In the early stages of a marketplace, should you focus more on supply or demand?

Edited excerpt from How to seed your marketplace by Boris Wertz:

The earliest days in a marketplace are a tricky time. There’s a chicken and egg problem when it comes to supply and demand: customers need supply, and suppliers need customers. But it’s nearly impossible to ramp up supply and demand in lock step.

We’ve found that in most cases it’s best to focus on building up the supply first. That’s because there’s more incentive for a seller to invest their time in the early days. There’s zero motivation for customers to stick around without any inventory.

So how to you go about seeding supply? There are four common strategies:
1. Identify unique inventory for which the sellers have no current marketplace
2. Convince existing inventory to list on your platform
3. Pay for inventory
4. Aggregate readily accessible inventory

(1) I think this only holds if the cost to suppliers of appearing in your marketplace is low, for example if they can sell the same merchandise through other channels as well. If, in contrast, you require exclusivity from suppliers, then you’d better deliver sales to them by nailing the demand side.
(2) Cf. How marketplaces can build a competitive moat.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s