Collaborative marketplaces are fascinating. Social interactions and transactions have been limited to personal and geographically limited networks for hundreds of years. Modern communication and global social networks now enable even large communities and complete strangers to cooperate and mutually benefit from each other nationally and internationally. Seeing our society being brought together and synchronized like a busy bee hive is certainly part of the fascination of the collaborative consumption movement.
An altruistic vision alone is unlikely to feed you
Sharing a vision and being obsessed with a concept is certainly important to build a business, however in order to build a sustainable business, it is more important to have an actual market. No matter which business guru you follow and which books you read – it always boils down to the key question: “Who is your customer and for what product are they willing to pay x amount of money?”
A purely altruistic vision of saving the world, being sustainable and simply fascinating is nice, but will not feed you or any other employee. If you don’t want to be dependent on generous foundations all your life and waste your valuable time fundraising every day of the year for a good cause, then it is better to start understanding how you can deliver value beyond being the most rational, socially intriguing and resourceful choice.
“But everyone is my customer”
Especially with collaborative marketplaces it can be tough to narrow down your customer group. Isn’t everyone supposed to be your customer?
Yes, the goal is to have everyone using your product in a couple of years, this should remain your vision. But it is always easier to start focusing on a geographically closed and well defined community, to reduce the complexities in finding, talking to and supporting your customer that you will face when running your business. It is time to focus on a limited use case to make your life a hell lot easier.
B2B or B2C?
While thinking how to narrow down your target group, you might also consider whether you want to provide a B2B, B2C or C2C service. Here I want to share some of the experiences that friends and I have made in the world of collaborative marketplaces while figuring out our markets.
B2B and B2C look great from the outside. Businesses are economically driven, have many regular transactions and embrace innovation and sustainable business practices. The decision makers want to be more resourceful and efficient and every cent they save gives them an advantage over their competition, so also your disruptive ideas might be beneficial. The B2B or B2C market is most certainly much bigger than the C2C market, so that you could establish a viable business in this space. Also, most businesses have a sustainability report today or actively want to build a more innovative or sustainable brand. All of these aspects definitely make it interesting to look at B2B or B2C transactions.
However it is of utmost importance that you are familiar with the common industry practices. Get an overview of the market by talking to 20-50 businesses. How do they do what you want to offer today? Who do they buy it from and how much are they paying? How do they choose from who to buy the product and what are the key criteria for their choice? Is there something they can’t do today, which you could provide? (Simply follow the Four steps to the Epiphany here…)
Hurdles of B2B or B2C as entry markets
From my personal experience, B2B or B2C services have great potential, but are often not a suitable target entry market because of the inherent uncertainty in marketplaces and the high established industry standards.
There is a lot of uncertainty in new collaborative marketplaces, which makes them unsuitable for businesses at an early stage. Collaborative marketplaces bring multiple parties together to cooperate, this gets messy quickly and introduces multiple points of failure and many questions. Who will the customer be, will they be reliable, trustworthy, on time? What happens if anything goes wrong with the transaction? Who will be paying for the lost time or revenue? Or even worse, what if the business loses a customer because of one bad transaction you facilitated. All these uncertainties are too risky for businesses, because every step is business critical. Especially if steps are business critical the decision process will take longer, businesses can be quite inert. As long as you cannot guarantee a certain level of service it might be extremely tough or impossible to establish business relations and compete with existing proven services. So be prepared to answer those questions in your chosen niche market.
Also the industry service standards might go far beyond the service you can offer at the beginning. Industry standards might be to offer complementary insurance, real time tracking of a transaction or direct integration into business software. Being able to offer all of this needs a lot of business expertise and time to implement. So, probably your first customer will not be the industry leader, but smaller companies which are again harder to find and sell to.
C2C as a way to start
In my opinion, C2C is the best way forward for collaborative marketplaces to start. If you are a rental platform, marketplace for transportation or other, it will be easier to establish an acceptable level of service for C2C transactions. It is a way to experiment with your customer, prove your business, learn and grow and prepare for an expansion into the more professional B2C or B2B space.
Of course these are only subjective impressions from my own experiences in setting up peer to peer deliveries and transports. Not everything might apply to your chosen market and I am sure there are exceptions where businesses are very willing to use collaborative marketplaces early on as an additional stream to target customers.