Why There Must Be a Technology Revolution in C2C Marketplaces
Have you considered how many new items are sold every single day worldwide?
Just to give you an idea — Amazon & Alibaba together ship around 20 bn new items per year. These two online giants are grains of sand on the beach of all new products sold offline and online, but they sell significantly more items than ALL private sellers do using ALL world C2C marketplaces/classifieds. We have roughly calculated the number of items on all classifieds in the world by taking into account the average per cent of items listed by private sellers and the average per cent of items sold.
Comparing the quadrillions of new items bought each year and the few billions of used items being sold, it seems on a scale of things, we don’t really sell anything used. We keep it.
Another way to look at the C2C used stuff market is to analyze how many people list anything on classifieds. You’ll be surprised. We were. It’s a mere 1.5% of the internet population monthly (in some countries a bit more; in some — less).
But the best way to feel it is to look at your own habits and the behavior of your family and friends.
I used to think my family was extremely minimalistic; my wife and I agreed to buy as few items as possible. But somehow we have ended up with a garage full of stuff we replaced at some point such as tables, sofas, and laptops. To be honest, I wear 5% of my closet. The rest is just hanging out collecting dust.
And we have two kids. They’ve got hundreds of dolls and ponies. We keep giving (and giving and giving) them away to other children, but somehow the girls’ room is always full of stuff they don’t use.
I’d bet most people behave more or less the same way; there is a reason there are 2523 books on Amazon about how to declutter your life.
It’s actually a big deal. There are also another 883 books on compulsive hoarding or hoarding disorder defined as an excessive acquisition and inability or unwillingness to discard large quantities of objects that cover the living areas of the home and cause significant distress or impairment. Up to 5% of adults suffer from this syndrome.
Our team is pretty sure there is something fundamentally wrong: tons of valuable stuff is languishing unused in garages and closets.
Frictionless C2C trade
People keep their stuff despite the fact that there is a well-known way of getting rid of it: online classifieds. Brand awareness of online classifieds in developed countries approaches 100% of the internet population. Why do only 1.5% of the people sell something on them?
Let’s be honest. It’s a hassle to sell something.
There is a thing in economics as “transaction costs.” This term was coined by economists in the last century. They pointed out that in order to carry out a market transaction, it is necessary to bear some costs: for finding a buyer, negotiating, inspecting a product, paying commissions and so on.
Lower transaction costs equals more efficient trade. Zero transaction costs equals a frictionless market, a theoretical trading environment where all costs and restraints associated with transactions are non-existent.
If you have a high-value item (like a car) which you don’t use, you are ready to bear quite high transaction costs: spend time, pay listing fee, etc. Lower value of an item — less transaction costs you are ready to bear.
What are the main transaction costs incurred in a C2C transaction?
1. You need to list an item and pay commission/fee at some point
2. Find a buyer/seller
3. Negotiate a deal
4. Make a payment
5. Deliver a product
Let’s imagine all of these are eliminated; you literally don’t need to do anything to sell all your unused stuff. Blink your eyes and the money lands on your credit card. I would do it in an instant! I guess I would get thousands of dollars for my unused stuff.
Wouldn’t you? I bet many people would.
Currently transaction costs you have to bear on existing classifieds products are too high for the majority of people to sell something.
Frictionless C2C trade is our ultimate goal at Lalafo.
How existing and new technology creates a frictionless selling experience
So let’s take a closer look at each barrier to find out how technology can significantly knock it down. Our dreams are becoming reality as we at Lalafo are working on some of the technology described below, and we’re pretty sure the other parts (like logistics products for C2C classifieds) will be addressed by the business community soon.
Listing an item
A few months ago, I sold a car in one day. But I had prepared for selling it at least for a month. I had postponed listing the car for several weeks. Why? Because readying an item for sale is serious business. You need to clean it up, take nice photos in good light, select listing categories and parameters, describe it, research prices etc. I honestly hated every second of it. Until the moment I got the money.
The same steps we need to take in order to sell my daughter’s toy. That’s why we don’t do sell them.
Very soon you won’t need to do most of these steps due to computer vision and NLP capabilities. Machines will define items better than humans both for standardized articles like my car and non-standardized pieces like my daughter’s no-brand ponies. Models, makes, colors, thousands other characteristics and features of a product you can’t describe with words will be available for your item in seconds.
Machine learned algorithms will suggest a price range for your item connected to the demand of buyers in the form of requests and offers showing how fast you can sell your item for a certain price. You will decide your price/time threshold.
There is huge work being done in the background to make all of this happen. We’ll share it in separate posts because it will happen very soon.
However, the biggest challenge you have is not the description or the price but making the decision to sell. The top reason people don’t sell anything is that they don’t know what to sell (while having tons of items in their garage).
It seems people have amnesia about the items they own. I do. I tried to recall what I have in my garage and my closet and then opened it and realized I completely failed. Try it in your storage shed.
To remember what you own there should be a technology tracking the items you buy. So simple. The data is already there. Of course, it’s a challenge to collect and combine it, but we don’t doubt it’s an app coming in the near future.
Tech companies are already addressing purchase tracking in different markets like insurance and using different sources of information such as bank transactions.
Worldwide blockchain or any other technology of collecting and storing data on your transactions would speed it up.
Finding a buyer/seller and negotiating a deal
This is much smaller barrier compared to the previous one. Even now C2C marketplaces have high liquidity in many categories. If you are not super greedy and set a reasonable price, in most cases, you’ll sell your item pretty quickly.
Aside from user acquisition, search relevance and other well-described products and tools for increasing liquidity, there are still several other interesting points to discuss.
Consider selling an item differently. When you list an item now, you expect to sell it in a few days. Most classifieds automatically delete all items not sold in X days to keep their listings up to date. That means now people sell only if there is some urgency. They sell only those items they really want to sell fast.
There is another way of selling your used stuff — without time limits. As we found out earlier, most of your items are anyway hanging in a closet or residing in boxes in a garage. Imagine all of them are available for potential buyers. Imagine all the stuff in your district (city, country, and world) is available for search by potential buyers.
Consider all items you own as depersonalized and publically available for offers. If I get a good offer, I would sell that stuff I didn’t plan to sell.
As a buyer, you can literally find anything you want, and the complete transaction is only a matter of the time it takes your offer to a seller to be accepted.
And as a seller, your stuff is sold when someone wants to buy it and when the price threshold you’ve set is met by a seller’s offer.
Payment & delivery
There are two major issues connected with payments and delivery in C2C marketplaces: item inspection & cross-border transactions. Both of them depend on logistics companies and are ideally addressed by some form of cash on delivery when a buyer inspects and pays for the item upon delivery. This is already in place on some markets and on its way on others.
It becomes more complicated for cross-border transactions; smooth ones currently do not really exist. People don’t sell used stuff to other markets. Why not? Localization & price. Aliexpress shows that worldwide cash on delivery affordable for low value items is possible. Something similar needs to be established for used stuff to boost cross-border transactions.
We at Lalafo strongly believe there will be a revolution in С2С marketplaces in the next 5 years.
Both the fundamental reasons and technology are there. Now it’s a matter of execution.
