One of the main reasons that the marketplace business model is so popular is that it requires no inventory to get started.
This means that with fairly minimal investment you can get transactions to take place on your marketplace. This can allow you to quickly validate your new marketplace idea and even start to make some money.
At Dittofi we have seen hundreds of marketplace founders get suppliers onto their marketplace and – in this article – we wanted to collect up the top five strategies that marketplace operators use to get their first suppliers.
These strategies include:
- Become your own marketplace provider
- Manually onboard new marketplace listings
- Seed your marketplace with third party data
- Build up an email list
- Build a single player mode
By the end of this article you will know what the pros and challenges are of each of these different approaches and be able to make an informed decision as to which is the best option for you.
Strategy #1: Become your own marketplace provider
In 2007 Brian Chesky and Joe Gebbia, both designers in their mid-twenties, shared an apartment in San Francisco. Their landlord had recently hiked up their rent by 25 per cent, forcing their friend, Nate Blecharczyk, to move out. So they needed to find a way to make some additional income, fast.
It was Joe who had the lightbulb moment. A design conference was in town and there was a shortage of hotel rooms. While they were at work one day, Joe sent an email to Brian.
“I thought of a way to make a few bucks,” he said, before pitching his plan to turn their apartment into a “place to crash during the four-day event.” The email was signed off with a simple: “Ha!”
Brian and Joe knocked up a quick website and advertised their space to possible guests. Guests arrived during the conference, paying just US$80 per night and staying on blow-up beds in Nate’s old room, and during South by Southwest (SXSW). This was the start of Airbnb!
The story of founders being the first supply on their marketplace is not uncommon. Vrbo began when their founder, David Clouse, decided to rent out his ski lodge in Breckenridge, Colorado out to tourists.
I did the same thing in 2017 when I built a marketplace that matched Airbnb cleaners with property managers. In this case, I started my marketplace by offering out my own time as a cleaner. The goal was not to become a freelance cleaner; rather I wanted to understand what the challenges were going to be with offering a short term cleaning service to Airbnb property managers.
Listing your own property doesn’t allow your marketplace much scope to scale. However, listing your own property or services can teach you a lot about what your buyers or renters expect from your marketplace. It can also allow you to test out your product before rolling it out to a wider audience.
Learn how to create your first marketplace listing. Follow our guide on how to create your first marketplace listing now!
Strategy #2: Manually onboard your marketplace listings
In 2009, Brian Chesky, was in a meeting with Paul Graham, co-founder of Y-Combinator, the renowned Silicon Valley startup accelerator. Brian’s company Airbnb was part way through the Y Combinator program and has a modest number of early users.
Brian recalls that meeting with Paul went as follows:
PAUL: “So… where’s your business?”
BRIAN: “What do you mean?”
PAUL: “I mean, where’s your transaction?”
BRIAN (sheepishly): “Well… we don’t have a lot of transactions.”
PAUL: “But people must be using it?”
BRIAN: “Well, there are a few people in New York using it.”
PAUL: “So your users are in New York.”
BRIAN: “Yeah.”
PAUL: “And you’re still here in Mountain View.”
BRIAN: (silence)
PAUL: “What are you still doing here?”
BRIAN: “What do you mean?”
PAUL: “Go to your users. Get to know them. One by one.”
BRIAN: “But that won’t scale. If we’re huge and we have millions of customers, we can’t meet every customer”.
PAUL: “That’s exactly why you should do it now”.
This conversation is taken from Reid Hoftman’s book Master’s of Scale. Reid uses this example to introduce readers to one of the most important bits of advice for startup founders: “Do Things That Don’t Scale”.
Doing things that don’t scale gives an early stage marketplace the opportunity to build a “handcrafted” experience for their users. As Reid explains, this is precisely what will give your marketplace the edge over your competitors. It is the subtle details of a product or customer experience that really make users love your solution. The advice Reid gives is that building a product that 100 people are fanatical about is far better than having a product that millions of people only somewhat like.
Most MBA students and armchair investors will refute this as an approach that “doesn’t scale”. They will tell you that having a product with a million users is better than having a small, but passionate user base. However, ignoring the subtle product details will not work in the long run. You can always get a large number of people to try out your marketplace with a clever growth hack, but unless they fall in love with your product, they will not continue to use your marketplace in the long run.
“If you look at the companies that have gone on to become most valuable, they tend to have fanatical early users… Fanatical early users are in it for the long haul; they stand by you and most importantly they tell their friends.”
– Sam Altman, CEO of Open AI
After his meeting with Paul Graham, Brian Chesky and Airbnb co-founder Joe Gebbia decided to go to New York and meet their Airbnb hosts. They offered to send professional photographers to take pictures of each Airbnb listing. Who were the photographers? Brian and Joe.
The founding duo visited each host individually and, as Brian recalls, there was one trip that stood out to them in particular. After photographing the hosts home, Brian asked the host, “Do you have any other feedback?”. The host then disappeared into a back room and returned with a thick binder that had dozens of hand written suggestions on how to improve the product.
As Brian recalls. “It was like he created a roadmap for us.”
How to get started?
- Login to Dittofi and Install one of our full stack marketplace templates and experience what it is like to create the first listing on your marketplace.
- What would you change about this experience for your users? Where can you find a marketplace supplier to test out your ideas and see if they have any feedback for you?
Ultimately, these home visits became a secret weapon for Airbnb. Brian would meet with his hosts and have deep conversations about things like How they would like to see peer reviews work? What do they need most from customer support, and when?
The lesson here is that when you’re building a new marketplace, it is the only time that you’re small enough to work with only a handful of users. This represents a unique opportunity for your marketplace to build a user experience that your marketplace providers love. When you build a loyal group of early users, this becomes a narrow but deep wedge and this provides a solid foundation to scale later on.
Strategy #3: Seed your marketplace with third party data
Many marketplaces integrate with third party data sources in order to give the impression that there is massive amounts of supply on their marketplace.
When Shan-Lyn Ma and Nobu Nakaguchi founded Zola, in 2013, they began by designing an online wedding registry for couples. The goal of their MVP was to allow couples to search through an assortment of products and then click to add the most desired products to their wedding registry.
To do this, Zola needed to provide couples with a wide assortment of products from day one and so, the founders chose to plug their platform directly into the databases of different online retailers. This allowed them to display the products that were listed on other websites directly on their own website.
This approach is also taken by the online travel marketplaces Expedia, booking.com, Trivago and more. These systems started by plugging themselves into large databases of pre-existing tours, hotels and flights. They then simply displayed these solutions on their own websites.
Although the approach of plugging into an existing database of listings can give your marketplace an immediate boost, it is not without challenges. These include:
- Oftentimes you will have to pay for access to third party systems.
- Data inside of these platforms is often outdated and inaccurate.
- You will need to find and develop a custom API integration which can be difficult and time consuming.
- The data provider will likely charge you a commission on each transaction which will eat into your profit margins and make your marketplace more expensive than the competitive alternatives.
- Finally, although the data might make your marketplace look like it’s buzzing with activity, it can also lead to a generic lookalike marketplace that lacks any unique selling point.
To use this approach effectively you therefore need to consider what value add your marketplace will provide to the data that you’re using to seed your marketplace. One example of a marketplace that used this approach effectively is the jobs marketplace Indeed.
Before Indeed existed, job seekers had to visit hundreds of sites to find relevant jobs – a centralized marketplace for job listings did not exist. To solve this problem, Indeed built an aggregation technology that pulled data from multiple job boards, career pages of company websites, staffing websites & so on. Indeed then normalized all of this data into a single, searchable repository.
Once Indeed had the data, they were able to attract more Job Seekers & focused heavily on building a tool for Job Seekers. As Indeed gained popularity, it also began forming partnerships with employers to receive job listings directly, reducing the reliance on their aggregation technology.
If you think this path is best for you, we recommend that you speak to one of our marketplace experts. They will be able to help guide you on where to find the data for your marketplace.
Strategy #4: Build up an email list of suppliers
One of the most effective forms of marketing is email. Some quick stats on this.
(1) Email is 40x more effective at acquiring new customers than social media campaigns. (2) You are more than 6x more likely to get a click through from an email than social media.
So – clearly email marketing is important, but how does it actually work?
Plenty of marketplace founders have used email as a method to acquire and engage their suppliers. The best way to describe how this works is to explain what is a sales funnel. The image below gives a quick pictorial representation of a sales funnel.
Above the funnel is a cloud. This represents all of your potential marketplace suppliers. This traffic might be hanging out on platforms such as Facebook, Twitter, Reddit, Quora or other online forums. It might also be hanging out offline. Where ever your potential marketplace suppliers congregate, you need to be in those places.
Once you have thought about where your suppliers congregate, we move to the first rung of the sales funnel. This is called “bait”.
Think about how bees are attracted by the smell of something sweet or fish are attracted by a small animal wriggling around on the end of a fishing line.
Your job as the marketplace founder is to design bait that will attract your idea customer profile or ICP. Nowadays people are very busy and creating bait that is attractive requires some thought. Imagine your user is scrolling through endless short videos, on Facebook or Instagram, your bait needs to be attractive enough to them in their tracks stop your ICP in their tracks and get them to visit your website.
Digital marketing expert Russell Branson calls this the “Enquirer interrupt”.
Did you know that the National Enquirer is one of the most widely read publications in the world? They place their publication in one of the busiest spots on earth: the checkout stand. People only have a split second to make a buying decision, so the publication offers short two-to three- word headlines that will stop almost anyone in their tracks. The magazine is an undisputed master at interrupting your brain patterns and making you notice them.
Your job online is almost the same. You are trying to engage your potential marketplace suppliers who are already checking their email, Facebook, and cell phone all at the same time. You have to interrupt potential customers long enough for them to click on your ad and visit your website.
Digital marketing hack
New marketplace founders tend to overcomplicate their “bait”. You should design short, punchy titles, with catchy images or videos. Don’t sell features of your product, sell the result that your target ICP wants to achieve.
Once your ICP is on your website, the next step is to get their email. This is typically done with the help of “lead magnets”.
A lead magnet is a marketing term for a free item or service that is given away for the purpose of gathering contact details; for example, lead magnets can be trial subscriptions, samples, white papers, e-newsletters, and free consultations.
For example, the developer marketplace Toptal uses popup forms to gather up developers and product managers.
Once you have an email list of suppliers, the next step is to build a communication funnel. This is a sequence of emails that you can use to engage your community of suppliers and to keep them coming back to your marketplace.
There are a tonne of different marketing tricks that you can use to build an engaging communication funnel. The communication should start by welcoming new suppliers to the marketplace. It should set their expectations, give them examples of how best to design their product or service listings e.g. what pictures work best and so on and provide them with example case studies where you’ve had success in the past.
To set up your marketplace sales funnel, you will need to integrate with marketing technologies that will send out automated email threads. Dittofi’s marketplace template makes this easy with built in support for digital marketing tools.
Strategy #5: Build a single player mode
In 2008 Marco Zappacosta and his team founded Thumbtack in an unconventional way. They first started their company and second went out to hunt for an idea. To do this, they asked themselves the question “what problems exist today that will inevitably be solved by technology”.
Hiring a plumber was one of these problems. They recognized that every homeowner struggles with hiring service professionals or, as Thumbtack calls them, “pros”. However, the struggle to hire pros is not because there are not enough pros. In fact if you talk to plumbers and other service professionals, they’re all looking for more work. So – it’s really a problem of search. Marco and his team thought, “how can we solve this problem of search”.
The Thumbtack team saw this search problem as the problem that they wanted to solve. To do this, the first step was to get all of the pros into one searchable interface. However, this was challenging because pros were already used to publishing their services on an assortment of different websites. This includes sites like CraigsList which was where they had their main source of work.
To get the pros to list on Thumbtack, the team decided to build a tool that would allow pros to create a rich profile that they could then publish onto CraigsList. When the rich profile was created, the team would duplicate this content on the Thumbtack site. This approach solved a problem for pros who were looking for ways to make their profiles standout online. It also became Thumbtack’s initial customer acquisition strategy.
Although it sounds simple, building a tool for one side of the market can take many years. In the case of Thumbtack, it took them more than 3 years to perfect the solution.
Another company that took this route was OpenTable who developed a table reservation software for restaurants. This software replaced the traditional pen and paper reservation systems that were used by restaurants at the time. Once the OpenTable team had amassed enough restaurants in a certain area, they opened up their platform to restaurant goers. By doing this, OpenTable brought even more guests to the restaurant and were able to take a commission on the guests that they brought to the restaurant.
This roundabout approach to acquiring marketplace listings has many benefits since it means that your sellers are deeply embedded into your marketplace. However, it takes a lot longer to develop and is far more resource intensive than the other strategies discussed here.
If you’re looking to go this route, you should expect to spend anywhere between 1 to 3 years (and maybe more) funding your idea. So make sure that you have access to capital to take this path.
Conclusion: What is the best way to get marketplace listings?
There is no one way to get marketplace listings.
At Dittofi, we have seen that the most successful marketplace founders are those who choose an approach that best fits the stage that their marketplace is in.
For example, new marketplace founders should probably NOT spend time developing a complex marketplace sales funnel. Instead, they might want to consider starting out by listing their own products or services or manually onboarding users. This takes a high level persistence and can be uncomfortable at points. But it is the first step to getting traction on your marketplace.
Once marketplace founders understand the process of onboarding new suppliers, and their marketplace is also starting to drive demand, it may be time to invest in creating a more automated sales funnel to attract suppliers on auto pilot.
For more information on how to onboard supply and demand to your marketplace, read some of our other articles listed below.
You can also read how to create your first listing or schedule a call with one of our marketplace specialists to learn more.
Become a Marketplace Insider
Join our inner circle for exclusive insights, coveted trade secrets, and unparalleled strategies – your journey to marketplace dominance begins here.