What should you consider before creating your own marketplace? Thinh, the founder of Cakeway, answers this question.
Are you doing this for the right reasons?
There are many ways to build a business, but let’s be honest right away: starting a marketplace sets you up for a lot of hard work. If you want to build a marketplace, it has to be for the right reasons. Making easy/quick money isn’t one of them. Mainly because building a successful marketplace is not easy nor quick. It’s a strenuous, ingrate and hard process.
Why is it so hard to build a marketplace?
Because of the double-sided sourcing problem.
Usually, in business, your number one concern is simple: getting customers or users. You are the supply, and you have to find demand. Well, the trouble with starting a marketplace is that it makes that problem doubly hard. You now have not only to find demand but also supply.
Some call this the chicken and egg problem, but I find this analogy sucks. It’s not about chicken, eggs, or who came first.
Rather, it’s about being able to turn a vicious circle into a virtuous one.
You need to get away from that lonesome place where providers ignore you because you haven’t got a lot of demand and buyers also ignore you because you haven’t got much of a supply. And instead, find yourself in that spot where you’re attracting providers because you have a lot of customers, and vice-versa.
More simply, it’s about being able to get from the “suck” loop to the “positive feedback” loop.
And it’s one of the hardest things to do. But when you get there, boy it feels good.
Don’t get lured by what you see today
Marketplaces attract entrepreneurs because they look easy. They look obvious. You see AirBnB and you’re like: “Of course! I could have figured it out myself”. People want cheap places to sleep at and many people have vacant rooms in their houses.
Or you see Uber and, oh yeah, so much people with cars, it was obvious something had to be done with this.
But, successful marketplaces are like magicians and top performers. The art and prestige of their craft is to make incredibly difficult things look easy. Uber, Etsy or AirBnB make it look like it’s easy. But in reality, it’s super hard. Like super, super, super hard.
Not that I want to discourage you and talk you out of starting a marketplace. I just want you to be well aware of the challenge ahead.
To get where they are today, these huge marketplaces had to struggle for *years* before even seeing the tiniest bit of light. And while every once in a while, a success story happens, you don’t hear about the thousand others who failed miserably.
Again, there are many other easier ways to make money. A LOT easier. So if it’s your primary goal, forget about the marketplace and go for the lower hanging fruits.
It can be freaking long
Unless you have a huge audience—and sometimes even if it’s the case—building a marketplace up to the point where the feedback loop starts kicking (when you reach the **critical mass**) is going to take you a LONG time.
As in *years*, without truly knowing if it’s going to take off. Are you really up for 24 months, at a minimum, without any revenue or tangible proof of success? That’s a question you definitely want to ponder.
Ok, you got it, and you still want to start building your marketplace. What then?
## You’re making things too complicated
Paradoxically, **while establishing a useful and thus successful marketplace is long and tedious, the way to start it shouldn’t be**. Yet that’s what most people go for. They think of overcomplicated platform infrastructure, mechanism, and design.
They design wireframes and, when they have the money, spend thousands of dollars on building a feature-packed website which would pretendingly cater to all the needs of their future users.
Or they spend days and weeks doing market study, polls and asking people to fill forms.
Other times, they heard that marketing’s the real deal, and they go pouring loads of cash into Google Adwords and Facebook ads.
None of that is needed to start. Too complicated. Get simpler. Don’t hire developers, don’t learn to code. Use an easy solution to get started right away. The faster you’re online, the sooner you’ll figure out what is needed (or even IF there’s a need).
The way to go
Wanna know the secret to building a successful marketplace?
Drum roll…
Serve one person, and only one, at a time. One after the other.
That’s it. No matter what your marketplace is about, if you’re able to serve one provider, allowing them to sell conveniently whatever they have to sell and be happy, you have now satisfied two people: your provider, and their buyer. Or vice-versa, if you started with satisfying a customer’s demand in the first place (by fulfilling supply yourself).
And to do that, you don’t need a fancy $30,000 website, a sales pitch or Facebook ads. All you need is direct contact with one person having a need, and the determination to find another one who can solve that need. Get on the phone. Send emails, do things freaking manually.
Once you did it a first time, do it a second time, and a third time. Have you served your first provider well and he’s happy? Go for a second one. Serve them well too. Make sure they’re thrilled by your help. Then a third, and so on.
Once you get 10 or more satisfied providers—and *satisfied* is a key word here—or that the manual work begins taking too much time, then you can start thinking of automating processes, add features, and marketing.
This is how you really get any marketplace going.
