up with might look similar to some, but they follow a completely different business strategy and their target audience is also different.

One of the first things you need to do is to pick a very specific target market and completely dominate it before expanding into bigger or adjacent markets. You need to become a household name within that tight niche market because you need the recognition and momentum to move into bigger segments.

For every opportunity, there will likely be hundreds of possible niches. For example, you might target a specific geographical location, demographic or niche interest. You can’t really choose an opportunity that is too small at this stage, but it’s important that you can foresee how you will be able to realistically expand.

Be the one side of your marketplace

It will be difficult to provide the services when you don’t have the buying or the selling side strong enough. When starting up the business try to focus on one side of the model and create some type of content you want to expand further once your market is mature, use your own inventory if necessary or reach out to friends and other business relationships to provide their inventory. When one side of the market is established it will be easier to attract the opposite side.

As the owner of the marketplace, you have all the right insight: how to match up buyers and sellers. You know which products sell the most and at what price ; what popular keywords are powering the traffic. If you don’t share that knowledge about demand with your suppliers, you are missing out.

  • Share the insight: Etsy was aware that there were an increase in searches for owls. So they advised their designers of this news, which resulted in more owl merchandise for buyers to select from, they also suggested the best price point from past purchases.

Without realizing it,  in a two-sided marketplace, you can act as the analyst for all your suppliers. Think of your search results as an ongoing survey of your buyers—and then consider the  no results found as potential need your suppliers can fill.

Foster your own community

To consistently grow your business, never stop fostering both sides of your network. Always ask for feedback. Reach out to users. Hold meetups. However you need to engage them, find a way and do it. Fostering a strong sense of community and generating loyalty with both sides of your platform will help your marketplace grow. You have to be transparent about your business. Creating a hype for a business is another thing and is used for marketing purposes but promising something that cannot be delivered will make your community lose faith in your business and that is something that should be taken seriously. The happier the users and the more trust they gain will work in the favor of your business in the long run.  Creating your own community is a great start and there may even be existing communities that you can attract through your own business ideas and make them your own. Uber is a very good example of focusing on an existing community as they targeted car owners and offered a way for earning extra money by using their own vehicle, all they offered was a unique platform. Try to dig in the social media and look for communities that have potential but lack a proper platform.