How some platforms are slowly losing the game?

My recent experience with an online marketplace (I should not name) turned a bit sour after about 6 weeks of trying them out. I was excited to have found them on Google search and quickly posted my first job with them (and Yes I did not read the small print).

I needed to move house and was seeking quotes from removal companies. A quick Google search provided me with a list of removal companies in my area. I was visiting their websites, checking prices and leaving messages for quotes which was time consuming. A marketplace purpose built for jobs like these was exactly what I needed.

I signed up with the platform (as consumer) almost as soon as I found their website. The registration process was quick and impressive. Within a few minutes I was signed up, email verified and other identity document details posted to them and viola I was a verified user. Wow! they also had a chat window right on the dashboard for any questions I had.

I did not use the chat then but felt really good about the whole experience. Posting my first job was real easy; just describe your job, submit your collection and delivery address details, complete the inventory and the quotes start flying back almost as soon as you publish your job.

It was all fantastic experience but things started going south for me from the point I accepted the lowest quote. The removal guys came on the day, walked in our flat and started counting the boxes we had already packed. He then explained that the work will take 2 more men and will cost me 3 times the original quote. I had to cancel the job.

After my first experience I posted 4 other jobs but ended up with similar experience. One of the guy explained that they deliberately quote low and how it is win-win for them and me. Their offer get selected because they quote lowest (with a view to negotiate later) which is win for them and the job publisher pays less commission to the platform owner which is win for me. In most cases once the provider arrives, cancellation from the customer means no refund of the commission and in some cases the provider will still charge some money (for his time).

My relationship with this platform was only 6 weeks long and none of my jobs were completed during this time. I finally quit the platform.

I then sat down thinking what does it really mean for the platform playing the role of facilitator for these transactions? Is this causing negative network effects that may eventually kill the platform? Does the founders even know this is happening? What can they do to prevent the negative impact?

In my case the platform has failed to match my requirement with a genuine provider every single time. I did not get the value I expected from the platform. The providers are not providing realistic quotes, not interacting with the consumer before committing for the job. Consumers end up losing money at the end or pay extra if they are desperate to get the work done. This will result into negative network effects as consumers will start to quit the platform and with less consumers the providers will have to compete even more decreasing the value factor which would lead to further churning. This problem if becomes rampant would eventually kill the platform.

Why is this happening?

The very nature of the interaction between the provider and the consumer requires the two participants to agree on terms before any work can be carried out. Providers need to actually look at the job that need done before they can provide an accurate quote. As a result the terms cannot be agreed on without the provider first looking at the job.

The providers then compete for getting the quote accepted knowing very well that the quotes would be renegotiated. This hurts the platform as the percentage cut to the platform is based on the quotes. Consumer experience is ruined as he loses the commission paid if he cancels the job or pays the extra that is asked on top of the quote.

What can the platform do?

The direct interactions weaken the ability of the platform to generate enough value and hence provides opportunity for the parties to close the deal off platform and avoid the transaction fee.

The strategy for the platform should be to capture and provide all the information necessary to agree on terms of the interaction on the platform itself. Mechanisms should be put in place to capture and provide metrics that indicate the reliability of a provider and the quote. A cap can be put on the percentage fluctuation that is allowed for the final quote to increase the trust. Consumers should be allowed to cancel and commission refunded. Providers should be incentivized for completing the job within the allowed fluctuation threshold. This would eventually build the consumers trust with the platform leading to more jobs published, accepted and completed.

What other strategies do you think the platform owners can implement to enhance the value offering for both providers and the consumers?

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