Women in Product Chicago — Building a Two-Sided Marketplace

By Shilpa Mohanty

Last week, Women In Product Chicago in association with Sprout Social brought together marketplace product leaders for a conversation about how to build and scale two sided marketplaces.

Links to live recording: Part 1, Part 2

The panel of marketplace experts included Sandra Dainora, SVP of Product Management at Sittercity; Dan Melnick, COO at Reverb; Shreena Amin, Director of Consumer Product at ShopRunner; Lisa A Fiore, Founder and CEO, LandscapeHub; and Cat de Merode, Product Leader at Peapod.

In the ever-growing gig economy, two-sided marketplaces — from ridesharing to grocery shopping — have rapidly become the business model du jour and consumers worldwide are responding to this exciting and powerful trend.

Running and building a two-sided marketplace is a fine balancing act between managing and predicting supply and demand, building a technology that facilitates faster and more efficient service, and creating a robust customer experience, all while managing the ups and downs of seasonality. Additionally, many companies often fail because they are focused on the wrong metrics at the wrong time. A two-sided marketplace allows suppliers and customers to interact with one another and creates value through an intermediary platform.

Based on a wide range of experiences, the panel was able to cover a lot of ground: how do you balance the different, sometimes conflicting, needs and problems of two different sets of users? When do you know you have product market fit and when do you adjust course? How do you know when it’s time to expand? For those who couldn’t make it or want a recap, here are a few key highlights from the conversation:

In the early days, it was very difficult to get the two sides or players of the marketplace, where should one focus first for starting to build the marketplace?

• “Start by seeding one side of the market, we were inspired by Grubhub’s Fax Machine solution early on, at Pretty Quick, we started listing salons and spas that wanted to set up online booking appointments and we started sending traffic their way by using scrappy, low tech solutions to prove our value and reduce risk before entering a financial/contractual agreement, Content and Partnerships are other strategies, successful marketplaces prove their value in small niche communities first ” — Shreena Amin, Director of Consumer Product at ShopRunner
• “Having a right density and then being able to expand is key to success, besides that Trust and Security play a big part in setting up a marketplace” — Sandra Dainora, SVP of Product at Sittercity
• “We have seeded both marketplaces with our inventory as supply in terms of goods is applicable on a wider scale, so having exclusive inventory leads to power over pricing and it’s easier to gain market advantage advantage for the first few years, good way to invest capital” — Dan Melnick — COO, Reverb
• “Our challenge was to make our customers buy from online from offline channels, so we are essentially changing behavior, we started with suppliers first to get enough product online for the buyers to feast, there is also huge impact to our business from a seasonality standpoint” — Lisa A Fiore, CEO and Founder of LandscapeHub

Do you have any advice on how to you build a successful marketplace keeping seasonality in mind? What’s the right approach there?

• “People mostly buy musical equipments from stores on weekends, but we wouldn’t stress much if there are dips in sales during that time, there might be other factors associated as well ” — Dan Melnick — COO, Reverb
• “As opposed to retail when you have seasonality for a few months as a time e.g, holidays, when you have a time based inventory, seasonality is a different setting altogether, it’s mostly weekly. For spas and salons, demand is high on weekends/evenings, so we use creative strategies such as dynamic pricing, promotional tactics to counteract the low inventory problem” — Shreena Amin, Director of Consumer Product at ShopRunner
• “Most of the delivery for Peapod happens on weekends. So, Peapod tries to incentivise people to buy grocery on weekdays, it’s still a tricky beast for a 30 year old company who has it’s operations and logistics all figured out ”- Cat de Merode, Product Leader at Peapod

How much attention should you pay to Competition? Does the two sided marketplaces have doubled the competition?What are your personal views or company’s views?

• “There are a few marketplaces in landscaping industry that offer a full range of services, so we take a look and pay attention to the competition on a regular basis, we take that as validation of our ideas and not necessarily get demoralized by it, first to market is certainly an advantage, but we don’t believe that’s a game changer” — Lisa A Fiore, CEO and Founder of LandscapeHub
• “We focus on customers as our primary driver and focus on solving customer problems” — Sandra Dainora, SVP of Product at Sittercity
• “I think about Competitive Strategy a lot, it depends on the phase of the business you are in and nature of your industry, what do we need to do to win” — Shreena Amin, Director of Consumer Product at ShopRunner

What are the KPIs/metrics do you track to achieve a product/market fit?How do you set goals to achieve them?

• “I think on both supply and demand, the notion of cohort is very important and it speaks to scalability of your marketplace, if you can repeatedly bring back buyers and you can stack those cohorts to track CAC, NOB, that will be a good measure” — Dan Melnick — COO, Reverb
• “I would say along with life time value of a customer, and customer acquisition cost, customer satisfaction score is a critical measure too — Shreena Amin, Director of Consumer Product at ShopRunner
• “A lot of KPIs are around the health of the marketplace such as how many suppliers are signing up, how many buyers are willing to buy online, cost of transaction? ” — Lisa A Fiore, CEO and Founder of LandscapeHub

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