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February 25, 2015

Sellers Will Make or Break Your Online Marketplace

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I’m often asked for input on how to best build and grow an online marketplace. If you look at the ones that have hit their stride and are growing like Lending Club, which had the second-biggest IPO of 2014, and others like Udemy, Minted, Etsy, and Airbnb, they all have one thing in common: a relentless focus on delivering an outstanding customer experience. However, most nascent marketplaces tend to define “customers” largely as the demand-side (i.e. people purchasing the goods or services off of the marketplace).

Many marketplace operators do not place enough attention and focus on their supply-side, which are the sellers of the goods or services on the marketplace. They especially fail to listen, deeply understand, and properly incentivize these suppliers. In most marketplaces, suppliers of these goods and services tend to be independent sole proprietors who enjoy the freedoms and flexibility this type of employment offers. Think about eBay sellers, Uber drivers, Udemy instructors, or even the designers on the Minted marketplace. These people or “suppliers” tend to not only work alone, but we are finding they greatly value their freedom and flexibility. Like most working in more traditional corporations, these sellers/service providers want to be treated with respect, empathy and most importantly, want to be heard. It is the job of the marketplace operator to fill the role of listener and provide the necessary avenues for a two-way conversation to happen. In other words, marketplaces should treat their providers of goods and services as their own valued employees, not just as vendors.

Along those lines, I have found that in every single successful marketplace, supply-side satisfaction is not just measured by pure extrinsic motivators (like dollars and cents), but also measured on “intrinsic” motivators as a more important driver. In addition, those marketplaces that spend the effort and time meeting and communicating with their suppliers of goods and services will more likely be able to have a thriving supply-side workforce. The best marketplaces make their suppliers feel emotionally “invested” in the success of the marketplace by including them in key directional decisions.

From my experience on the board of several of the latest marketplace successes and during my time at eBay working closely with sellers, I can tell you that deeply empathizing, listening, and understanding these intrinsic motivators on the supply side is often the missing ingredient that tends to separate good marketplaces from great ones. In the winner-take-all world characterized by strong network effect businesses like marketplaces, there is little/no room for second place, so getting these intrinsic motivators right is crucial. Let me explain with examples of what I mean by intrinsic motivators and how some of the best marketplaces are driving these to maximize the sell-side.

In his bestseller “Drive,” Daniel H. Pink covers the difference between extrinsic motivators, such as bonuses and rewards, and how they pale in comparison to the internal motivators of passion and purpose.

“When the reward is the activity itself—deepening learning, delighting customers, doing one’s best—there are no shortcuts … People will work hard and persist through difficulties because of their internal desire to control their lives, learn about their world, and accomplish something that endures.”

When supply-side participants of a marketplace feel like they are part of a community, a marketplace ceases to be just a platform for commerce. Instead, the marketplace becomes a social platform and a supplier’s relationship to it is more like the one that Pink describes. In other words, the supply-side contributor becomes emotionally vested in the success of the marketplace and that is a much more powerful motivator than viewing the marketplace as simply a means to generate a paycheck.