Jason & Scot Show Episode 190 – Marketplaces Deep Dive

A weekly podcast with the latest e-commerce news and events. Episode 190 is deep dive into Marketplaces.

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Episode 190 of the Jason & Scot show was recorded on Monday, September 30. 2019.

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Transcript

Jason:
[0:24] Welcome to the Jason and Scott show this is episode 190 being recorded on Monday September 30th 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason Scott show listeners hey Jason do you know what kind of show we are going to do today.

Jason:
[0:46] I’m guessing a deep dive,
Jason and Scott show.

Scot:
[1:02] That’s right we are going to do a deep dive into everyone’s favorite topic will at least mine marketplaces.

Jason:
[1:09] I sort of assumed that you assumed whatever your favorites were where everyone else’s paper.

Scot:
[1:15] Of course yeah and so we’ve done deep Dives on Amazon well done a couple other topics in marketplaces come up a lot.
I thought this is a good time to talk about marketplaces cuz there’s actually a lot of innovation going on in market place has a lot of changes and then.
The ratchet here together and I’m speaking on at a B2B show tomorrow called B2B next and I’m talking about marketplaces and how that impacts B2B folks.

Jason:
[1:41] But it should be said that you probably created a bunch of fascinating unique content just for the podcast and you might reuse it but you’re not just giving us the.

Scot:
[1:50] Oh no this is totally custom for our listeners.

Jason:
[1:52] William you of course are the marketplace Guru but so I am super excited to hear your latest updated take on how marketplaces are doing and where they’re going so take it away is God.

Scot:
[2:05] Yeah yes it is the first thing I want to do is just
the down-low backgrounds are all on the same page and the number one question that comes up is what is a Marketplace and I think everyone out there has their own definition I have a pretty broad definition of marketplaces because then I think.
That helps us not talk about the different flavors and.
You know some of the pros and cons of those flavors some people have a really tight definition of marketplace is a lot of times it’s funny you get into these late-night over beer discussions around well is that a Marketplace or not.
Azure me simply a Marketplace.

Jason:
[2:37] People in the world get into a late night beer conversation about.

Scot:
[2:40] You’d be surprised especially at the people you and I hang out.

Jason:
[2:45] Imagine if the channel advisor conference is that happens a lot but yeah.

Scot:
[2:49] There’s actually Prime more discussion around what’s not a Marketplace and what is anyway my kind of loose definition of a Marketplace is a venue where buyers and sellers come together to meet and buy stuff.
The meeting is just part of the fun of it all but it’s really a a way for buyers and sellers to meet each other or transact and and.
How many conomic kind of exchange is that that you’re definition.
What will talk as we go into different types of marketplaces so we can kind of talk about you the different flavors with in that room.

Jason:
[3:23] No I don’t that’s not a controversial definition to me I guess the Nuance buyers and sellers come together to buy stuff like I probably would say buy stuff from each other like to me that’s the.

Scot:
[3:36] Exchange so what’s interesting is when you look at the data out there.
The trend is marketplaces are growing faster so marketplaces is Corinne Gartner a growing 23% year-over-year in the US versus kind of 15% of eCommerce now they’re part of that 15% so it’s actually probably like.
12% or 10% – marketplaces the number of marketplaces exploding if you look at markets like China
over there over 90% of transactions are on a Marketplace so you hear the US were at something like 55 60% and
you have a lot of people would would predict that at some point we may actually get because marketplaces are growing so fast in there so many new ones popping up maybe we’ll look more like China down the road so that begs the question why are these marketplaces so popular
and I can look at five areas where marketplaces add value
in in today’s world in this kind of layers in with changing consumer behavior for the consumer has changed more in the last 10 years in the last hundred
so consumers Love convenience what were my favorite Jeff Bezos isms is people asking you I’m starting a company what should I.

[4:49] What should I bet on and his recommendation is
bet on things that won’t change so instead of picking something that’s like the hot new thing that on something that’s not going to change and this is why I consumers like marketplaces because they bring elements that that you know
people are just going to love more of down the road so convenience no one.
People dye their time more and more so convenience is a good one selection so if you’re going to go to Avenue B at a physical location or website or an app for what not you know the more you have to buy from assuming you can navigate it the better off
I’m people of Valium so in addition to convenience bball is love to save money
I’m and then the those are pretty tangible and we can measure them the ones that are little bit harder to measure our trust.
So a lot of the value provided by marketplaces is giving the buyer and seller this kind of trust umbrella to to make sure that if something goes wrong in the transaction and can be unwell
and then.

[5:48] You another thing that’s really helped the surge of marketplaces is the increase of mobile traffic so a lot of bubble places we’ll talk about have elements that they give mobile kind of the Titan with the phone
that’s obviously helped Amazon and eBay so when he when you’re when you’re
we’re out and about the more products in your hand the better off so mobile has been another area that’s really cause to search here and then the creation of a lot of the new marketplaces can be put back.

[6:19] Mobile the surgeon mobile
the last one the last trenda I spend a lot of time thinking about it and we’ve had Casey on the show is that this bifurcation this is value or any consumer versus the convenience or any consumer and what are things that I think a lot of.
People I talked to in the industry that don’t get is you like okay convenience I get it
but then there’s like this addictive element of convenience so you know you and I are big Starbucks user so once you’ve used the mobile app
functionality of Starbucks then the next time you get in that Starbucks line even though I happily waited there for years before the mobile app came out.
When should when you get back in that line it just feels like it’s taking 10 times longer than it should
server example I checked into my hotel hear the lock didn’t work they sent for someone to come they didn’t come in 5 or 10 minutes it felt like an eternity so I just went it was easier to go get a new room then then to the Other Extreme tips of people are
addicted to zero friction and decreasing friction and that’s going to be a theme that you’ll see when we talked not openly about why are marketplaces so popular vote but wire what are the next wave of marketplaces.

Jason:
[7:30] I totally buy that song like the focus on these sort of a bum Evergreen benefits.

Scot:
[7:37] So those are the benefits that marketplaces Bluebird by a lot of people are familiar with this kind of Amazon flywheel I was one of the first people to use it now it’s kind of overdone but
yeah it it shows this is one of the reasons marketplaces are growing so rapidly is you have this this virtuous cycle a lot of people call it Network effects where you know you.
If I will get started off with selection is anger point so he could to resolve selection that brings more consumers in
that means more sellers come to your platform cuz they’re going after the buyers and that brings more selection
that’s one leg of the flywheel and then the other leg is once you get enough selection you start have overlapping selection now you have competition prices go down that’s kind of this classic flywheel this built on these consumer preferences that that are causing marketplaces to
grow faster than individual consumer things.
Cool so you know if you’re most of our listeners are kind of what I would classify as retailers or brands of all sizes why should you care.
The boy that says it’s kind of largest segment of e-commerce it’s growing and we want to do on this one is actually kind of turn your head sideways a little bit and talk about Sony’s new models and then I think that will help you
dick even most retailers are already kind of
cross the chasm of thinking about should I sell on a Marketplace or not there’s a couple of new ways to think about marketplaces I wonder who’s here if they will talk about.

[9:06] Let’s talk about the the types of first of all let’s listen to these couple terms so we talked about marketplaces one of the things we talk about is we use this slang
one piece repeat.
I’m a third-party Marketplace is a Marketplace like eBay where just sellers are are there and it’s only sellers involved.
I’m a first party transaction is where is a traditional retail transaction.
So Amazon’s one of those marketplaces that’s kind of unique in that you have first party meeting Amazon is departing and third-party meeting through other sellers.
I’m so we would tend to use more talk about marketplaces as an industry we tend to use this one p3p kind of language.
I’m your specific to Amazon a lot of people within just Amazon Silo Amazon has two platforms vendor Central and Seller Central so vendor Central is the one p platform so if you’re going to sell on Amazon to use that.
I’m in the 3p platform is vendor Central those things are emerging as as a popular strategy has become to do both which is even kind of more mind-bending.
So it’s those are just some binoculars to make sure one understands cuz we’ll start to use those
another common language is gmv gross merchandise value or volume depending on who you talk to
I’m in weird catching there is just like the payments world you have kind of two measurements you have Revenue but it’s a derivative of the transactional value going to the system
I’m in the payments roll we use TPB a lot of times is that.

[10:36] Kind of a transaction processing volume and then gmv is the value of the goods going through the marketplace and then the formula is the most Mark marketplaces have a a commission. Take rate
are there a lot of different names for I prefer take rate the fees they charge for transacting on their platform
the revenue is is essentially gmv X take rate equals the revenue of the marketplace so those are bunch of terms I just wanted to lay out there.
Jameson.

Jason:
[11:07] I think it’s the big ones a question I often get and I’m curious what your answer is is what happened at 2 p.

Scot:
[11:15] Yes or some people call Dropship to pee so so that would be second-party yep so you know if you want to kind of stretch at you can you can kind of say a Dropship relationship is is kind of a 2p.

Jason:
[11:30] Yeah I just like to say it’s it’s not it’s not a sequence it’s we’re talking about first party things and third-party things not counting.

Scot:
[11:37] Yeah yeah there’s no fourth party stuff there could yeah I don’t know if you have to
the types of products are the types of marketplaces so so,
I just mentioned so eBay is a pure third-party Marketplace a lot of people are familiar with some of the Chinese marketplaces like tmall and taobao all those are all pure third party
then you have your Amazon introduced this idea of what I would call hybrid Marketplace so you have some first-party some third-party
all the other retailer type marketplaces are like that so Walmart Sears Etc they would be this hybrid kind of a thing there’s.
If you’re on a Marketplace and you can’t tell you no it’s a market
Place item but you can’t tell who the seller is I call that a Dropship Marketplace yeah there’s probably some other way there to Brand it where the seller is masked so you’re essentially you know you’re buying from this these kind of sellers back there but they’re not identified in their own way
that’s how all Overstock works for example in a couple of the new marketplaces will talk about.
What are those all of this stuff I just described are what we call two-sided marketplaces so there’s a buyer and a seller.

[12:49] What are the interesting things in The Last 5 Years in this is kind of
probably part of the Advent of of the rise of the smartphone in the mobile world is 3 sided marketplaces so you add this third side
I’m a classic example here is the food delivery companies so you have the buyer who is the hungry consumer not like you and I right now it’s around dinner time and then the seller is typically restaurant it may actually be a commercial kitchen is kind of coming up as another thing.

[13:14] That’s two sides of the marketplace but the two of us unless we’re going to go pick up the food the two of us can transact until we have that third side which is
typically the delivery Marketplace so a lot of this was born from realizing with the ride sharing apps Uber lifting the big ones and then Dede in the.

[13:35] In China’s accident D D D D D D anyway.
To that created this this kind of ability to say hey there’s there’s a fair number of gig workers out there that are willing to move something from point A to point B.
Plug them into this Marketplace and now we’ve got a three-sided Marketplace that’s one example you’re now seeing.
Obviously ubereats kind of participates that in themselves but now you’re seeing furniture delivery
all kinds of marketplaces now that are on this three sided so that the third leg that most of you they’re familiar with product marketplaces is new is the the middle infrastructure Logistics kind of marketplace to get to plugged in on that side.

Jason:
[14:20] And is I can imagine that a little bit of a gray area like.
How much value that that middleman provide sort of designates whether it’s a two party or third-party market like cuz you you could look at Amazon and say.
Like even on their third party sales when they’re doing fulfillment by Amazon and adding all all this value to the sale that that could be a 3 of 3 sided Marketplace.

Scot:
[14:47] Where to get super technical at kind of think if if if the buyer or seller is providing the logistics it’s a two-sided Marketplace.
But an example where would be a three-sided Marketplace is Amazon does have Flex which is a driver Marketplace so so if your order came through Flex I would argue that’s a three-sided Marketplace but if Amazon was employed
the drivers
now on Amazon does have this hold delivery program which is kind of sin cholita 99 so yeah so so if I think increasingly more and more of it is three sided.

[15:19] Yea nice things blurry over time,
so that’s kind of where we are and that’s the history so it said you can look at the size out there the biggest Marketplace operator I put elastics here cuz why these China Chinese companies that when they report these DMV numbers
their there they’re not gaap accounting there’s a lot of craziness that goes on in the China market around did a transaction really happen or not.
I’m and there’s there can be a bigger disconnect between the DMV and the actual Revenue the company silver example Alibaba has a Marketplace called.
A cowbell where and in an Ali Baba itself to be to be Marketplace really buyers and sellers meet and it’s more of an ad platform and then you know they make some assumptions and say that’s the gmv they’re not actually collecting.
A rake.
Take Kratom from that Marketplace so I think I actually just recently taobao.
What’s London’s weeaboo tencent.
So so tencent Alibaba and JD depending on your kind of which day do you look at and believe there there’s a largest ones out there and
and that’s because you have the Chinese e-commerce markets already bigger than the US and then 90% of its marketplaces and and the others there’s there’s a kind of race they all have to,
put out bigger and bigger DMV numbers hard to tell how much of that is true.

Jason:
[16:45] I sometimes think of it they now LG is like a Craigslist where.
Craigslist probably classified ads like facilitated a lot of sales but Craigslist wouldn’t know.
Exactly how much sales they they fulfilled so you can imagine them reporting some estimate of how much sales were generated then there may not be perfectly at.

Scot:
[17:08] Yeah what they do is just the way you and I we were kind of napkin diagramming this we would say well yeah we had this many what you do know is traffic numbers rights we had this many listings in this many buyers come through let’s assume a conversion rate of.
X percent somewhere between 5 and 10 probably and then an average order value of 75 bucks and then boom you know Craigslist does 50 billion dollars a year.
Those numbers you have to take a grain of salt,
then as we as we go down a level on Teen Mom which is another part of the Alibaba that one is actually you know you’re required to use a Lipe and everything it has at a crate so there you can see that you.
It’s relatively large and even just tea Mall itself is effectively.
To Amazon’s in an eBay so it’s huge so you know it’s kind of the scale we’re talking about here so there’s a bigger marketplaces in the China area,
I’m did you come down to the US Amazon has grown to be larger than than eBay kind of north of 100 billion and then you have eBay at about 90 billion
and then you come down and and you have a bunch of smaller marketplaces.

[18:15] I’m so glad all this up and it’s about 50 to 60% of transactions you guys are going through I’m by by gmv dollars transaction dollar amount are going to marketplaces.
So so definitely a big opportunity for Brands to consider and and and think about as well as retailers.
Let’s talk about some of the new trends in marketplaces so
some of the new marketplaces that have hit the scenes so Target plus I think it’s one of the biggest ones that’s been announced in the last year that hasn’t gotten a lot of PR so
you know full disclosure I guess I should have said this at the top but I started a company in 2001 called Channel advisor we went public in 2013
2015 I moved from CEO to Executive chairman of still chairman of the board there
but I’m not involved in the day-to-day but I didn’t know we’re one of their launch Partners at Target plus and that’s been a big.
From what I understand that’s been really successful for those sellers on there now a lot of times when when folks.
Get into the world of marketplaces they they rightly do so cautiously nothing Targets in that camper I think it’s an invitation only type of a Marketplace but.
I’m right here it’s doing pretty well.

[19:33] The end in one of their they’re interesting Innovations is using that store footprint when we have conversations with retailers about launching of marketplace one of the big concerns is
I am so someone buys a pair of sneakers from Jason sneaker shop and they try to return them to the Target store you know what it what the heck is the sales associate going to do.
I’m Target to the lot of chair with their Marketplace tube to really kind of tie that whole experience together and in my understanding is it works really well where you could buy anything on the market place and return it in the store on your next Target once it’s kind of a neat.
Differentiator that have their Walmart obviously has had kind of ups and downs with with marketplaces so
they had their own Marketplace in the acquired judge Mark Lori who came along with that acquisition is a big believer in marketplaces and he was at Amazon for a long time.
He started Quincy which didn’t operate a Marketplace but sold was very aggressive selling on marketplaces and leveraging them and we mentioned you mentioned on a recent new show that they’re kind of doubling back down on marketplaces at Walmart,
you you point it out to other new marketplaces that you wanted Highland.

Jason:
[20:43] So I sign in malls has launched the marketplace and appreciate that make is a head-scratcher but then you realize Simon has traffic that comes to their own website and they’ve.
They’re trying to drive traffic to their own website and they want to be able to sell all the.
The goods that their tenants in their mall would offer it right and so what what’s the solution for having a.
You know website owned by Simon that can sell goods from all these different tenants from their brick-and-mortar properties it’s essentially hosta Marketplace
where are those tenants can sell their goods to the traffic that comes to send them all so they’re kind of created a digital version of there.
Their physical malls I know and this was interesting to me because Urban Outfitters is sort of a vertically integrated set of brands that mostly sell their own stuff.
And they actually the last year launched the marketplace and sort of expanded their assortment which is interesting because I don’t think that they were a big wholesaler outside of the marketplace.

Scot:
[21:55] Yeah and then another Trend within marketplaces is to go really vertical so you know if you’re a buyer of a certain category the generic experience you get from an Amazon or Ebay or Target or Walmart
is your maybe you have some filters by size or something like that.
But let’s say I’m a comic book collector and I really care about you is this graded by a commercial Grading Company and what is that grade and
you know what series is this thing I maybe if I go to eBay looking for that item I maybe it’s kind of going to 5000 listings to
try to narrow it in that maybe and then I can’t really get my handle on if it’s really kind of what I’m looking for so you’re seeing this kind of explosion of what I would call hyper vertical
experiences for folks one that’s kind of a really interesting one is house so this is in the in the.

[22:50] Home home home improvement category, how started out is this really cool way to husband and wife team wear
I think I did was a kitchen remodel I think they did a remodel part of their house they realized that there was no tools for really kind of visualizing it in and putting together the whole project.
So you know being I think one of them are there both Engineers they they said there’s a need here so I think they kind of.

[23:16] You know I necessity was the mother of invention that created this tool
I’m in for a long time it was just that and then what they realized is if you go through the steps of saying alright I want a new bedroom and here’s the drapes and the bedding and the mattress and all that stuff
and you could print a shopping list when I go that last kind of step and say
hey here’s a little Marketplace of your now you’re at the bed Choice selection now you can see a Marketplace of beds you can see a Marketplace of wall coverings whatever it is so that’s really interesting one where
you know you would you wouldn’t have to think of a Marketplace being plugged in that way but it do,
I’ve actually seen them on the IPO watch list recently that this the GMB from the marketplace component is is by far the largest part of what they do and it kind of.
You know that that tail is wagging the dog now where the remodeling tool is become just a driver for sales into the marketplace
one of our favorite guest and listeners Jason Del Rey is really into the sneaker area there they’re called sneakerheads so there is a huge I don’t know how to size this was all so funny about the internet and then they become.

[24:28] Five ten fifteen billion dollar niches because
once you kind of get in there to find it in proven experience it can explode on you so there’s a company called goat and they recently merge with Fight Club
they’re effectively a Marketplace for new and used sneakers really kind of putting out a grape by her experience for that sneaker collector
I’m which can imagine you know notify me when you find this item I’ve been looking for in my size and this condition again the things that are really important to these folks have a different differentiated experience.

[25:01] On the show we’ve been talking a lot about real real recently that’s essentially a Marketplace for these kind of higher-end items that need a verification stuff.
So if you’re going to go and make a an investment in a $500 Louis Vuitton bag or a certain piece of jewelry you don’t want that to be something that was sold outside the Theater District on a on a sidewalk if you want someone that is an expert in,
identify certifying and verifying that these are real items that are are you know from the manufacturer.
So so those are some of the interesting things Trends there another Trend we wanted to talk about was.
Marketplaces kind of going offline so it so there’s a couple we had date on the show that’s a good example of you know you could call that a
krog Marketplace but sky like a real estate Marketplace in the way to so your Betta is gone out and and
adult stores and they have these brands that are kind of like Mike releasing some of the real estate inside of their crate this really interesting unified experience for people to discover products what are some of the other up-and-coming physical marketplaces.

Jason:
[26:11] Yeah but I think that’s physical marketplaces are really catching on there’s a neighborhood Goods which started out in Dallas and I think they just did.
A reasonable size raised in my head I want to say like 10 million.
And they’ve announced a few new stores like there might be one coming to New York right now there is a store in New York called Schofield fields that has some like interesting spins on the customer experience they offer for each one.
Macy’s has a.
A separate section of the store they called Macy’s Marketplace which is powered by Beta so uses the beta technology but it’s it’s Macy’s property and they essentially lease a space in that and those are.
I’m starting to me all examples of these emerging physical marketplaces.

Scot:
[27:01] Yeah and Alibaba is actually gone on record in and that’s their biggest strategy for the next five years as they call it Ono online and offline so taking
all these things they learn in the marketplace online we have infinite shelf and then boiling it back down into a physical type experience.

Jason:
[27:16] And I forgot to mention there’s a.
One of these physical marketplaces in the Mall of America which I think it’s called four corners and then Mackenzie the Strategic consulting firm just announced they were going to open their own brick and mortar store as a.
Certified living retail lab also in Mall of America and my understanding is that is basically a brick-and-mortar marketplaces well.

Scot:
[27:43] I think we need a road trip to Mall of America. Maybe we’ll go next July I don’t I don’t go to Minnesota past October.

Jason:
[27:50] Probably smart and I’ma have to you may have a tough time adapting to Caribou Coffee in Minnesota that will get moved.

Scot:
[27:56] Okay I can make the coffee change its the minus 10 degree weather that doesn’t sit well with.

Jason:
[28:00] Fair enough.

Scot:
[28:01] So that’s kind of an interesting trend is in the end product marketplaces is kind of going it from online into the offline world
a couple other big trends that we’re seeing in product marketplaces put into two buckets
what is friction reduction in this is kind of an that your convenience bucket that we talked a lot about in the other one is advertising Marketplace hybridization so
I did the things are Blended together the site of reduction of friction
you know one of the sets of Facebook has been quite active in the marketplace category in there taking a couple runs at this that that haven’t worked if you remember Way Way Back you should be able to set up your company pages and have a little store in a tablet
I’m weeks terminal out with that with folks and knowing whatever they could barely find your company page much less the antelope Marketplace tab.

[28:51] And then then Facebook kind of just created what they saw was all these people forming their own little groups so we have one of these in my neighborhood where it’s just kind of a
the Facebook group and then it it tends to very quickly have a little kind of product section.

[29:05] Play Private Eyes that with something called Facebook Marketplace which is really more that Craigslist kind of a vibe
but now they’re they’re doing a lot of experimentation around that to make it and inviting real sellers in there that are not just kind of know hey I have used cops for fifty bucks kind of a thing they’re they’re putting the kind of
tiptoeing into a seller platform payments platform in those kinds of things and then also.
Also within that world Instagram has been quite aggressive on this and just rolled out Instagram check out
and that is seems to be getting a lot of focus from Facebook and in a lot of nursing directions they could take that so
what interesting direction is if I’m an influencer could I recommend a certain product and have you know almost like an affiliate type relationship there where
I promote you I have a picture of this item and it made its cool pair of shoes and you know.
You can buy it directly from the brand but then I get some kind of a revenue share from from promoting them so that’s the only really interesting and they seem to be putting a lot of a fair amount of effort into the Instagram check out then
so far it seems to be going really well didn’t you want to add on the Facebook Instagram son.

Jason:
[30:22] No I mean again I think those are definitely.
Interesting experiments at the moment like it you know it big controversial question is that that model has worked really well for a long time in China so far it hasn’t had amazing success in the US so it’s I feel like it’s interesting to.
Keep watching that and see if it gets customer.

Scot:
[30:46] Yeah absolutely said so the there’s been way more failures here than than successes in the US to Twitter had a buy button Facebook how to buy Button as well as part of the ad format.

Jason:
[30:59] Yeah I think Pampers at online store on Facebook in 2007.

Scot:
[31:04] And you know what I would is a Marketplace person with a lot of these Market.
Please continue to get wrong is the user experience so that order one for example you know and we were we were one of their Partners on this.
You know it’s pretty easy to put a buy button out there but it’s really hard to answer questions like well where is the product detail Page live.
Yeah what would a lot of people that want to do a quick and dirty Marketplace also don’t get right is inventory so you know the Twitter answer was will people will go buy the stuff and then the retailer can’t all of it was out of stock
let’s see you do that twice is consuming your life.
Forget the Twitter by button because you know it’s totally not helpful things like sizes so and then if you get another calories categories to get into
a parent-child relationship so you got like colors and sizes and then you get into fitment in so so a lot of a lot of times people say you know this kind of Go Fast and break stuff and BP culture
I’ll Chris he’s really bad user experiences and I would argue a lot of these guys have not made it into the marketplace world because they’ve got so many corners it was really bad customer experiences early on.

Jason:
[32:17] Diana it gives me I just in general with marketplaces what are the magic you have to get right is you you have to make it work for both audiences the buyers and the sellers and if you like you know some people are really good at.
Appealing to the buyers.
But they don’t offer nothing manatees to the sellers or you know some people are really good at offering amenities for the sellers but they’re not graded attracting buyers and it seems like the trick to all successful marketplaces is.
They’re they’re able to grow their value prop on both sides of that Marketplace in relative Harmony so they they don’t end up with a.
Ton of buyers and not enough stuff for them to buy and they don’t end up with a ton of inventory and not enough consumers that want an inventory.

Scot:
[33:02] Yeah yeah Dan and I you know how to start a guy get approached by a lot of people building marketplaces and analogy like to use is it’s like rowing a canoe or a kayak
if you if you only roll on one side yours can go in this endless circles and,
marketplaces great when you get it up to scale but it’s really hard to get it up to scale because you’re essentially building to businesses you’re blowing the buyer side in the seller side and you’ve got to have enough capital and hotspot and then also.
You know there’s this balance in the force kind of a thing that you have to do on on both sides of the equation to build the marketplace right and most of them do fail because they’ll,
they want reason of capital they’ll they’ll row on one side of boat and not the other or you know that they won’t nail that.
User experience in the middle or they won’t have enough value a lot of times you just kind of introducing a buyer and a seller isn’t enough you have to really kind of had that.
Trust factor and you know that serendipitous Discovery and in some of those things that are really hard to nail 100%.

Jason:
[34:07] I was going to say I don’t know that you’d call these different kinds of marketplaces or not but two that are coming up a lot and my conversations so I’m starting to have a lot of what I’ve been calling B2B marketplaces.
A business that usually is the manufacturer of a product that historically did not sell that product to direct direct to their there.
In business user that they had a an intermediary distribution Channel and so is the world is gone from physical to digital and they stop taking fax orders and move to a website.
They still don’t want to cut out their distribution channel so.
Traffic for the product is going to the brand manufacturer But ultimately the brand manufacturer wants.
One of their value-added resellers are there Distributors are there dealers or whatever their framework is to be the person that sells that product and so.
Marketplaces a perfect solution.
For that so I’m trying to see a lot of businesses like she would Packard Enterprise where you know one about the servers at hpe. Calm and then by the server from.
A bar that’s essentially a seller on hewlett-packard’s Marketplace.

Scot:
[35:25] Absolutely yes so this is where we can I take this Marketplace concept and most people think of it and I should I saw an Amazon or not it’s kind of like they’re big Marketplace question
but if we turn it on if we turn it 90 degrees how can you use marketplaces to make your business better so so using it as a way to using a Marketplace as a way to
you know navigate Channel
conflicts is one opportunity another one that we see a lot of and it is kind of what you see with the targets and Walmarts in the world is
exploding Out product selection so let’s say,
you not like to argue about the away suitcases for example so it’s always built this really great audience of Travelers and if they want to really explode out there skus
sure they can go to the old school way of of kind of building a bunch of them themselves but what if what if they just want to
you have some recommended products that work well like maybe some Bose headphones or something like that for travelers or.

[36:22] Hello I’m selling that they probably wouldn’t build they can go to that old school way of going and sourcing people to EDI and all the stuff
or would it be more effective to effectively just kind of hanging a travel Marketplace off of their website so it’s another thing that’s kind of interesting is you know and then.
And you don’t have to again when it when you bring that up a lot of people like oh you know I don’t want people to buy toys from my thing you can you can
because you can control this you can control the rules of engagement right so even in your B2B example A lot of people will say why don’t want.

[36:56] Tell her one and tell her to compete with its that’s fine you don’t have to.
Marketplaces that. Just have one seller and maybe it’s by geography whatever the Rules of Engagement are of your Marketplace
it have there but what you’re doing is you’re part of that that ethos of the Ring a Marketplace is.
Everyone having a great user experience giving the seller tools to manage things on their selves versus you as a company taking on all the ownership of that management of things so it’s a much better shared responsibility
and your supplier will be happier when when they have cell service tools cuz they can make a bunch of decisions themselves versus you kind of forcing them on them within the Rules of Engagement.

Jason:
[37:40] That’s why make sense the other use case that’s come up a lot I don’t know if it’s just.
Accord have timing or there’s a lot of these these these kids is out there but is a Marketplace solving a regulatory problem and so by that what I mean is the automotive industry for example
like in most cases the manufacturer is not allowed to sell the cars to a consumer so a manufacturer makes the car.
A dealer has to sell the car to a consumer and so even one of the solutions there is at the manufacturer’s website via Marketplace and have the Dealer’s be.
Sellers on that Marketplace and in much the same vein is illegal for the the alcohol product.
Creator to sell the alcohol to a consumer so drizly one of the most popular alcohol delivery services.
Is really just another Marketplace you know they’re they’re not the seller of record selling alcohol and having to deal navigate all the.
The issues with alcohol licenses in distributor licenses versus dealer license is there a market place and they allow.
Retailers that have a retail distribution alcohol license to sell on their Marketplace.

Scot:
[38:54] Yeah and you can imagine you know what’s used automobile dealership because it’s kind of near and dear to my heart
you know you can imagine will who gets the lead well let’s say you’re in you look like our region of Raleigh-Durham there’s like four Toyota dealers within like a kite area
well now it now you can use those Rules of Engagement to create the right Behavior so you can say who gets the highest scores on there
their service department whose sales reps get the highest NPS scores and you can kind of
change the the flow of leads are our sales into the the dealership based on these kinds of Rules of Engagement and drive the behaviors you want so
you maybe have a bunch of dealer saying that vehicles in stock and they don’t suit so there’s all out of stock in the stock thing a lot of the same kind of things we we see in the world.
I guess cars are product but they can have in the widget world could be applied to the vehicle thing or or.
Or even alcohol which alcohol store gets the order could be based on you know.

[39:58] How update are you on this then you can start to create all these interesting new monetization mechanisms you know like
you know the dealers made us an ad platform you could learn them so that’s another one of things we’re going to talk about the second is is this is interesting way to layer in advertising into marketplaces in and have a whole nother layer of
you know self management in letting giving the marketplace seller participants pools to let them hash it out figure out what the right thing is for the consumers.

[40:30] So then so the two biggest Trends in marketplaces that were seeing kind of here around 2019 I talked about
reduction of friction so so we’re seeing people trying to do that in Social and a lot of times what we’re doing is we’re bringing the transaction up
right so let’s use Instagram as an example so you see this exciting new shoe on Instagram now you go to Shalom some shoe site and then you have to login create a thing you know all that stuff,
and then re-enter all your payment details so bad by pulling it up and getting getting a bunch of clicks it’s going to make it better for everybody
that’s whatever it’s got going for the Holy Grail and as you mentioned has worked in China but not the US ship was in that vein Google has been chewing away at this for a long time and their own kind of version 4 or 5 of this on the latest iteration is Google shopping actions
and that’s where you do a search for something and you’ll see this little icon and that effectively you can buy now right from the Google ad on your mobile device
I believe this is Android only right now but where are you know,
again. Lozier child as a partner in the sand I think we’re seeing some really good traction from folks that are in this program because you can imagine
you know you go from a
you all right I didn’t add I got to click then I had to have a converging and all that good stuff to now I had an ad and I got to convert so you take all these steps out of there it’s going to
be better.

Jason:
[41:59] Just less friction between the purchase intent and the purchase.

Scot:
[42:02] Yeah.
Yeah and you know what’s interesting is the travel industry is ahead of us in the e-commerce world so Google travel has you can buy a ton of stuff right from Google travel and I think they’re taking a bunch of learning as they’ve got there
I’m weird that song Like a Virgin 600 and they’re bringing it over into the product world so so I think you know with all the Google smarts going on and they seem pretty committed to
this all the way up to company so so that’s why I want to keep an eye on
and it would be a Jason’s not sure if we did talk more about Amazon sew in April this year Amazon announced one day Prime so you’re just when everyone thought that they could kind of catch up to 2-day Prime now there’s one day Prime and
you know I seen data that shows increasing late that day since April they’ve really been dramatically delivering on this and ramping up their delivery program kind of in in front of holiday
so it’s something like,
about half of the products now Prime eligible products are also eligible for one day Prime so so I think my holiday next year will have you know almost.
All prime deliveries will be 1-day except for certain regions like Wyoming or something.

[43:11] Another big Trend in marketplaces is this ad Marketplace hybridization and Ali Baba was way out in front of this show
so taobao for example almost all the revenue on taobao comes from ads because
that’s a person-to-person Marketplace and they’re not collecting at a crate a really is is they make all the money from ads say to bestie mad
Mormon put in tea malt in about half the revenue and tmall is from a transaction fee in the other half is from an ad
you have to do is we have to be careful is just when you throw ads in there it can do no do spam right cuz a lot of times the person that can spend the most on an dad.

[43:49] Actually may have the worst product offer for consumers because they’ve got the most margin to spin on a Stanley add Amazon is very clever way around this is you have to own the buy box which means you got a great value
then you can do an ad so then as we talked the Amazon ad functionality is a
exploded a bus for vendor Central and Seller Central in overwhelmingly a large percentage of the pixels on the screen are sponsored or advertising.
So that has been a huge Trend and now we’ve seen Walmart replicate that and I think you’re going to see a lot of other people look at this marriage of ads and marketplaces
makes it hard as a vendor in this world be at 1 P r3p or even hybrid cuz now you got all these.
Just give you this whole nother set of levers should I reduce the price on my product and nickel or should I spend more on Advertising
is it really how much of its accretive like
truly additional and how much of it isn’t so that you know you’re still a lot of thinking going on around there and I’m sure you guys think a lot about that as well.

[44:54] Set and then also you kind of brings crashing into the world all the agency guys now and product guys are like hey what are you guys doing here go
do some TV ads or whatever it is you guys do so it’s really interesting that that that intersections causing a lot of friction and and a lot of resetting and Mini Market Place examples back to
you’re thinking well I thought I knew it all I was on this Marketplace let me rethink that figure out how how do I leverage this advertising piece and how do I think about the ROI on that.
I always keep an eye out side the World Of Products on marketplaces to see what’s going on there’s a lot of really interesting things they are going going down one of the biggest ones is
you know for a long time investors love these kind of zero asset marketplaces so eBay 0ass at Marketplace it’s a bunch of people in San Jose just kind of guiding the marketplace and all the buyers and sellers.

[45:46] Get involved with the company Amazon is more full stack because they do get involved at the 1p Parton to get involved in the shipping,
that’s a big Trend so as companies have started to try to have a better customer experience they are they’re going deeper.
Classic example you a lot about is in the real estate industry so in the early days you had Zillow and Trulia those two companies.
Merged and
you know they would essentially they’re kind of a lead Marketplace for realtors then accompany kind of came out and said you know if we if we did really good data analytics and we just bought the houses for kind of
turn to 20% below market and then flipped him very quickly we can have a much higher take rate so the average take rate in a real estate market place is like 10% but these guys have like at 33%.
Take right now. That’s one that’s kind of the the bullish example the bearish or negative example would be
by really loading up on a lot of real estate if there’s a recession you know who’s going to be the last person kind of in the musical chairs there so it’s so that it remains to be seen what’s going on there we work gets pulled into this because I effectively kind of.

[46:59] Kringle market place where they go and take long-term leases and then they’re kind of real estate Marketplace inside of that lease
Airbnb is a great Marketplace for vacations and where you want to stay there going why it is so there is trying to put together unique experiences that kind of say
all right you know you you want to have a fun family outing we’re going to put you in a treehouse and along with that Randy horse riding and and and that kind of thing.
Last one I’ll point out is this is where Uber and Lyft are doing some interesting things and this is anchoring around the customer and they’re saying my customer wants transportation
and they came to me for cars what other Transportation can I give them so it’s this is called multimodal in the transportation world so they’ll say all right Jason you want to get from this location in Chicago
2 and location in New York you’re going to scooter from here to the subject of the what he got caught the L
I’m here in Chicago and that’s going to take you to the airport and then that’s going to take a New York and then we’re going to have Lyft pick you up and take you from point A to point B I’m in and maybe in there you’ll you’ll ride
other
mix mixes of Transportation so so taking the consumer and trying to grab more of their journey is a really interesting kind of thing and then that world you call it multimodality
I’m so kind of fun to Think Through what else can we do in their product world for people around this stuff you know if are there signals that we get from these products where we could tie in.

[48:26] Maybe a trip somewhere or travel or who knows what else we could try in there.

Jason:
[48:31] Even just like that installation services and stuff that you see marketplaces like Amazon start to bundle with sales feels like a a permutation of that.

Scot:
[48:41] Yeah and then the last one if you if you are interested in learning more there’s a lot more material out there about marketplaces when I remember it was kind of lonely in 2001 being the guy screaming it
top of Mount about marketplaces but now the good news is there’s a lot more content out there one of the best ones is
they’re Dilaudid PCS that that it really almost got Focus to the exclusivity on marketplaces one of the biggest ones that that loves marketplaces is Andreessen Horowitz.
Search Marc Andreessen founder of Mozilla and Firefox and then his partner Ben Horowitz It’s Kind of a Funny Thing.

[49:26] You eat your so the word internationalization has would like 18 character says i18n
so use that same saying Andreessen Horowitz there’s 16-character so I think it’s a16z
I’m so you go to a16z they have a lot of really good content around marketplaces
the two folks that really publish a lot there or Jeff Jordan and he was the CEO of eBay and PayPal for a while and then he focuses a lot on marketplaces
and then they just recently brought in a guy Andrew Chen and he does a really good job of pontiff Hughes from Uber.
I’m in on their growth team so so a lot of really good content there and when you go you may say Scott’s crazy while I think about this but you have to kind of connect the dots and think
all right.
I have a certain business problem in your B2B examples a good one could I use a Marketplace here in a different way that I’m thinking about marketplaces which is the normal should I sell on eBay or Amazon,
so a lot of interesting
some of this content is how do you solve that two-sided problem of building two things you know how do you how do you fake Demand on one side how do you fix a play on the other there’s a lot of really interesting he said he’s now in conton out there so
what will link to their their blog a landing page and then they also have some good Twitter feeds that willing to in the show.

[50:42] So we’re getting tight on time so hopefully that gives you a good feeling for marketplaces and some of the different flavors out there and what’s going on in the product Market Place world.
Some action items so you know if you really
one thing I wanted to One Last Train I want to talk about is this is kind of in that category of things becoming marketplaces you wouldn’t think,
this is maybe even a little bit early prediction for for our prediction show Shopify is an e-commerce platform press and bees and they just recently announced that they’re building their own FBA like shipping capability well
you know one thing.
Shopify lakhs to be a Marketplace is a unified or four people come in and say I want to shop amongst all the Shopify Merchants so so for me that’s really interesting one where you know I think we’re going to see
Things become marketplaces you would have never guessed someone Shopify does it does it then why wouldn’t Salesforce all the platform companies you’re having this kind of vinaigrette interesting
interesting way of taking on Amazon by having a unique shop amongst my Merchants kind of a capability I think we’re going to see a lot of.

[51:52] Innovation in the next 5 years around that I action items to thanks for making it this far so
I’m a big believer that you have to really Embrace these marketplaces they’re not for everybody but in the in the kind of the obvious use case figuring out how to sell on them should you sell on them
if you’re if you’re not going to you’re going to miss kind of half the opportunity out there.
Another one is everyone is very siloed and I think about advertising in one bucket and then where to sell your products in another those worlds are colliding you need to have kind of that capability integrated on your side
the the table Stakes of convenience of getting your products out there are very high so you need to be able to partner with someone to help you with those delivery times.
The good news is because Amazon’s raise the bar
a lot of people I’ve talked to said why I went to a 3pl and you know it was like five days and three times as expensive or more
Partners out there that can do this I mention Shopify Zone Network.
FedEx UPS Wise Guys now have programs that are very Amazon FBA asked not only in their cost but in their service levels.

[53:09] You know you can’t say enough about data quality we we we we just talked about personalization earlier and and.
The Venn diagram of data quality overlaps for pretty much everything on site merchandising.
Yeah that is the one topic you see people don’t invest enough in product data so so that’s one of those things you get kind of 10x when when he invested really rich product data the same shoe for marketplaces cuz you’re going to want to go to sell on Amazon or build your own Marketplace
and you’re not going to have the right taxonomy and way to do this
this is a whole new way of thinking about things so there’s a whole new set of measuring and kpi is to develop their and then the last one we talked a little bit about this is consider applying a Marketplace to a part of your business that that’s not
maybe immediately obvious could have been offline thing you do could it be a way of dealing with suppliers in a much more efficient self-service type way this more scalable and then has some yo.
Add-on benefits that that you wouldn’t get if you just kind of did it the old school way.
Should you have your own third-party Marketplace there’s a variety of vendors out there now that will help you set up a Marketplace so they can plug into most of the platforms the one we’ve talked about on the show before is Miracle they just raised a pretty sizable around 6 to $89
you were smooching there’s a couple other than yours out there.

Jason:
[54:31] Miracle is I think I’ve is sort of the original enterprise-class solution and it’s it’s spelled peculiarly for her listeners that I’ve heard it before it’s a m i r a k l which I’m sure they thought was cute but it’s kind of been.
Yeah yeah and in fact it was the French version of best by fnac that these guys wrote an internal Market play software for.
And I thought oh my God like other people need this besides fnac we should turn this into a product until it’s either so that’s how a miracle was born from.
From a fnac but we have not seen a platform.
Have native Marketplace functionality yet which is interesting like you you might expect that to come but we have a miracle has done enough traction and with the fundraising we seeing the number of.
Newer competitors emerge that can be sort of a plug-in Marketplace like miracle and so one that I’ve seen in the US a lot recently is one called marketplacer.
Which I understand is started out as a European provider in and there are some small or ones that I personally know less about but I do see in the marketplace there’s one called near me.
There’s one called Iceberg there and then when I seen a number of times it’s called arcadier and some of these are.

[55:55] Flea product I solution some of these are code bases that you can use to add to sort of cells maintain platforms like Magento in a few of them I think are even plugins that are available in the Shopify App Store so you can kind of.
Pretty easily add them to your to your existing Shopify installation and then kokorico is the funnest one to say.

Scot:
[56:18] Coco Rico.

Jason:
[56:21] I don’t either but it’s it is another one of these like a startup software service mark.

Scot:
[56:28] Did you have any other action items for folks on marketplaces that you’ve seen out there.

Jason:
[56:32] No I do I think your advice not to overlook.
The customer experience elements that it’s not just about the offer in the customer I think it is very relevant because I feel like a lot of the.
The marketplaces that we’ve seen not succeed and not every Marketplace in the US has succeeded.
It feels like it often comes down to that customer experience at execution until I I I certainly.
I’m sort of agree with with that point but yeah that sounds like a great west of action item.

Scot:
[57:09] And with that we are we hope you’ve enjoyed this deep dive on marketplaces.

Jason:
[57:14] And as always if you have further questions especially hard questions for Scott then I highly encourage you to visit us on our Facebook page or hit us up on Twitter.
We’ll try to stump Scott on the marketplace questions I’m if you have any easy questions I’d be happy to weigh in on them as well.
And of course if this show added value we sure would appreciate it if you’d get on iTunes and give us that five star review iTunes being another example of a Marketplace.
Until next time happy commercing.

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