Marketplaces are amazing businesses if you get them right. Getting traction both on demand and supply sides is incredibly tough and product has a big role to play. Having been customers on some of the well known marketplaces such as eBay, You Tube, Airbnb, Uber, etc., a lot of us have experienced the demand side products. However, the supply side product is a bit of a mystery and that is where marketplaces create a lot of their initial magic. To keep this magic going, there is a constant need to prioritize supply side product features and I hope this post can help with that.

Before we get into the details, it is important to realize that there is always one supreme skill or asset that is the biggest value add of a supplier to a marketplace. For example, for eBay sellers, this skill is sourcing — our sellers bring a lot of unique inventory on eBay based on their intuition of what sells. For You Tube, this skill is the art itself i.e. acting, tutoring, humor, etc. For Airbnb, it’s not the skill but the asset i.e. the property and for Uber it is both the skill i.e. driving and the asset i.e. the car. Now all supply side product features can be bucketed into three categories:

1) Features that give back time to the suppliers

2) Features that give back resources to the suppliers

3) Features that try to directly enhance the supreme skill or asset

Features in the first two categories allow suppliers to spend more time or resources on their supreme skill or asset by taking time or resources away from non-critical skill or asset. For example, for eBay, product features that reduce the shipping hassle and simplify the listing creation process fall in the first category, giving sellers more time on the weekends to do sourcing. Similarly, product features such as sponsored listing fall in the second category because they give sellers the cash flow that they can then invest into sourcing interesting products. Explicit guidance on what to source would fall in the third category because it attempts to help sellers improve their supreme skill skill (sourcing) itself. For most marketplaces, product features that expose more data/ metrics are the most obvious first step in the third category.

Now the decision of which category of features to focus on depends on multiple factors ranging from the value proposition of the marketplace, the industry it plays in, the state of maturity of the marketplace, etc. When a marketplace is young, it should ideally prioritize product features that fit the first and the second categories. If it does a good job with those, then additional investment into product features in these categories will only yield diminishing returns. For example if eBay’s shipping and listing flows are sub-optimal to the extent that an average seller gets only 2 hours a week for sourcing when they need 4 hours, then any product innovation on shipping and listing would have great returns. However, if eBay’s shipping and listing flows are optimized enough that sellers can spare the 4 hours they need, then any additional product innovation there won’t add significant value except for maybe some added goodwill.

The only marketplaces that need to spend significant product resources into the third category in their early days are the ones that are trying to achieve a high level of standardization from a skill or asset that can’t be easily standardized. For example Airbnb did put and has been putting a lot of effort into taking beautiful pictures of hosts’ properties. Uber on the other hand has a good degree of standardization but then driving is a pretty standardized skill to start with, so, it didn’t need to invest a lot into the third category of product features in the beginning. Now if in the future it wants to capture trip data and expose it to its drivers to show them when they braked too hard or took too sharp a turn at high speed, then it will be playing squarely in the third category of product features. The need for the third category of product features can become more obvious though as marketplaces mature and become complex and more competitive. This happens because suppliers become uncertain whether their skill or resource still adds as much value as it did before. This is happening with eBay and when that happens, product features in the third category can definitely help.

To summarize, while a lot of product features might seem like gems that can help your marketplace get to the next step of awesomeness, think carefully about your value prop, your industry and your maturity to decide what kind of product features you should focus on. Having a consistent framework definitely helps. Challenge your framework and adopt a new one if the old one doesn’t stand the test of time but don’t be all over the place. As I mentioned in the beginning, marketplaces are not easy to get right and your product is one of the most important levers you have.

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