In this digital age, marketplaces are quickly shifting to online and mobile platforms. These types of marketplaces are not always easy to build.
Marketplaces are where the exchange of goods and services take place. This can happen online or in person. Since the advancement of technology, marketplaces have become more mobile and virtual in nature. Buyers and providers now interact with one another through a kind of digital platform. This peer-to-peer interaction exhibits convenience and affordability to consumers and providers alike. These characteristics alone are not enough, though, making marketplaces difficult to build.
Startups especially struggle when it comes to building and maintaining a marketplace. This is because of the simple fact that attracting buyers and suppliers is such a difficult task. But once your marketplace obtains enough liquidity it becomes even harder to kill.
These are the 5 things Sophia feels are most important in building a marketplace:
1. Outward expansion
When expanding beyond one's niche within the marketplace, you set yourself apart from competitors. Also, with expanding, your product will draw in more consumers. Toot began as an app dedicated to tutoring in academics, but soon expanded. They wanted to increase their reach beyond the high school or college student. The addition of skills to the app became a big upgrade. Users could now learn to cook, surf, or even rock climb. This enticed consumers outside of the typical academic background she originally started in.
2. Solve the chicken and egg problem.
Supply and demand becomes a reoccurring issue when it comes to the building of a marketplace. If a platform lacks providers, buyers stop using the service. If there are not enough buyers, providers search for a better alternative. Los Angeles, with its many surrounding colleges and schools, has more than enough buyers. The problem was in obtaining more providers for the marketplace. Sophia solved their issue of supply by launching an app version that only onboarded tutors. This solved the issue of supply. This brought in more providers, thus creating a better balanced marketplace.
3. Bridge the gap between buyer and supplier.
The last thing a company needs is a gaping void between a consumer and a provider. Gaps not only create a loss in customers, but also result in a loss of providers as well. Toot bridges this gap by connecting tutors with users through the app. This gives the user the power of choice altogether. The tutor never has to search for a student, rather the students come to them. This bridging between tutor and student prevents either party from leaving the platform.
4. The more suppliers and buyers, the better.
The location is key. Where you choose to build a marketplace can determine success. Los Angeles, for example, was the perfect choice for toot. Schools such as UCLA, USC, Loyola Marymount, and Pepperdine made LA a great place to start up. The city provided thousands of students (demand) in need of tutors (supply).
5. Create a community that promotes trust and safety.
Without a solid foundation of trust, a marketplace can crumble. A tight-knit community helps the customer/provider relationship that marketplaces thrive on. Toot accomplishes this through the relationship with its community of tutors and students. Customer service feels like calling up a friend. Tutors and students know that calling to ask questions is not an issue; toot is there to help.
By following these 5 principles, you too will be able to build a marketplace in your own community. If you have built a marketplace already and would like to share some insights, I'd love to hear more! Comment below.