Marketplaces: different types and amount of control

Digital marketplaces are hot and happening. Thanks to COVID, the amount of e-commerce players and supply & demand platforms are rapidly growing. B2B players realize they might have to become B2C players, as the disruptive shift caused by Covid requires a strong new business direction. For example, think of a ‘traditional’ B2B paint company that starts a B2C digital sale channel, as a result of losing regular construction clients, who have seen their projects put on hold for an indefinite amount of time. Another example would be food delivery: a large amount of restaurants and coffee shops now have shifted towards a digital delivery platform.

Recently, we’ve helped a client go through the process of starting a new marketplace. They didn’t have much experience in how to decide what kind of marketplace they aimed to become, what ‘degree of control’ they should have, and how much ‘freedom’ marketplace entrants and end users, should be having. This control factor is important, as it ties to business goals, marketing activities and overall quality control of your services. So let’s look at control a bit deeper, and how it affects your marketplace.

In the following diagram, we’ve summarized some key aspects per marketplace model, ranging from Matchmaker to a fully Digital Store:

Let’s highlight some aspects from this diagram.

Quality of experience/marketing

If you want to ensure the quality of your service or product, then you’ll have to have some control over this. When you simply connect supply and demand — but don’t take an active position over the quality of goods that are being traded (say, food, gadgets, or sports products), then you might be a great ‘matchmaker’ (such as Craigslist is), but you won’t be able to guarantee a certain level of quality (of the product, delivery times, customer service, etc.)

This becomes more important and relevant when you decide to launch directed marketing campaigns (e.g.: ‘get your burger in under 10 minutes‘) or want to assure customers your platform offers the best possible products/services, etc. In those situation, you will have to get more grip on your marketplace, as you might desire handle payments, fraud and customer complaints in a central way.

Data capture

Another important factor for maintaining a level of control are data capture and business intelligence. Take, for example, one of our clients that was thinking about starting an e-commerce platform on WhatsApp and Facebook. Though that would be a very smart decision in terms of ease of use, and removing the entrance barrier for people to download a dedicated app, our client would also give up a lot of data points. As 3rd parties enter your ecosystem, you will often lose ‘eyes’ on data that’s valuable to you. Building a standalone marketplace or e-commerce, therefore gives you control over more data, such as traffic, conversion, ad budget ROI, and other factors.

Another important note to mention here, is the relationship to business goals and KPIs. Take for example, the KPIs of Uber Eats:

Once you’ve setup your goals and determined which indicators (KPIs) you want to start measuring to evaluate if you’re on track of reaching those goals, you’re then able to define which data points you need to capture in your future marketplace. In Uber Eat’s case, they want to closely track delivery and food preparation times, so this implies that they need control over this (or at least collect all data points on it).

Commission, delivery and usage costs

Lastly, you might want to evaluate how much control you want over commission, delivery and usage costs that your marketplace actors have to pay (or receive). For example, in a ‘free for all model’/matchmaker, suppliers set their delivery costs and may choose to increase or decrease that number, at any moment. This gives them the opportunity to seize the spotlight with discounts, ‘hot deals’, and other tempting offerings — which is all great — but also induces the risk of end-users being scared away because of high additional costs, when ordering their product.

Going to back to our client: they felt like ‘attacking’ the market by eliminating commission costs for suppliers, and delivery costs for end-users, by absorbing these costs themselves (at least in the first months after launch). As such, they wanted full control over this factor, and not give marketplace actors the freedom to set these parameters.

This article was originally written for Studio Frankly’s blog.