The “taxonomy-driven marketplace”
In May 2015, after 18 months of analysis and testing, La Belle Assiette released a new version of its platform. This marked the first step of our new strategy : building a “taxonomy-driven marketplace”.
Before we get started, “taxonomy” is the practice of classification of things, including the principles that underlie such classification. For example, for a service provided by thousands of different suppliers who all have different ways of operating, the taxonomy process will classify the different procedures, quality levels, prices and describe all the underlying principles.
The aim of this post is to explain what the “taxonomy-driven marketplace” model is. The model can help entrepreneurs create marketplaces for chaotic industries — where a highly fragmented supplier base offer multiple products or services, at variable quality standards, to a demand that is volatile and infrequent. The model creates order out of chaos.
Note : it is fair to say that I have not invented anything here and that other marketplaces are using similar structures. However, I believe that by formalising the model, it can easily be applied to other verticals and that other entrepreneurs with similar challenges may find some solutions.
A brief marketplace history
But that wasn’t enough for online marketplaces (or consumers). They wanted more! They started moving up the value-chain. Instead of simply connecting historic suppliers (hotels, takeaways, restaurants) to consumers, they created new kinds of suppliers. Airbnb for hospitality, Uber for transport, Drivy for car rentals. This would disrupt the distribution models of entire industries.
This recent trend has enabled marketplaces to become players in industries, not just facilitators. They no longer just enabled the operations of the industry, they became competitors to historic players. For example, Airbnb will soon be booking more rooms than the world’s largest hotel chains.
With this move, marketplaces became brands. Users book “a Uber”, not “driver xyz through Uber”. This created fantastic value for marketplaces. It also launched a new trend in marketplaces. Suddenly, entrepreneurs started building the “Uber for x” (or the “on-demand economy”). If Uber had done it for transport, why not replicate the model for other verticals? So we got Ubers for doctors, massages, weed delivery etc.
However, the “Uber for x” model does not work for all industries. The first casualties appeared in 2015, such as HomeJoy. It requires specific supply and demand conditions, as we will see below.
This left no choice for marketplaces, they had to continue innovating and create a new model for those industries. This was the case for La Belle Assiette, which is operating in the catering industry.
Marketplace models are industry-specific
When you map out demand and supply dynamics for existing marketplaces you start noticing patterns:
- In industries when consumers spend at low frequencies (so not very often), such as hotels or car rentals, and where a marketplace really facilitates things (it is much easier to find a product on ebay, a flat of Airbnb etc…), it is possible to create traditional marketplaces where consumers and suppliers meet and then transact.
- In industries where consumers spend at very high frequencies (taxis, weed (?)) and where there isn’t the risk of a consumer attachment to a specific supplier (like your favourite cleaner for Homejoy), it is possible to create an on-demand model. But users will require the marketplace to handle all the supplier curation and trust.
- In industries where consumers spend at medium frequencies (takeaway delivery), marketplaces can operate traditionally (like Just-Eat) with low commission rates, or bring new features/value to the market and take higher commission (like Deliveroo).
This implies that your marketplace model needs to be industry adjusted. Simply put, you cannot just copy Airbnb or Uber for another industry. However, I believe there will be a marketplace for all industries, entrepreneurs just need to continue innovating to find the right fit for their industry.
The “Taxonomy-driven marketplace” model
We saw that marketplace models need to be adjusted to industries. But what happens for industries where supply and demand dynamics are not as extreme as those listed above, where the solution isn’t as clear?
I’ll take the example of La Belle Assiette and walk you through how we came up with a possible solution, the “taxonomy-driven marketplace”.
We are operating in the catering industry. Here are some of its dynamics:
- It is a large industry ($14bn in the U.S.), where the average basket size is high.
- Demand can vary from medium to low frequency, depending on the service (private chef, receptions, buffets, fresh meal deliveries etc…).
- Supply isn’t consistent. Each chef/caterer has their way of doing things.
- There are a lot of suppliers, it is very fragmented.
- Consumers require strong curation. You are dealing with food and high average baskets, consumers want 100% trust that the supplier is good.
- But consumers also want to interact with the supplier, they value who he is. You cannot entirely “hide” the chef/caterer behind an on-demand model.
A Traditional marketplace?
Historically (that’s a big word for 2.5 years…), La Belle Assiette had positioned itself as a traditional marketplace — an intermediary for booking a catering service provided by a freelance chef. A user would run through list of chefs, start conversations with them and maybe book a service.
However, as each chef had his/her own ways of doing things, the user experience was problematic. It was tough for a user to find the service they were looking for. La Belle Assiette helped with strong supplier curation (only good chefs had access to the platform), but that only got a user so far.
The platform was not creating enough value for users. The traditional marketplace model wasn’t a perfect fit for this industry.
La Belle Assiette needed to create order out of chaos. Catering is a very fragmented market, with individual freelance players who all share patterns (they cook and serve food) but none of those are codified (they all do it differently and at various prices).
To solve this problem, to create a more consistent user experience, the company analysed the on-demand model. This is the model used by Uber for transport, Instacart for grocery delivery, Stat for medical care. The company just sells a service that it designed, with one way of doing it. It then requires on freelance suppliers to execute, following the company’s procedures.
In La Belle Assiette’s case, the on-demand model would bring the codification of complicated services. La Belle Assiette would be designing its own catering experiences (prices, menus, features, procedures), it would sell these services online and after a booking is made, ask chefs to execute it following the company’s design/procedures.
For example, the design of La Belle Assiette’s core service (private chef dining) with an on demand model is:
- La Belle Assiette designs 2 or 3 menus every week
- A user pays for a menu
- A random chef is picked, wears La Belle Assiette’s gear, uses La Belle Assiette’s equipment, arrives 1 hour before guests, greets guests with a pre-defined welcome message, cooks the La Belle Assiette menu, leaves at a pre-defined hour etc…
This solved the user experience problem. Everything is codified so La Belle Assiette can describe precisely to users what their service is.
But would the on-demand model really work for La Belle Assiette ? As we saw above, on-demand models:
- rely on having a high frequency purchasing rate by users, keeping the supply busy fulltime, they are almost employees of the company
- don’t keep the suppliers very engaged and creative.
Both are problems for the catering industry. Consumers are not going to book a catering service every evening (yet… give the market some time☺), so it is very hard to keep suppliers busy all the time. And one of the USPs is that chefs are cooking their own menu, that is what makes it delicious and scalable, you don’t need to train the chefs on new menus.
On-demand helps with the codification of the experience, which is necessary for La Belle Assiette, but doesn’t fit perfectly for the catering industry. Back to work…
La Belle Assiette needed to maintain the two advantages fo the on-demand model: user experience consistency and quality control. With this in mind, it created the “taxonomy-driven marketplace” model.
Think of it as “the on-demand economy” having a baby with “vertical marketplaces” like Etsy. It looks like this:
Here’s how it works in theory / for La Belle Assiette :
- The marketplace can offer several services (represented in yellow) / For La Belle Assiette, those are different catering services (private chef, buffet, canapés…).
- For a given service, the marketplace defines several levels / We have 4 levels (Casual, Temptation, Prestige, Signature)
- For each level, the marketplaces defines a price / For the private chef Service, Casual LoS is 35€/pers, Temptation LoS is 49€/pers etc…
- For each level, the marketplace defines a set of features and procedures that suppliers must follow / A Temptation experience must have 3 courses, basic ingredients, the chef arrives 30 minutes before guests, they wear our gear. A Signature experience has 6+ courses, expensive ingredients, a waiter, bread included, chef arrives 2 hours early
- The marketplace allocates suppliers to a level depending on the quality they can provide, after having vetted that itself / We test all our chefs (and will do so continuously) and allocate them to one level of service
- The supplier then can create their offer for the service and level (and therefore price) the marketplace authorised. Market competition is based on client reviews and their offer, not price / Chefs fill the menu templates for their allocated levels
As a result, La Belle Assiette is no longer a “traditional open marketplace”, but is not an “on-demand service” either. It is a “taxonomy-driven marketplace”.
- It offers several well defined and designed services. As a user, you know exactly what you are buying.
- It has 4 levels for each service. Within a given level, you are guaranteed a consistent price, quality and experience.
- Suppliers (chefs) maintain their creativity. Their menus are unique, but were built within the boundaries of the procedures we require them to follow and the price points we authorised.
Taxonomy is the practice and science of classification of things or concepts, including the principles that underlie such classification. That’s exactly what we’re doing. We have a great supply (chefs) that can offer many services. We define the principles of classification (price, procedures, quality) and then organize it. We design the experience and make sure it is consistent, but the chef’s creativity remains, they choose what to offer for a given price. That’s why we’re calling this model a “Taxonomy-driven marketplace”.
I believe the “taxonomy-driven marketplace” is a model that can be applied to many other industries. Creating one requires talented teams for service design, market analysis, supply acquisition/curation and marketing, on top of great engineers. But if you know what you’re doing, know how to design and price appealing services for users, know how to build and control supply, this model is scalable.
Final note : as mentioned above, I am probably not inventing anything here. This formalisation helped us adjust our product over the past months and understand how we could address a very large market, with a marketplace. It may help others too!
Thanks to : Marion Guériot, Alex Terrien, Guillaume Flandre, Astrid Laplanche and Laurent Sachs for their input and proof-reading.