6 Smart Tips for Expanding Your Marketplace

By Gautham Iyer, Industry Expansion Lead at Kinnek

Expand your Horizons

At Kinnek, we’re looking to be the definitive marketplace for small to medium sized business purchasing across multiple industries. We aim to offer everything SMBs need to launch, operate, and grow. It’s a goal that has allowed us to successfully launch into 14 markets over 3 years. As we’ve grown and continue to expand, we’ve learned some lessons about marketplace expansion along the way.

If your goal is to grow your marketplace from a local operation to an Amazon, eBay or even a Wal-Mart, the key is expansion. However, in order for a marketplace to succeed at expansion, it needs to scale and it needs to scale smartly. Below are the six ways to think smarter about your company’s expansion:

#1: Grow your Core First

The first real test of a marketplace is its ability to acquire customers, have liquidity for the items you offer, get customers to return, and deliver broader value through the uniqueness of the platform itself for any core industry.

Rome wasn’t built in a day, and neither was Amazon.com — the online e-commerce giant stuck to books for 3 years after its 1995 launch before dabbling in other categories (CDs, toys), and then aggressively launching into other categories in 1999. Before expanding to other segments, it’s crucial to focus on your core industry, learn from your mistakes early on, and hone the critical aspects of your marketplace. Other industries will obviously differ to a degree, but the only way to effectively scale is for 80% of your platform to work for any industry you select, while the remaining 20% of the platform and operations adapt from that industry. Basically, you need to get that “80%” right before expanding.

#2: Know Your Marketplace Suppliers

It’s possible to expand to new industries without lifting a finger if you know the supplier side of your marketplace well enough. Knowing your suppliers means you will be aware of other products or services beyond their main business.

For example, a marketplace like TaskRabbit had a network of individuals who could supply manual services. As they expanded, it became clear some of the existing individuals could also provide more specialized services and had already been qualified. This extra service provided built in liquidity for new categories with minimal effort. By knowing your suppliers very well, you can tap into these hidden liquidity sources in order to quickly capture new industries.

#3: Know Your Marketplace Buyers

On the other side of the marketplace, your buyers are a crucial source of guidance on where to expand as their requests indicate built in demand for new items. You can use various tools to determine demand for new items including calls, surveys and internal data analysis, but whatever you do, leverage your buyers as they’re already working with you for a reason, and they’re likely to buy even more from you if you offer what they need. In its early days, eBay was willing to allow for a variety of less common, “long-tail” items to be auctioned on its platform outside of its core collectibles market because its buyers were willing to purchase them. In doing so, it was able to test and explore new channels for growth, including the unexpected such as automotives.

#4: Let Your Current Product Base Work For You

Once again, looking to your own existing marketplace will allow you to discover new channels by using your current offerings to capture buyers outside your core industry. West Coast startup EatClub originally focused on providing meals to individual employees as customers, but when it started to see demand from their employers as well on a company level, it further expanded to tap into a catering/restaurant network to better service this new bulk order channel.

#5: Expanding Into Completely New Industries Is a Gamble

There’s no easy answer to the question of whether expansion to a completely new industry or product is the right way to go. EBay’s acquisition and incorporation of PayPal, though distinct from its auction model, was a clear complement to its marketplace and increased customer retention. Ultimately, this new industry was a huge success. Meanwhile, if you consider Uber’s expansions outside of its Western markets as entirely new, the road is a little rockier. The Chinese market in particular has proven incredibly challenging for them to succeed as a result of both government as well as competitive pressures related to the market. Should they have expanded there? Time will tell, but any smart marketplace should be aware of ALL the risks associated with an entirely new expansion. If you are going to take a gamble, make sure it is an informed one.

#6: If It Doesn’t Fit, You Must Quit

Sometimes expansion into a particular industry was a stretch too far for various reasons: a market you thought was growing starts contracting; the landscape of buyers or suppliers consolidates and unfavorably shifts industry dynamics; unexpected regulations completely disrupt the market and create obstacles to your model; there are a plethora of reasons. Any of these things are possible, and you need to be aware of them as they’re happening. Like Uber and Lyft in Austin, if the odds aren’t in your favor at this time, and you’re burning money, it may be time to withdraw (at least temporarily).

What all of these tips have in common is simple: do your research. Knowing your market, supplier, buyer, and products inside and out will lead you to the expansion potential of your marketplace. Similarly, when moving into any new industry, be informed about every single piece of the landscape — and be flexible enough to pivot or pull back whenever necessary.

Gautham Iyer is the Industry Expansion Lead at Kinnek.

He has an MBA from the MIT Sloan School, MA in Economics from Boston University, and a BS/BA in Electrical Engineering and Economics from the University of Michigan.

Gautham is excited to identify new opportunities for the marketplace and ensure the platform is able to scale up to effectively meet the needs of new customers and suppliers.