Each marketplace is unique and complex in its own way. They require building multiple sides at once and can be vexingly hard to gain traction. When doing product development for a marketplace, it is paramount to understand the particular nuances of your marketplace. So, how do you measure the many facets of marketplaces? Fmr Outdoorsy CPO/CRO Colin Gardiner shares insights on what to consider and measure in your product’s marketplace. 

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What is an online marketplace?

Digital transformation has changed the way we interact with suppliers. There are now many different types of marketplaces you can access all from the comfort of your home. Here is how Colin defines an online marketplace. 

“Online Marketplaces are a type of e-commerce website/app where products or services are provided by multiple third-party suppliers and aggregated for the demand side.”

“There are many types of marketplaces: P2P/C2C, B2C, B2B, B2B2C, and more. They can be multi-sided e.g. three parties in one transaction.”

“Starting an online marketplace startup is like trying to build a house out of Jenga blocks. You’re constantly worried about it falling apart, but somehow it still stands tall.” 

Acquiring supply and demand 

Supply and demand have a huge impact on the competitiveness of an organization. Together, supply and demand determine the prices and quantities of most goods and services. This is what you need to know about acquiring supply and demand:

“Typically start with acquiring the supply as it is the unlock for marketplaces.”

“Demand acquisition should be predominately organic and the product should support this by creating pages for Google, helping WOM, and generally driving product-led growth.”

“Focus on markets where supply is highly fragmented and heterogeneous.” 

“Where do you start? Who do you bring in first? And how do you grow them at the same time, so that the marketplace can grow and scale together?”

Product Strategy: Marketplace+ 

So, what is needed to be successful in the marketplace? You need to have a plan for success embedded into your product strategy. You have to go beyond just bringing supply and demand. Check out what Colin calls Marketplace+: 

“It is no longer sufficient to just bring supply and demand online! Product builders need to create products that embed on one or both sides of the marketplace to add value.”

“Marketplaces thrive when they lower search costs, add value to transactions and typically command higher take rates.”

“Marketplace+ is bolting together a marketplace plus a SaaS, Fintech, Insurtech, etc. to create a high value and sticky product for all participants.”

“You need to produce GMV at scale, with a take rate that allows for a high contribution margin.”

Marketplace Revenue

Let’s talk dollars. A marketplace’s revenue is kind of funky. Marketplaces get money from each transaction it processes on the platform. So, it’s important to know how it works: 

“Marketplaces tend to take a small cut of the overall transaction meaning the actual “slice of the pie” is small.”

“The “whole pie” can be quite large but it’s not really the revenue for the marketplace, it is the total transaction volume.”

“You take from both sides because it’s the sharing economy after all!”

About the speaker
Colin Gardiner Outdoorsy, Fmr CPO Member

Colin Gardiner is a startup and tech entrepreneur that thinks about everything through an economics lens. He has worked as an early employee at Outdoorsy (+$2B GMV), Roamly (+$20M GWP), Tripping (+$500M GMV), Ancestry.com and JustAnswer. Within these startups, he has played critical executive and founder-level roles raising over $200M and helping to grow industry-leading businesses. He is an expert in digital marketplaces, platforms, and insurtechs/fintechs and focuses on growth, monetization, retention, analytics, insurance, finance, and unit economics. He currently runs an advisory business, helping founders grow and optimize their businesses. He also runs Yonder Capital which is a syndicate focused on funding pre-seed, seed, and series A startups.

About the host
Rishikesh Yardi Instacart, Head of Chapter Seattle

Rishikesh is a Sr. Product Leader at Instacart. He has 10+ years of field knowledge at some of the most prestigious product companies in the world. He enjoys working on product development from the bottom-up and seeing products come to fruition.

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