The biggest mistakes to avoid when scaling your marketplace: Part 2
Hokodo recently hosted a webinar tackling one of the most pressing topics for B2B marketplace operators – how to avoid the biggest mistakes when scaling a platform. Our VP of Marketing Lucy Heavens took the helm as moderator, providing thought-provoking questions for three panellists with expertise in B2B marketplaces:
We gained so much advice from our panellists during the webinar that we had to split our learnings across two blog posts. If you haven’t already read it, catch up on the first part here – then dive into the next five pieces of advice from Louis, Marc and Pierre.
1. Don’t try to grow too fast
During our webinar, Louis reflected on his experience of seeing some marketplaces who tried to grow too fast and jeopardised their businesses in the process. Some operators fall into the trap of letting any seller come onto their marketplace, influenced by the belief that a bigger network of sellers makes a marketplace more attractive to buyers. However, this practice carries a high risk of bad actors infiltrating your platform.
“If you have a supplier who's delivering the goods late or there are damages or disputes, then that's going to be a real issue. Similarly, if you have buyers who are doing chargebacks and so on, that's creating a lot of hassle,” Louis explains, mentioning the damage this can have on economics and value of the marketplace for everyone involved.
2. Don’t undersell yourself
Another way that marketplace operators unsuccessfully try to propel their platform in the early days is by starting off with very low take rates, i.e., only charging a small commission per transaction.
“That actually constrains you because you put your buyers and your sellers in a world where you're not charging the right price for your services,” says Louis, “and you're going to endanger, in the long run, your monetisation model.”
This can become a huge issue for many reasons. Firstly, it can make future funding rounds and sustainability an issue. Secondly, many marketplaces have in place a roadmap for bringing more services into the platform, such as payments, financial services or logistics, but if you only have that tiny commission, it’s going to make growth far more difficult.
“I'd say, especially in the early stages, daring to be expensive might slow you down a little bit,” Louis concludes, “but in the long run it will be a big enabler.”
3. Nail your category strategy
Secondly, Marc says, you must consider the sellers on your platform and what your marketplace offers. One of the most important considerations here is your category strategy.
“The general rule is that the closer you are to your core business, the more you will sell,” explains Marc. “So, if you are a food and beverage wholesaler and you decide to sell electronics, it may not work really well. But if you start to sell beverages, maybe it will work better.”
The takeaway here is that marketplace operators need unfaltering knowledge of their niche and all the industries it intersects with in order to curate the right sellers and products for their platform.
4. Add value for buyers and sellers
One of the biggest issues faced by marketplace operators is platform bypass. This is when buyers and sellers connect on the marketplace but then decide to take their transactions off the platform, so they can avoid paying any fees.
The key to avoiding platform bypass, according to Pierre, is to add so much value beyond the initial discovery that buyers and sellers are happy to pay your fees.
“One way of doing this is to inject some additional services like payments, financing or logistics, that people will struggle to reconstruct outside of the marketplace because they don't have the trust elements,” explains Pierre. “They haven't cracked the cross-border intricacies that your marketplace may have solved for them.”
5. Build and nurture trust
The common thread running throughout our webinar and all the points in this article is trust. It takes time and deliberate action to build it, but without trust a marketplace is doomed to fail.
How can marketplace operators build trust on their platform? By following all the advice in this blog post! If you carefully vet the sellers on your platform, add significant value for all parties and show that you are an expert in your field, trust will be a natural byproduct.
“At the end of the day, one of the fundamental value adds of the marketplace is about trust,” Louis summarises. “It's about trust, it's about convenience, but if you undermine the trust early on – you only have one reputation, it's going to be tough to claw your way back.”
Want to learn more from Louis, Marc and Pierre? Catch up on the webinar below.