One of the most common reason why startups fail is that they pick a marketplace business model that is not scalable and end up in poor long term sustainability. A recipe for success starts with setting yourself apart from the crowd by adding a little smidgen of magic and avoiding a few common mistakes.
1. Poor Risk Management
The biggest risk for an online business is the inability to gain new customers and the loss of its customers. The best controllable driver of risk and source of profit opportunity is the degree to which the company’s culture is aligned with its customers and markets.
Through proper marketplace risk management, organizations can minimize the negative impacts of threats to its business and maximize the upside impact of sales opportunities. The marketplace owners should focus on identifying and mitigating the risks associated with retaining and gaining customers in a competitive environment.
2. Assuming One Size Fits All
The amount of data available varies greatly by different marketplaces, and not making the most of the data you have is a mistake to avoid. Outline a clear approach to gather data and focus on the marketplace to push for the widest set of metrics available. For example, Amazon provides limited data to the partners but the data offered through Premium Amazon Retail Analytics service is very useful when reviewed carefully. While other popular marketplaces such as Rakuten can provide more data, so don’t assume one size fits all.
3. Focusing Too Broadly
Another common mistake is trying to sell too many types of verticals. Having many different verticals at one point is typically hard to manage and you are more likely to end up being only okay at each vertical. When you cut it down and focus on just one or two vertical, you’ll start to see traction. Overall, make sure your current vertical market is large and growing. Then dominate it.
4. Not Adding Value
Although small amount of disintermediation doesn’t always matter, it’s important to know your customers and the value you are giving to them through your marketplace. If you know don’t know what matters to your customers, start monitoring each stage of your marketplace funnel and focus on where user activity drops off to address this. From there, you can compare where users are disintermediating against your value props and ensure your value is clearly explained and actually rings true for users.
There are many reasons that cause marketplace startups to fail, but the most common one is that the entrepreneurs miss out the essential factors and focus on expanding their product range or earning money. Select an appropriate marketplace software for your business, and pay attention to how it will impact your business processes.