How Can Marketplaces Succeed in This Competitive Landscape?
Kenneth Low & June Boo
Executives of Arcadier
June 13, 2019
How Can Marketplaces Succeed in This Competitive Landscape?
Many marketplaces were created to give suppliers a collective power, which could not be achieved on their own. But with the growing number of marketplaces in every industry and the vast amount of providers on each one – how can a platform truly differentiate its services?
In this episode of Platform Players, Arcadier's June Boo and Kenneth Lowe share deep marketplace insights based on their work with hundreds of modern platform companies and outline what it takes to succeed in today's competitive landscape.
Do you hear that? That’s the sound of Platform Innovation at work.
And this…is Platform Players.
The platform economy has become popular that some speculators say that platform companies are in a “race to zero.” So we’ve decided to ask the experts. Check out what Kenneth Low and June Boo of Arcadier have to say about the future of online marketplaces.
This is your Platform Player Flashback!
“The Governor of Cross River State, Nigeria would like to meet with you.”
Kenneth Low could not believe what he was hearing.
“Can you repeat that, please?”
He pressed the phone closer to his ear, as if it would help clarify his confusion.
“His Excellency would like to discuss engaging Arcadier to help develop his platform for selling the state’s quality cocoa beans to global boutique chocolatiers. You must travel to Calabar, Cross River State Nigeria to meet with him.”
When he co-founded Arcadier to help entrepreneurs set up their online marketplaces, Ken never dreamed he would receive a call from the Governor of Cross River State, Nigeria. And yet, here he was, buying a plane ticket to West Africa - which, he was told, has the best cocoa beans in the world because of the area’s volcanic soil.
The situation became even more surreal when he landed.
“His Excellency is overseas meeting dignitaries and we are uncertain when he will be back. I would advise you to go to your hotel and stay there for your own safety. Tourists often become targets for crime and we do not wish that to happen to you. We will call you when his Excellency arrives.”
For the next three days, Ken woke up early, put on a suit, and waited for a call that never came. He did as he was told and did not leave the hotel - not even to eat. Luckily there was a café in the hotel , but fish and chips was the only think he recognized on the menu. He couldn’t risk a bad stomach, so he ordered it. For every meal. For three days and he sat at exactly the same table.
Then on the fourth day, the phone rang.
“His Excellency has arrived. We are sending a car. Be dressed and ready to go in fifteen minutes.”
Ken scrambled to get dressed in a full suit and tie and was just in time to cram into a black car, wedged squarely between two armed guards. Now, out of the air-conditioned hotel, he realized just how hot it could get in Africa. And he was in a suit, melting into the two large men that sat stone faced on either side of him.
“Just keep breathing,” he told himself.
Then the car pulled out onto the road, navigating over endless hills and potholes and Ken became very aware of all the fish and chips he had eaten the days before. With the constant jerking motion of the car, he was certain he was going to lose his lunch in front of everyone. And then he almost did.
Ken was relieved to arrive at the Governor’s house and get out of the car – until he saw his advisor walking briskly towards him.
“His excellency needs to check on the state of his rice factories. Please get back in the car. You will follow us.”
His stomach turned, but Ken did what he was told and resumed his position in the back seat, between the guards, and quick as a flash, he joined an entourage of other black cars bound for the rice factory.
Several thousand potholes later, they arrived and Ken sprang from the car like a man on a mission.
“Mr. Low, you cannot approach his Excellency. You must wait until he is ready to see you.”
After viewing the grounds what seemed like hours, it was Ken’s turn to step forward and give his pitch. In the middle of an empty zinc roof rice factory, flanked by numerous armed guards and in 95 degrees Fahrenheit heat, he opened his mouth to speak:
“Your Excellency. I am Kenneth Low from Arcadier, and I am confident we can not only set up your cocoa online marketplace, but help you reach massive global scale which only a digital marketplace can reach. Your farmers can list their quality beans on a Cross River State branded marketplace to sell to anyone in the world directly! We can get your marketplace up in a matter of days as a Software-as-a-Service (SaaS) company focused on marketplaces we have all the features ready to delivery what you need easily. Imagine the transformation that you can drive to change how Cocoa beans are traded from offline to digital, a true disruption of a traditional way of B2B procurement and trade.
The pitch lasted ten minutes and Ken couldn’t actually tell how it went. Soaked in perspiration, he looked over at the Governor, who was nodding his head. A small smile crept across his face and he whispered something to his advisor.
“His excellency thanks you for coming. He would like to execute your MOU contract over coffee tomorrow and will send the legal team to meet with you.“
Arcadier is the world's fastest-growing SaaS marketplace builder and is widely recognized as a global leader of multi-vendor marketplace technology, with more than 9,000 online marketplaces in over 170 countries created on its platform.
Let’s get down to the NITTY GRITTY.
Here’s your host, Kurt Bilafer.
Marketplaces were created to give providers a collective power, which could not be achieved on their own. But with the growing number of marketplaces in every industry and the vast amount of providers on each one – how can a platform truly differentiate its services?
I knew the experts at Arcadier would know, so I called up Kenneth Low and June Boo to give us the real scoop. Guys, thanks for talking to us today.
Help me understand what makes Arcadier unique and different. I haven't seen many other solutions that actually are Marketplace as a Service. Help me understand the differentiators and the benefits of what you're offering.
When we started Arcadier, our main focus was building marketplaces in a very bespoke manner, meaning that we were custom building marketplaces from ground up for individual clientele. We started very much as a platform organization where we told all our individual clients that despite the fact they were custom building their marketplace projects, but we're going to continue to build the platform with the court so that with every build, it becomes more affordable.
One of the value propositions we brought to them was that in spite the fact they're custom-built, they're not going to cost you millions of dollars to build because we're going to start to reuse the [courts 0:55]. By the same time, you have to arrange – there has to be a license [inaudible 1:01] custom license-built proposition.
Seven years ago was when the SaaS model was starting to grow with Uber, and Abbey creating a whole slew of Me Too equivalents across the world. In Asia, we saw a huge slew of new models that are either replications of the ones that we know in the U.S., or they were new ones from laundry, sharing common laundry service to bike rentals. You name it; there was a market for it.
There was a huge growing demand for marketplaces technology. A lot of people did not know how to build one. They actually had a marketplace idea, but they did not know how to build one. More importantly, they actually did not have the deep pockets. Quite often, they were entrepreneurs starting out, or small organizations starting out for a particular region of a particular country.
So, the aha moment actually struck us that, "Hey. Is there a way to make marketplace software a SaaS proposition whereby we can actually make it easy for someone to build and templatize something so that someone can actually spin a marketplace out within minutes of actually onboarding?
So, we scanned the market at the time, and there weren't really many places out there. The usual suspects like Magento and Stripe and Wix were still only allowing people to build online stores. No one was allowing people to build online marketplaces at that time.
There was a huge white space, so it was like, "We could be very similar to the equivalence of Shopify, Wix, Squarespace, and Magento, but different in a sense that it was a multivendor marketplace technology.
So, since you guys touch and see so many different marketplaces, what advice do you have to marketplace founders that might be listening to this podcast?
Maybe I'll start first. I think, for me, from what I've seen being a strategist, I'm always a believer in looking at some of the successful ones that we have worked with. Having a clear vision and direction in terms of why you want to want to start a marketplace and offer it as a marketplace business is very important because there are just far more failures than successes that are known to the general public and the business community.
The means that we know have been seen on all the publications are the ones who have made it, but we know that at least 80% to 90% of the business that started where there's e-commerce on marketplace level does too fail. Without that conjunction is even harder to actually be focused and to support the kind of commitment and the result that's needed to ensure business sustainability.
For me, as we decide to go ahead, then you have a couple of very important decisions to make. I can think of two. One is that definitely, you would need to define how you want to build your marketplace.
Whether or not you're looking for your own basically pre-built or you want to outsource it or use a SaaS provider like ourselves, and understanding basically some of the pre-imposed built implications is even more than actually just deciding about the technology because building a business, building a marketplace is an ongoing commitment.
So, knowing what you intend for your organization and being or have the time for deployment capabilities and requirements. You need to know that when you build it.
If you are an existing company like some of the clients I speak with, some of the biggest things that we saw in terms of a challenge are that you do need to identify who are your largest people challenge. Then make sure that you have plans set in place to get the kind of buy-in starting from the top.
We've seen many examples where, for instance, in sales teams and for some of the traditional businesses, they were opposed to the idea thinking that having a marketplace, an online marketplace would replace their jobs. However, those were successful.
They typically are being retrained to focus their energy, their resources, and their time to build relationships to basically up sale the portfolios of products and services versus just pushing sales through. Knowing some of these challenges can really help in establishing really successful marketplace.
Obviously, you're seeing a tremendous increase in the number of marketplaces. Now, part of that is you have platform solutions that are evolving into multi-sided marketplaces. What do you think is driving this trend? Do you think it's a big part of its globalization? Do you think just more and more people are getting comfortable purchasing online? What do you think is causing this sort of massive wave of marketplaces that are entering?
You have to realize that if they're not collectively discovered, and people are just going to a single place to discover all of them, they're not going to be found even if they have an individual online store. So, that collective purchase behavior starts to emerge and also converge in the online world.
So, the pattern of behavior of the growth of marketplaces right now follows if you see in history that the case old history of the offline world how people have gone from main street stores to shopping malls, and now, that's what's happening online. You're going to see this grow even more significantly over time as marketplaces take precedence and become really the future of e-commerce.
I agree. I think marketplaces are important for discovery, but in that model, I guess the caution is, are we in this race to zero? Like everything just becomes a commodity. Or if the marketplace doesn't have a differentiator of the vendors on the marketplace struggle to provide differentiation or product, I think that's one of the challenges.
If we go back to the Constantinople, these huge early marketplaces, the reality is the vendors, though they weren't in a centralized place, were scattered about. So, people didn't have an easy way to do comparison shopping. Online, it's super simple to see who has the lowest price and who's got the fastest shipment.
Do you think this erodes some of the margins? Do you think because it makes it easier to be discovered, people will find economies of scale? Where do you think the upside is as more and more things work to move to marketplaces if the products are hardly differentiated?
I guess the interesting part for this is that – the trend of marketplaces as we know when we get this question quite often. People start thinking about your eBays, Amazons, and your B2C retail marketplaces of the world. It's even getting harder for them to be discovered even within eBay or Amazon. What we coin Horizontal Marketplaces that sell everything from baby powder to cars.
So, what we've started to see emerging in the market is that the market is trending towards what we call Vertical Marketplaces. So, people are very much moving to – if I want to find a particular item, I go to a marketplace for that particular Vertical.
So, you have baby products, and you have baby-product marketplaces. Let's say, "I want to find a space to live in." I would go to a Vertical where it sells space accommodations, rental, marketplace.
What we've even started to see even in greater development is what we call the emergence of the hyperlocal hyper vertical marketplaces. So, it's not only about cost-sharing across the world. It's cost-sharing or accommodations for a marketplace for a specific country, a specific city.
So, even in Arcadier's world, we're starting to see people building marketplaces. I'm at Airbnb, but I'm actually at Airbnb for only Christian travelers in Jakarta. So, it's very hyper-specialized in that way where it's not about accommodations per se, but they only speak to a particular set of the market.
Indonesia is the largest Muslim country in the world, but there is a marketplace out there that allows Christian travelers to stay with Christian families in Indonesia. So, we're starting to see such emergence.
LGBT travel marketplaces are also – we have a couple of them use our marketplace technology to build. It's not for the whole world. It could be for Amsterdam. It could be for London. So, it's the emergence of hyperlocal, hyper-vertical that actually serves a particular region.
They don't have to compete across the world. They're actually serving a particular sector of the market. So, some of the margins in that regard are still very much preserved. That's what we're seeing the proliferation going towards.
It's not creating noise in the market where everyone is an ex-eBay, but the marketplaces have started to become very local in the way they're serving in terms of vertical and a particular region of a country or city.
On top of that, marketplaces have always been the key to the big ones, but we also start to see that marketplaces are used more as a utility, what we call marketplaces as a utility where it actually serves a particular purpose, and it's not to serve the end consumer, the mass public, but use as a technology to drive greater efficiency within an organization or within a particular sector.
There are two examples I can give. For instance, in the hotel industry InterContinental Hotels Group, for instance, actually have a marketplace that is not externally facing, that's internally facing that allows all its franchise hotel general managers to buy from preapproved vendors from the group so that they will maintain brand standards in terms of the cutleries they use, the beddings they use, and all that.
But you and I will never be able to venture into that particular marketplace because it's to maintain brand standards. They have a marketplace that's internally facing. That use of marketplaces is so underrated, and it's what is driving the future of marketplaces, especially in B2B.
Yes. So, you're talking about specialization at the marketplace level, not so much at what is on the marketplace. So, from the very beginning, people are going to that marketplace because they have a very specific need. I think you are seeing that evolution.
It's interesting to see whether these micro marketplaces, which I guess is one of the things to think about it, how they will thrive because if you have an Airbnb, the question is, do you need those that cater toward specific audiences, and if you do, maybe you feel safer because ultimately, the goal of the marketplace is not to just enable commerce but to build trust along with that process. Right.
So, it's specialization of localization certainly helps.
Platform Players is brought to you by Yapstone, the premiere payment provider for the platform economy. We’re reaching the end of our show, but have just enough time for TICK TOCK, where Kurt gets up close and personal with our players. Kurt, June, Ken, the countdown is on.
What's your favorite book?
My favorite book? The one that came to mind was a book I read a couple of years ago called The ONE Thing by Gary Keller. It talks about being a successful person that's usually is just the one thing. So, what do you have to do every day within the span of a year, a month? The one thing that you have to do in order to choose what you want to do.
What's your favorite smell and sound?
Wow. Favorite smell. I would say it's the smell of fried noodles, the Singapore style black noodles. The fragrance of the garlic that's coming out from the wok is my favorite smell. It gets me really hungry.
So, what's your favorite smell and sound?
My favorite smell is hot chocolate. I love that chocolate smell or even cocoa. And just the sound I have to say two things. Something that came immediately to mind is my daughter's laughter. She has this very open, really cheerful laugh, and every time she giggles, or she laughs, she thinks she's the funniest person in the room, which makes everybody laugh and follow her and catch on her mood.
What's the best piece of advice you've ever received?
I would say it's about being humble and respectful to anyone that you meet. That has been pretty awesome advice that I received from my first boss 20 years ago where he was saying that you never know who you might have to call on in the future or rely on, so make sure that you're respectful for everyone from the tea lady all the way up the value chain in any environment that you work in.
The best piece of advice is from my previous boss, Karen Shepard. She said to be present, to be present in conversations, to be present in meetings, to be present with your loved ones, family, and friends. So, a lot of times, there are a lot of distractions, and many times we might be multitasking as we are speaking to someone.
Then we might lose some of the gest or potentially not catch some of the emotional cues that were being given by someone. So, she went through the leadership team, some of life’s lessons, and this was something that I think really helped, which is that you've got to put down your phone. You've got to not wash because the light is flickering, and just be present with the company that you're with.
So again, I just want to thank Ken and June for joining us on today's Platform Player Podcast. It was great to hear about Arcadier and the transition and transformation we're seeing in marketplaces both for internal use and external use B2B, B2C. It will be interesting to see where marketplaces head next. So, we'll definitely be watching Arcadier and see where you guys head. Again, Ken and June, thank you so much for joining us today.
Well, thank you. Thank you for having us, Kurt.