This is a joint post by Casey Winters and Dan Hockenmaier. In marketplace businesses, the network is the product. If you’re not growing both supply and demand, the product generally isn’t getting better over time. And your network effects which compound organic growth are not getting better, and probably getting worse.
One additional for the "when to try it section" (is supply enough incentivized):
Marketplace that are very narrow in categories might have a harder time here --> suppliers see other suppliers on the marketplace as direct competitors. From their perspective there is a big risk that they might loose the demand to another supplier if they "show them the marketplace".
I work at a shipping container marketplace (container xChange) which is quite a narrow category - most suppliers in a market (e.g. Houston) know each other and would never share "their lead lists" with each other.
Because of that we never really tried to push for it, because the additional value that we would need to bring to make up for the downside of potentially loosing leads seems very high. Having said that it still happens every once in a while, but often then tends to be lower quality demand that the supply side does not want to transact with without the payment guarantees that the marketplace brings.
How about you white-label the transaction/quote page so these supplier-referred demand customers can complete that first transaction on the supplier's page and not other suppliers. Then, the marketplace will later upsell such demands.
We already tried things into this direction (e.g. selling white-label webshop solutions that sellers could use to sell to their existing customers) but suppliers were very hesitant - they still fear that we will take away their demands (since we would get access to the company information once buyers use the checkout flow).
Only speculation, but I could imagine that if we would have started with "single player mode" (e.g. building container inventory management, white-label webshop etc.) we could have still managed to build the marketplace on top later. Starting with marketplace and than moving towards single player tooling now seems harder for us (our customers see us as a marketplace now).
I didn't think of it as brand building, but I agree that's a way to think about it. An individual home on Airbnb can't have a brand usually, so it can't drive demand the way a restaurant can.
Fair enough. I am thinking more niche categories. Like great tutors and course creator bring demand to an online course program and so. May be the niche nature where the supply has capability to differentiate strongly can have this play.
There is getting demand side to market to supply, which is very rare, and then there is demand converting to supply, which is more common. For the former, some food delivery startups had diners recommend restaurants to add, but I don't think it was a big lever. For the latter, collectible and resale marketplaces have a high overlap of demand and supply. Airbnb was also able to get some more supply after people booked trips by asking them to Airbnb their place while they were gone to help pay for the trip.
You are right that demand side bringing in supply is rare. My intuition is that this works well when there are negligible negative own-side network effects (i.e., no congestion), convenience benefits for the demand side from bringing suppliers to the platform, or with mission-driven/community marketplaces like sustainable CPG.
Another mechanism is that demand marketing can bring in supply, either because this builds awareness for supply or because they want to get ahead of that incoming wave of demand brought about by the marketing campaign.
We run the world's first B2B marketplace for film-related resources called https://myfilmapp.com that is transactional and not just listing.
We enabled demand-side to bring supply to our platform, by incentivizing the demand-side by giving them 5% cashback in their wallet that could only be redeemed in subsequent transactions, which worked wonderfully well. Our gain was 1) onboarding new supply-side and 2) triggering more transactions because of unutilized money lying in the wallet. 3) Triggering adoption since we are the pioneers and this is truly disruptive initiative and therefore a new way of booking resources for film projects.
For an early stage marketplace we are building, we are seeing a good untapped potential to generate demand from supply as you call it - especially from the suppliers' Instagram page.
A question for you guys, how common is it among marketplaces to have differential take-rates for demand generated through marketplace vs own channels (but processed by SaaS).
If we do take diff. take rates, does it create confusion/complexity in the minds of sellers?
Great article, thanks!
One additional for the "when to try it section" (is supply enough incentivized):
Marketplace that are very narrow in categories might have a harder time here --> suppliers see other suppliers on the marketplace as direct competitors. From their perspective there is a big risk that they might loose the demand to another supplier if they "show them the marketplace".
I work at a shipping container marketplace (container xChange) which is quite a narrow category - most suppliers in a market (e.g. Houston) know each other and would never share "their lead lists" with each other.
Because of that we never really tried to push for it, because the additional value that we would need to bring to make up for the downside of potentially loosing leads seems very high. Having said that it still happens every once in a while, but often then tends to be lower quality demand that the supply side does not want to transact with without the payment guarantees that the marketplace brings.
How about you white-label the transaction/quote page so these supplier-referred demand customers can complete that first transaction on the supplier's page and not other suppliers. Then, the marketplace will later upsell such demands.
Good point!
We already tried things into this direction (e.g. selling white-label webshop solutions that sellers could use to sell to their existing customers) but suppliers were very hesitant - they still fear that we will take away their demands (since we would get access to the company information once buyers use the checkout flow).
Only speculation, but I could imagine that if we would have started with "single player mode" (e.g. building container inventory management, white-label webshop etc.) we could have still managed to build the marketplace on top later. Starting with marketplace and than moving towards single player tooling now seems harder for us (our customers see us as a marketplace now).
Great article and examples at the end. Thanks!
Thanks Nicolas!
Really good framework, examples make it easy to relate to.
This ability of supply driving the demand is also based on how much brand building supply can do. Is that the factor you see in play anywhere?
I didn't think of it as brand building, but I agree that's a way to think about it. An individual home on Airbnb can't have a brand usually, so it can't drive demand the way a restaurant can.
Fair enough. I am thinking more niche categories. Like great tutors and course creator bring demand to an online course program and so. May be the niche nature where the supply has capability to differentiate strongly can have this play.
Is it possible to get the demand-side to bring supply to a platforms? Are there any examples of where this strategy either worked or failed?
There is getting demand side to market to supply, which is very rare, and then there is demand converting to supply, which is more common. For the former, some food delivery startups had diners recommend restaurants to add, but I don't think it was a big lever. For the latter, collectible and resale marketplaces have a high overlap of demand and supply. Airbnb was also able to get some more supply after people booked trips by asking them to Airbnb their place while they were gone to help pay for the trip.
You are right that demand side bringing in supply is rare. My intuition is that this works well when there are negligible negative own-side network effects (i.e., no congestion), convenience benefits for the demand side from bringing suppliers to the platform, or with mission-driven/community marketplaces like sustainable CPG.
Another mechanism is that demand marketing can bring in supply, either because this builds awareness for supply or because they want to get ahead of that incoming wave of demand brought about by the marketing campaign.
Great article. - practical and very actionable.
Thanks a lot, Dan and Casey.
Brilliant article and very meticulous.
We run the world's first B2B marketplace for film-related resources called https://myfilmapp.com that is transactional and not just listing.
We enabled demand-side to bring supply to our platform, by incentivizing the demand-side by giving them 5% cashback in their wallet that could only be redeemed in subsequent transactions, which worked wonderfully well. Our gain was 1) onboarding new supply-side and 2) triggering more transactions because of unutilized money lying in the wallet. 3) Triggering adoption since we are the pioneers and this is truly disruptive initiative and therefore a new way of booking resources for film projects.
Would like your comments on the above?
Great and timely article.
For an early stage marketplace we are building, we are seeing a good untapped potential to generate demand from supply as you call it - especially from the suppliers' Instagram page.
A question for you guys, how common is it among marketplaces to have differential take-rates for demand generated through marketplace vs own channels (but processed by SaaS).
If we do take diff. take rates, does it create confusion/complexity in the minds of sellers?
Very common, but added over time.
How do I unsubscribe from guest posts by Dan Hockenmaier and just get Casey's posts?
This is a post from both of us. It's not a guest post. Substack just doesn't know how to render that properly.