Quick List of the Biggest Challenges for Marketplaces in 2023
Over the past ten years marketplace platforms have grown at a screaming pace but haven't achieved profitability in many cases. We think 2023 is the make or break year. Here's a quick list of the biggest challenges they must overcome to win.
- Marketplace platforms must figure out how to attract and retain users and suppliers much more efficiently.
- Marketplace platforms must do a better job at incentivizing and motivating merchants to engage with the platform.
- 2023 is about getting the house in order and building sustainable infrastructure to manage all sides of the marketplace.
Marketplace Challenges to Overcome in 2023
Over the past ten years marketplace platforms have grown at a screaming pace but have yet to achieve profitability in many cases. We believe 2023 is going to be a make or break year for many marketplace platforms. Here’s a roundup of some of the burning challenges we hear about everyday from marketplace leaders: 👇
Profitability now: Mature platforms have historically spent over 30% of revenues, or 50% of gross profits, on attracting & retaining users. Often way more for emerging marketplaces. There’s a big focus across the board on more efficient acquisition — organic, more nuanced referral structures, improving conversion funnels, finding non-monetary incentives that work — versus paid and one-time bonuses. In order to reach profitability these platforms have to get their acquisition and retention spends under control while maintaining the same growth rates. Marketplace platforms must figure out how to attract and retain users and suppliers much more efficiently.
Getting merchants to care & stick: The pandemic was a huge boon for 3-sided marketplaces, since many restaurants or stores were reliant on delivery. In 2023, lockdowns are over and the game has changed. It’s often difficult for platforms to get their merchants to prioritize deliveries or even turning apps on at peak times. Marketplace platforms must do a better job at incentivizing and motivating merchants to engage with the platform. Additionally, referencing the profitability and acquisition vs retention spends in the previous paragraph, making existing suppliers retain vs acquiring new ones is way more cost efficient — there’s lots of energy behind this. It's easier to keep existing merchants engaged than finding new ones to join up.
Streamlining operations: Many platforms have relied on tons of manual queries, hacky communications, and duplication of efforts across multiple teams to convince workers or merchants to do something across different markets. That might've been ok during growth period, but now there’s a push to identify and streamline these as headcount costs come under scrutiny.
Services mayhem: As engineering & product personnel rotate between teams or leave the company, many mid-to-mature platforms end up with an impenetrable web of services that manage pricing, incentives, market balancing, onboarding, CRM etc. Few people in the company know exactly how it works and debt accrues / rewrites are endless. It’s highly inefficient and is coming under more scrutiny as companies wonder how they can simplify and/or if they should emulate some of the more radical changes happening at places like Twitter.
2023 is about getting the house in order and building sustainable infrastructure to manage all sides of the marketplace. Village is building the infrastructure these platforms need to get organized and produce real ROI all while keeping users and suppliers engaged and even happy. If you are interested in finding out if Village is right for your business contact our team and we'll get the ball rollin'.