Most people these days order products online either from Amazon, Flip kart or eBay. Mobile apps such as Uber, Airbnb, Etsy have become part of life of people globally. In India, Flip kart, Zivame, Snapdeal, Jabong, Shop clues, Foodpanda, Swiggy have become part and parcel of people’s life. Fewer people go out to buy things. The easier consumer’s lives have become, more complex have the marketplace operator’s experience become.
Marketplace operators are unique because they aren’t just serving one base of customers. They connect buyers and sellers, service providers and consumers. They have to make sure that both sellers and buyers experience good product and service with each other. They need to hit liquidity as fast as they can, and they are often challenged by the chicken or egg syndrome; weather to first create supply or create demand, and then balancing transactions at volume. Some marketplaces have existed for a long time. They vary in size and focus, but all marketplaces share certain features. In simplest terms, a marketplace is a gathering place for commercial transactions and it is a clearly defined space where things are bought and sold. To thrive, marketplaces require order, confidence and trust.
Over the past two decades we are seeing the rise of some massive and extremely lucrative marketplaces. An online marketplace is a type of e-commerce site where product or service information is provided by multiple third parties, whereas transactions are processed by the marketplace operator. Online marketplaces are the basic multichannel ecommerce and can be a way to reorganize the production process.
Liquidity is most important: The amount of transactions conducted on a market platform is one of the most important features of a successful a two-sided market. It is about the health of the business, to function well, there must be a significant mass, and a proper balance, of buyers and sellers. Too few sellers or too few buyers will let down by a lack of variety and high prices as buyers move quickly for what limited items are available. Too few buyers and sellers will abandon the market and seek out better places to achieve their sales goals. It is therefore a delicate balance and one that can easily slip out of equilibrium. Getting the buyer-seller right ratio in a global consumer two-sided market is a huge task. Ensuring the global pool of buyers becomes essential where the vast selection of available merchandise and top sellers across the world come for the large pool of eager buyers requires an always-on 24/7 mindset.
Systematic processing is vital: Buyers and sellers are continuously looking for better reliable structure. Let’s look at Airbnb. It is an American company which operates an online marketplace and hospitality service for people to lease or rent short-term lodging including holiday cottages, apartments, home stays (bed and breakfast) and also hotel rooms to participate in or facilitate experiences related to tourism such as walking tours, and to make reservations at restaurants. The company does not own any real estate or conduct tours; it acts like a broker which receives percentage service fees in conjunction with every booking. Like all hospitality services, Airbnb is an example of collaborative consumption and sharing. The company has over 4 million lodging listings in 65,000 cities and 191 countries and it has so far done over 300 million ckeck-ins so far.
As a marketplace curator, they hire people to continuously find and feature best apartments for temporary stay and eliminate the shady ones. It is very difficult to eliminate shady apartments because going to the grass root level is difficult globally. Generally, the best listings are surfaced first as a result of both manual paper work and algorithmic curation. As a marketplace company, manual or editorial license is a big force to retain users. Airbnb learnt this hard way. They discovered this when they replaced user-generated apartment photos with beautiful, professional-quality photos. Even though this strategy did not work, it helped them create helpful guidelines for people listing apartments, which gave them the lift-off they needed. Now, most photos are in fact user generated.
Feedback very important: While Uber has earned an impressive reputation over the years, it has also faced criticism over a few scandals. Some customers have complained that drivers had cheated them out of money and the worst complaint is few incidents of female customers were sexually assaulted by the drivers. Things like these have negative brand impact. Uber faced hassles over such issues.
Most of the cab services apps have rating systems built somewhere into the process for both buyers and sellers. So Uber, Ola, Flywheel and other service providers ask both drivers and passengers to rate their experience at the end of a ride. To actually make this data valuable, however, companies have to use ratings almost invisibly to filter out bad users and continually improve service. But, one fact is users don’t want to spend the time to do the rating and reviews. Customers expect that the company has already removed poorly-rated drivers from the system. Customers assume that a driver with lower than a 3-star rating on Uber will not exist, and as a result, very few riders worry about having a bad experience. The result is that drivers can depend on the system to weed out abusive or deceitful passengers. On both sides, ratings help people trust that they will get what they are expecting. But, in fast-paced world, this doesn’t happen, in services like these, feedback is most essential.
Enabled by algorithms: The marketplace companies are technologically driven because for them data is everything. They keep track of what customer are browsing and buying. The goal is to improve conversion rates and help the industry become profitable. Internet merchants are teeming with mind-boggling flow of data. For example, Paytm has about 30 lakh visitors every day with about 3 million page views daily. Algorithms help it crunch data on customer preferences and increase sales. Algorithms are the base for all online transaction – payment, ordering, shipping, feedback everything. Algorithms strengthen the ecommerce companies. Huge amount of money is at stake on customer acquisitions and deep discounts.
Focus is on supply: To be successful, marketplace companies need to focus on their suppliers because the service providers will exist only if the customer receives the product within a defined time. On a flipside, customers are in touch with suppliers as well as marketplace operators depending on who is giving good discount and swift delivery. This can be taxing for a lot of start-up leaders who are focused on pleasing traditional end users. But for buyers, keeping in touch with both is a routine. For marketplace operators after collecting data, they need to take precise action to enforce short ship times. Time is essence for their very existence. Most importantly, when delivery period, quality and price expectations are violated on either side, the buyer is left high and dry, or a seller never receives payment. Therefore the marketplace companies need to have a very human-centric customer service approach. They are heavily reliant on phone calls and personal communications from their ground staff.
Conclusion: All in all, the marketplace firms need a strong foundation of information about the experience of customers and suppliers both. The retail concept of marketplace business has proliferated and is here to stay. It is common that after a time, firms experience a shakeout (an economic condition that results in the elimination of marginally financed participants in an industry) and only the sturdy ones survive. Ultimately, all online marketplaces will survive only if they prove their staying power by offering efficiency and inimitable value to consumers.
