Marketplaces creation, who attract first ?

All marketplaces or matchmaking platforms often have difficulties in acquiring users and are usually confronted with the chicken and egg problem: should they attract buyers or sellers first or generally speaking seekers or providers? The problem is that a marketplace must have both customers and suppliers of goods or services, but one cannot be achieved without the other. How to get out of this vicious circle?

Be careful to identify supply and demand from a marketplace point of view. Indeed, on some platforms, the users who ask for a service are the ones who create the offer of the marketplace. This is the case, for example, with quote request sites where users post their needs to receive quotes. Here, the needs posted are the marketplace’s offer and the service providers are the requesters.

In this article, we will look at several options to launch a marketplace: put the sellers first, put the buyers first, attract both parties simultaneously or act as the offeror yourself.

1) Putting sellers first

Getting sellers on your platform first seems to be the safest choice. This was the choice of Airbnb, for example, which focused the majority of its marketing budget on recruiting homeowners in the early years.You can advertise your marketplace to sellers by promising them a future influx of customers once a base of sellers is established. It’s not necessary to pay sellers up front before they receive actual orders, but it can be helpful if you have the resources – it could increase your chances of getting your first critical sellers.

It’s handy to have a lot of sellers right from the start because if buyers arrive at an “empty” marketplace they will leave immediately with a bad first impression. Unlike buyers, who want goods and services immediately, sellers can wait and won’t lose anything if there is a temporary lull (except possibly some time to create their account and add their products…). This is of course if you are on a marketplace business model where the seller only pays by results ( business model based on commission for example).

But how do you get sellers to enter a marketplace that has no consumers? Let’s review the most effective strategies.

Provide an economic incentive

This is pretty risky, but if you’re convinced that there’s a substantial untapped market and that you can attract applicants once you have enough offerers – and if you have the financial resources – then this is a possible route to take.

For example, when Uber launched, it sought out drivers and promised them a fixed minimum wage even if they didn’t carry passengers. Drivers could sign up and continue to work at their regular jobs while waiting for the service to pick them up and receive their small, but valuable, paycheck. This strategy worked for Uber, which is now one of the largest transportation companies in the world.

Bet on intrinsic value

One way to make your marketplace work effectively is to build a product that doesn’t need both offerers and askers to deliver value. In other words, determine a certain value that your product can offer to one of the marketplace actors independently, whether or not the other party is involved.We can for example set up tools that sellers will use to manage their business. For example, we can provide sellers with data, advice or tools such as CRM to help them manage their business. These “extras” on the marketplace will be all the more effective if they are provided for free.

2) Attract buyers first

Depending on the type of marketplace you’re creating, sometimes it makes more sense to build a base of buyers and then move on to finding sellers.

Let’s look at two surefire ways to find buyers first and see where you should start building your customer base.

Intrinsic Value

We’ve already discussed how the intrinsic value strategy can help you attract sellers first to your marketplace, but this strategy actually works both ways and can be just as effective in attracting buyers first by, for example, offering them tools that meet certain needs in their searches. Take the case of the sneaker sales site The Sole House which offers

a sneaker price list. Potential buyers of sneakers can use this service regardless of whether or not sellers are present. This attracts buyers and therefore sellers.

Incentivize potential customers.

In the same way that you offer an economic incentive to your sellers, you can offer buyers a certain amount of money for early registration. Of course, this doesn’t mean that you simply give money for people’s emails. For example, you can offer a discount on the first order or offer a discount on the first purchase for a minimum amount. In the case of a commission-based business model, if you know the average shopping cart of your buyers, you can optimize your discounts so that you don’t lose anything while maximizing what you can give.

3) Attract both parties simultaneously

Ideally, when launching a marketplace, you want to get sellers and buyers to sign up for your service at the same time. Nothing sounds more perfect than having sellers ready to sell and buyers waiting to place orders. Let’s look at two approaches that can help you attract both parties simultaneously.

Get sellers to bring in buyers and vice versa

In this scenario, one party is in charge of building the buyer or seller base for you. You can do this by developing a marketplace that absolutely needs both parties to work, in which case no one can do anything without their complementary party. This approach is effective when you have points of influence that will make buyers or sellers actively engage with the marketplace. It is also the case when sellers already have customers that they can bring to the platform or buyers have suppliers that will follow them wherever they go provided that they initiate the coming of one of the sides and so we come back to the previous points (it is not for nothing that we assimilate this problem to a chicken and egg problem).

Targeting buyers and sellers from the same community

When buyers and sellers have the same interests and provide similar goods and services, they can play the roles of buyer and seller on the marketplace. This is the case for a marketplace like Etsy, an e-commerce marketplace for vintage and handmade products. Etsy’s target audience is people interested in crafts: they make unique products themselves and also like to buy handmade items, so it makes sense to support fellow crafters by buying their products and offering them yours. This is exactly the idea of being participants in the same community. Buyers and sellers can take turns playing both roles and, therefore, keep your marketplace alive.

4) Act as a seller yourself

You can act as a seller yourself when launching a marketplace. Or better yet, you can launch a marketplace with the sole purpose of selling your own products or services and then attract similar sellers if your launch is successful. In the latter scenario, the goal is to attract enough buyer traffic to entice other sellers to join you. In the case of a service marketplace, you could yourself meet the needs of users in the first instance by offering your services. And why not “faker” several providers to start with…

As you can see, the best way to start a marketplace depends on several factors including the type of marketplace you are building. Carefully analyze the types of goods or services your business will provide. Once you have determined this, we can help you realize your vision and bring your marketplace to life.

Here is an interesting presentation to continue on this topic where Gilles Barbier from The Family talks about supply-driven, demand-driven or double-sided marketplaces depending on whether the easiest side to recruit is the supply side, demand side or both.  Identifying which side is the most difficult to reach will condition your different marketing actions.

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