Building a Marketplace
Dominik Olszewski
March, 9th 2021 • 7 min read
When building a Marketplace, sooner or later we will face the problem: "how to attract both sides of the transaction at the same time". This question is also repeated like a mantra in numerous publications and courses regarding this matter. During the last faw months, as a cofounder of Teamsharq, I came to the conclusion that although the answer to the above problem is extremely important in the long run, initially our attention should be focused on completely different issues.
Source: Unsplash.com
We will base our case study on true startup stories. As the example we take Booksy.com and iTaxi.pl platforms. Booksy.com is a Marketplace dedicated mainly to the beauty industry. Apart from functionalities typical for this type of solutions, it helps to manage staff and calendar, and finally facilitates communication with clients. The beginnings of iTaxi date back to 2011, where on the wave of popularity of such platforms as Uber or Bolt (Taxify), a local app connecting drivers with passengers was launched.
What do these two companies have in common? The founder: Stefan Batory. However, despite the fact that he starts both of them, Booksy is growing very fast, while the iTaxi seems to be stagnating for a long time. So the question is: why is this happening? After deeper analysis, it turns out that the answer may be surprisingly simple.
First, let's consider how the cab industry works in Poland (or at least it worked back in 2011). The customer had three options to choose from. He could use a cab stand, he wave at a cab driver on the street, or he could simply call one of the many cab corporations and summon a vehicle to a given address. It was not important who would come to the place. And that's the answer. What's happend is a classic mistake of many founders. They think about technical aspects of building a product and how it should work after reaching wide recognition. But they don't think how to gain this popularity step by step. Without clients, the application was practically useless for cab drivers and vice versa - without a large number of cars, there was no point in installing the application.
So why Booksy.com is so successful with almost the same business model? At this point, it is important to think how the beauty industry works. Does it matter who is our stylist? Do we choose always the same barber shop, hair salon etc? That's right. Most of the time, we visit the same places. What's more, even within the same salon, we always ask for the same person. And here comes the main advantage of Booksy.com over iTaxi. From the very beginning Booksy gave value to one side of the transaction. The salon got a platform where it could manage its calendar and employees, it could limit the number of calls from regular clients (it was enough to ask the client to sign up through Booksy next time). The whole Marketplace thing was just "the icing on the cake" here. An additional sales channel for the salon, not the point of the app itself.
So I guess it's worth asking the question, why Booksy chooses the Marketplace model at all? They could just offer their product as SaaS solution. The answer is very simple. Nowadays, in the tech world everyone is competing with everyone. Anyone who thinks their product is unique is either Elon Musk with a multi-billion dollar budget, or hasn't done a homework. Statistically, at the same time when we build our product, at least seven other, practically identical solutions, are developed world-wide. So Marketplace is therefore simply the best chance for a long-term relationship with your customers. The relationship that is not based on technology, but on the power of user's habit.
Taking all the above into consideration, I came up with a conclusion that in the first days of building the Marketplace, it is not about attracting both sides of the transaction at once, but simply about offering value to one of them. Moreover, founders should think about doing it in such a way, that early users want to pay for that value from the very beginning.
Written by Dominik Olszewski ( Linkedin)
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