Key challenge

Chicken and egg problem

You need both supply (i.e. sellers) and demand (i.e. buyers) in order to make the marketplace work. Without the supply side, how do you get the demand side to come to you? And without the demand side, what can you offer the supply side?


Strategy

Seed the supply side

Many two-sided marketplaces have been successfully launched using the following strategy... though it’s not easy. At a high level, here's what the experts say about building a two-sided marketplace from scratch: 

  • First and foremost, get supply. Without this, no one will come to get what you have.

  • The key to getting supply is offering the supply side something of value before you can promise demand.

You can try out these tactics to build up the supply side:

  • Offering a service to early adopters that’s undeniably valuable but won’t scale (e.g. online marketing and/or website design)

  • Providing tips/tricks/advice and industry news (e.g. through a blog or newsletter)

  • Host events and create a community around specific verticals (e.g. panel discussions, meetups)

Above all else, try to stick to these principles: 

  • Stay hyper-local; a good rule of thumb is that 10 suppliers in close proximity to each other is worth 100 suppliers scattered across the world.
  • Roll up your sleeves. Talk to suppliers and nail down a value proposition that will get them to sign up and that you can deliver on

For further tips on this approach, look at our playbook for building individual utilities.

If you’re a little further along and you’ve already built up supply, your best bet is to look into productizing the experience for your users with the tools below.


Tools

 

Sharetribe is an out of the box two-sided marketplace tool where you can enable your own users to sell or rent goods or services. Use this tool if you’ve already built up some of the supply side of your marketplace.

 

Squarespace is a great place to start from day 1 if you’re looking to build up supply. Setting up a page here is an easy way to communicate your value prop to the initial supply side users and give them a place to sign up. The rest of the work then happens behind the scenes or offline once they’re in touch with you.

 

Similar to Squarespace, but with a bit more bells and whistles if you’re into that. One advantage to Squarespace in the near term is the ability to allow users to sign in and create their own content; in the longer term, Wordpress is also easier to customize. If you decide to go the Wordpress route, you can try the Marketify theme, which is actually a marketplace right out of the box.

 

Typeform is one of the tried and true tools of experimenters. Use Typeform on its own or embedded in other pages. One magic trick with this one is that you can use Typeform to capture information from a user, process that information in the background (e.g. manually), then deliver it back to them or on some other page. Huge benefit before you have the engineering bandwidth to actually build something fully custom.

Examples

 

Airbnb is one of the most famous two-sided marketplaces. And it began as a test by having a handful of people crash on their couch. Check out their story.

 

Uber is one of the largest private companies in history, but it started humbly. Garrett Camp’s original pitch to now CEO, Travis Kalanick, was that the two of them split the costs of a full-time driver, parking spot and car to ensure supply for their first handful of uses/riders. Check out their story.

 

Each of the Etsy founders have a slightly different story to tell about the early days, but one thing is certainly true: the early approach to building Etsy focused on empowering makers to sell their craft (the supply side). Check out their story.


Experts


Additional advice

  • Morgan Citron on the Applico blog writes about building two-sided marketplaces (link).

  • Sangeet Paul Choudry offers a thoughtful analysis of types of platforms (link).

  • Version one’s guide to marketplaces (link).

  • Marketplace mistakes (link).