Illustration Why do you Need to Build Scalable Marketplaces Using Uber-Like Business Model

Why do you Need to Build Scalable Marketplaces Using Uber-Like Business Model

The idea of the shared economy gave life to many Uber-like startups around the world. Similar start-ups, like the above-mentioned Uber, are representatives of the new business model that we call platform. Such platforms provide very large growth and rapid development for any business. But their development is a very laborious process, which differs from building a business model that is familiar to us.

What is the difference between a scalable Peer-to-Peer platform and a traditional business?

One of the oldest business models is to find new technologies, and with their help, to undermine traditional enterprises, introduce innovations and create new sources of wealth. There are some intermediaries, which connect different groups of their customers (for example, drivers and passengers, as in the case of Uber) and help them negotiate with each other. The platforms they manage offer participants a simple and effective way to interact and do business.

Unlike traditional business models, intermediaries do not need to purchase raw materials, produce items, and then distribute it. Instead, they attract participants to their platforms and then reduce them to others. You can say that these people - this is the "raw materials" from which they produce their intermediary services. Thus, the platform divides people into producers and consumers.

How to build interaction-first marketplace?

interaction-first-marketplace

Remove the barriers

There is no place for a gatekeeper. So producers can easily get access to the consumers market. One such platform can be called YouTube, as well as Amazon Kindle Publishing. Scalable Peer-to-Peer markets, like eBay, also use a similar system with minimum delays and maximum protection level, thereby providing income to millions of people.

Applying experience

What do we know about brick-and-mortar marketplace? Such type of complex system of interactions constantly worked on optimizing resources and over the balance of supply / demand.

After all, it is a complex optimization process, which helps to promote and improve the business (going from improving the materials of production to improving in the sales department). Nevertheless, experience with platforms shows that they do not have the need to invest in infrastructure or physical assets. Therefore, working with them is much easier.

Let's look at an example. In our time, e-books have become an essential part of the life of many Internet users. Accordingly, a lot of people willingly give their money to read an online book they like. As we understand, the manufacturer must acquire the necessary set of tools in order to provide a mechanism for processing, publishing and selling electronic texts.

Also, this mechanism should provide for flexibility in relation to the different sizes of the screens of buyers' devices, and ready to be optimized for bigger screens, if it's needed. Therefore, the optimization process is extremely important.

Repeatable actions

You must create a user-friendly environment. Repeatability must make creation, curation and consume actions platform-users much easier. So, dependently on the type and aims of the platform developers must choose the right strategy to encourage manufacturers repeatedly create value on the expanses of your business.

Dribble and 500px are nice examples of such platforms. The first one allows users to maintain communication with professionals, and provide feedback, and allows you to create your own personal portfolio. The second helps photographers to earn money to sell their photos, which have already been evaluated by other people.

How should I curate the value?

You use curation strategies (thus, many admins will be responsible for security and the quality of your platform.), computer algorithms (as Facebook social platform use) or curate the information that related to the users’ feedbacks (for example HackerNews uses “karma” or reputation strategy among users).

Develop an appropriate monetization strategy

monetization-strategy
A quite valuable aspect of the development of the monetization of digital marketplaces is the provision of the fact that the transaction between the two parties took place only on the platform. Nevertheless, traditional marketplaces do not affect this problem, as to how their income is renting out market stalls.

For e-markets, there are the following monetization strategies:

  • through the intellectual analysis of the big data (for freemium models)
  • through fees for the use of infrastructure (for different-size marketplaces)

However, after a while, the type of monetization can change.

If the leading aim of the site is services, then it is necessary to limit the possibility for the customer and the consumer to communicate with each other directly, since there is a problem associated with transactions on the platform's expenses.

Thus, the user receives all the necessary information for purchase, without contacting the seller directly.
Otherwise, there is another link between the two parties. Namely, premature payment can motivate sellers to participate more actively in the transaction process. Only after a successful transaction, they receive the money transferred.

Upwork is an excellent example of a platform whose goal is to promote and provide consumers with their software for work and billing. So neither freelance specialist, nor users want to leave the platform.

Also read our article: Freelancer vs Development company. Your Business Choice [2018]

Improve the quality and add some interactions

The success of a platform often depends on how it is able to interact with two parties - consumers and producers. And accordingly, if it manages to scale in the interaction of these two, then the quality of the links also increases.

How to check if everything goes right?

There must be a balance between supply and demand. Therefore, consumers should be large enough to interest producers to create goods and services.
Today, the consumer initially dictates a certain standards of services in terms of quality, speed, and price, and all sellers eventually meet this demand. Of course, you can come up with a product, and then wait for a long time when it will demand, but this is not an option.

Therefore, most sellers are more focused not only on breakthrough products but also on the daily improvement of service and availability of modern offers in their line. After all, they want their product to be in demand in the right channels and be interesting to the right customers. It is very important to give people the product or service that they require.

You need to know your users. Therefore, gathering information and analyzing of it can help you to understand possible ways of developing new capabilities of your platform.

Also read our article: SAAS Website development: 6 Top mistakes (How to fix them!)

Of course, such approaches can change over time. First, relying on one directed business model, and then completely changing it. Therefore, at the time, TaskRabbit began with the fact that it was associated with handymen and domestic workers who worked several hours per day.. After rapid growth, the company developed a new model with algorithms related to the recognition of potential customers and their needs. After that, the company's popularity rose significantly, and the number of customers only increased.

Therefore it is really important to know your users and be able to analyze the data obtained from them. Since with this knowledge, it is possible to optimize the services offered, referring to interests and preferences. And it also helps to scale the platform, making it safer, improving interactions, without losing quality and making it more attractive to people.

Of course, it's not easy. It is necessary to monitor all processes of interaction and supervision on the platform properly. Namely, determine the degrees of freedom of interaction.

It is necessary to take into account all possible risks and be insured from any case. As did the famous giants AirBnb and Uber, as well as Etsy, Ebay developed their own internal and international insurance mechanisms. Trust is above all. Buyers want to trust the seller, the company, and the product or service. Thus, securing a lot of people, they earned a lot of trusts and thus became more in demand both for producers and consumers.

It is possible to say certainly that new platforms-marketplaces will appear during the next ready ones. Therefore, you need to be ready and know how to scale the platform in order to compete in the market successfully.

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