Wout Withagen
The first scalable version of your online marketplace (4/5)
Innovate & digitalize
Marketplaces
Mar 31, 2021
Do you have a super cool plan for a successful online marketplace? Then you might want nothing more than to get started with a first real version. I totally get it. In this blog, you'll read how to approach it. Step by step, you work from a minimum viable product to a scalable product. A fun and important step in the development of your online marketplace.
You have a strong proposition and a revenue model that works. And you know what the seekers and providers on your platform need (see also blogs 2 and 3 from this series). What do you minimally need to set up your online marketplace? And how do you develop a scalable product — that at its core does what it needs to do — bit by bit, with the input of your users? Build your soapbox car step by step into a shiny, top-notch SUV. In the beginning, not super clean, but primarily working, small, and agile, and increasingly slick and extensive as development progresses.
A minimum viable marketplace can be broken down into three sub-components. These are also the three main levers you can adjust in the coming period.
1. Minimum viable features
Imagine: after a day of hard digging, your team finds out that the hole was dug in the wrong place. Super demotivating. A metaphor that beautifully illustrates why working with minimum viable features is so important: you remain agile and can easily adjust in time. And that can save you a lot of trouble and frustration!
What does working with minimum viable features mean? Focus above all on the absolute core of your online marketplace: making a successful match between buyer and provider. Such a match only exists if two or more parties feel a 'win.' What features do you need for this? Design your online marketplace with them. And it must (should) be as simple as possible. That everything at the back is held together with rubber bands and tape, we will solve later.
Is it bad that you still have to do many (back office) processes by hand for now? Not at all! Your team actually learns a lot from this. By being as involved as possible in the game of supply and demand, the processes become increasingly transparent.
Want to read more?
This article is part of a 5-part blog series. Step by step, I take you through what you can and should know about building a successful online marketplace.
Blog 2: No one is waiting for your marketplace idea. Or are they…?
Blog 4: The first scalable version of your online marketplace
2. Minimum viable audience
You start with a relatively small target audience to test your marketplace. But not too small. The intention is that your test audience is just the right size to quickly gain valuable insights. How do you find the perfect test audience? Audiences come in roughly two flavors: a niche market and a general market.
If your marketplace targets a niche market, your total audience is already limited. Based on specific characteristics (size and sectors), or areas of interest in which a company or person is active, you make your audience just a little smaller. Not too small, because the number of transactions in a niche market is limited... It works particularly well with services: with one seeker and, for example, three providers, the game of supply and demand is already in full swing!
In a general market, it's different: there are many transactions, usually at a relatively low transaction value. You automatically target a wider audience here. Try to highlight one component in the beginning to keep it small. Catawiki, for example, initially focused entirely on comic books. Just make sure you have enough volume to reach a general audience and attract them to your marketplace.
3. Minimum viable location
Uber and Picnic beautifully demonstrate how to do this. They roll out their services by region. Not too long ago, Uber was only available in our capital. Now that it has proven successful for the Dutch market, the company is expanding its services further into the rest of the country.
Whether you can start per city, region, or province depends on what you offer. Roadside assistance provider RoadGuard, for example, had to go nationwide immediately. Pretty inconvenient if you break down in Zwolle, for example, but precisely there is no help available. Going international immediately is usually not necessary either. Unless your product or service is in such a niche market that you don't have enough volume with just the Dutch market. Determining your minimum viable location, in short, is done with a hefty dose of common sense.
But, you can't do it without flexibility in team and tech
A minimum viable product alone won't get you there. Starting well also requires something from your team. Namely: a super flexible and agile approach, better known as agile. You work in short sprints from sub-goal to sub-goal. Together you work on objectives, without the end result being set in stone. That requires people who are not afraid of change. And for an open, communicative work culture.
The technology you use must also be agile and scalable. Whether you choose turnkey or self-development: a successful marketplace often requires customization. Ensure you are initially flexible and scale when it starts to creak. And very consciously choose — depending on your goals — for the development of an app or website, ownership or purchase, and for data storage or not.
In conclusion
By going through these steps, you reach a minimum viable product. Ready to start, then! But...how do you ensure that your marketplace takes off and gains awareness and users? Your online marketplace can't do without marketing, activation, and retention. I'll go into this further in the next blog.