The Lean Marketplace: A Practical Guide to Building a Successful Online Marketplace Business by Juho Makkonen & Cristóbal Gracia

Author:Juho Makkonen & Cristóbal Gracia [Makkonen, Juho]
Language: eng
Format: epub
Publisher: Sharetribe
Published: 2018-02-28T08:00:00+00:00

10

How to design your marketplace’s transaction flow

In the previous chapter, you learned how to match your customer and provider. Now that the match has been made, how can you facilitate the transaction?

Many early-stage marketplace entrepreneurs pay a lot of attention to how many users sign up for their marketplace. This is a mistake.

User count is a so-called vanity metric—one that doesn’t tell you if the marketplace is actually satisfying your users’ needs. As mentioned before, the purpose of any marketplace is to facilitate transactions between users. Without transactions, your marketplace doesn’t provide value to anyone.

We define a transaction as an exchange of value between a customer and provider. The transaction may involve money, it may be a barter, or the provider can offer their product or service for free.

The number one goal for any marketplace is high “liquidity”. This quote by Simon Rothman bears repeating: “Liquidity isn’t the most important thing. It’s the only thing.” Rothman defines liquidity as “the reasonable expectation of selling something you list or finding what you are looking for”.

High liquidity—in other words, lots of transactions and lots of provided value—should result in happy users. To reach high liquidity on your platform, transactions need to be seamless. It’s not enough to match the customer and the provider. Many things can still go wrong after they’ve found each other. You need to help them transact easily and securely.

In this chapter, we will talk about ways of ensuring the transaction actually ends up happening.

Making the payment

The first thing to decide is whether completing the transaction involves an online payment through your marketplace or not. As we discussed in chapter three, capturing the payment is often essential for your business model, so the answer is usually yes.

Unfortunately, online payment is also a major source of friction during the transaction, which is why some popular marketplaces like Thumbtack and OfferUp have decided to skip it altogether. They reason that they want to facilitate a maximum number of transactions, and do not want online payment getting in the way. On those sites, the customer and provider simply form an agreement and complete the actual exchange of money outside the platform.

If you decide that a payment through your platform is necessary, you will need to select a payment method, define the steps of the checkout process, and choose the point at which the payment occurs.

How to choose the right payment method

Credit cards are the most common method of payment since they are used globally. They are especially suitable for online payments because credit card companies usually provide coverage for customers in case of fraud.

In some countries, paying with a direct bank transfer (or wire transfer) is more popular than paying with a credit card. However, bank transfers are usually not as convenient for marketplaces as they lack features such as fraud protection or the ability to preauthorize payments (more on this later).

PayPal is another well-known global payment method. In some countries, PayPal is available for people who do not have a credit card.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.