Marketplace Breakout Strategies: Take Rates, Defensibility, Payments | Field Notes by Connie Chan | Summary and Q&A

TL;DR

Deb Liu, former VP of Commerce at Meta and current CEO of Ancestry, discusses the importance of effective communication and intentional strategies in the workplace, the role of take rates in marketplaces, and the challenges and opportunities of building local versus online marketplaces.

Key Insights

• ❓ Effective communication strategies and intentional participation in meetings can positively impact career growth in the workplace.
• ☠️ Marketplaces should consider different take rates for listing fees, transactional rates, and long-term relationship rates to optimize profitability and value.
• 🏛️ Building local marketplaces requires geographic density, whereas online marketplaces offer more flexibility and scalability.

Transcript

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Questions & Answers

Q: How can effective communication strategies contribute to career growth in the workplace?

Effective communication involves actively participating in meetings, sharing ideas, and making a strong impact. By showing up and speaking up, individuals can make a positive impression on their colleagues and superiors, increasing their chances of career growth.

Q: Why should marketplaces consider different take rates for different transaction types?

Different transaction types have varying levels of profitability and competitive dynamics. Marketplaces should consider the costs and value associated with each transaction type to determine the appropriate take rate that incentivizes desired behavior and ensures sustainability.

Q: What are the challenges and advantages of building local versus online marketplaces?

Local marketplaces require geographic density to create a thriving ecosystem. On the other hand, online marketplaces offer more flexibility in terms of location and can target a wider audience. Local marketplaces need to focus on building density in one city before expanding, while online marketplaces can scale more quickly.

Q: How can marketplaces defend against new competitors?

Marketplaces should stay updated with changing consumer needs and technologies. By continuously improving their user experience, addressing pain points, and leveraging network effects and brand loyalty, marketplaces can maintain their competitive edge and deter new entrants.

Summary

This video podcast is part two of a conversation with Deb Liu, former VP of Commerce at Meta and current CEO of Ancestry. Deb discusses various topics related to marketplaces, including communication strategies, pricing take rates, and the defensibility of marketplaces. She also talks about the role of payments and shipping in marketplaces and the importance of user experience in creating successful marketplaces.

Questions & Answers

Q: What are some common things people need to learn in order to better communicate in the workplace?

One common thing people need to learn is to not give themselves a free pass in meetings. They should show up fully present and engaged instead of just observing and absorbing. This is important because there is a bias against people who are extremely quiet and not actively participating in meetings. By showing up and actively contributing, people can make a stronger impression and be more likely to get recognized for their work.

Q: How should marketplaces determine their take rates?

Marketplaces should think about take rates in three different sections. The first section is listing fees, which can help filter out low-quality or spam postings. The second section is the transactional take rate, which is where a lot of the marketplace's revenue comes from. The rate should be determined based on the margin in the market and what the marketplace wants to incentivize. The third section is for marketplaces where it's not a single transaction but a long-term relationship. In these cases, the marketplace may want to charge more upfront and less later to keep users on the platform.

Q: How do marketplaces defend against new up and coming competitors?

Marketplaces need to continuously innovate and evolve to stay ahead of new competitors. They need to identify what made them special in the first place and build on those strengths. For example, Craigslist didn't make the jump to mobile, which created an opportunity for disruption. Marketplaces should also focus on trust and reputation, as well as providing unique value or incentives to sellers that keep them loyal to the platform.

Q: What advice do you have for founders building local marketplaces vs. purely online marketplaces?

For local marketplaces, density is key. Founders should focus on building product-market fit in one city before expanding to other cities. It's important to understand the specific dynamics and needs of each local market. On the other hand, purely online marketplaces that rely on shipping don't require the same level of geographic density. Founders should consider whether their marketplace is better suited for local or online transactions and tailor their strategies accordingly.

Q: How do curated or private communities fit into the marketplace landscape?

Curated or private communities have their own place in the marketplace landscape. They can provide a higher level of trust and a more personalized experience for certain types of transactions. For example, mom communities may prefer to buy and sell with each other rather than in an open marketplace. The key is to understand the specific needs and preferences of different user groups and design the marketplace accordingly.

Q: How does payments play a role in marketplaces?

Payments play a crucial role in building trust and enabling transactions in marketplaces. For example, PayPal's addition to eBay helped establish trust between buyers and sellers by providing buyer protection and tracking numbers. Payments also make it easier to settle disputes and ensure that both parties are satisfied with the transaction. In some cases, marketplaces may need to incorporate escrow-like services or offer financing options to further enhance trust and facilitate transactions.

Q: How can the user flow for marketplace transactions be improved?

One area for improvement is incorporating true escrow services, which would require buyers to accept the item before releasing funds to the seller. This would provide an added layer of protection and help prevent disputes. Additionally, marketplaces can explore ways to make the entire transaction process more seamless and efficient, such as integrating payment and shipping services. Continuously refining and optimizing the user flow can enhance the overall marketplace experience.

Q: What are some game-changing user experiences in marketplaces?

There are several examples of marketplaces that have created delightful user experiences. For instance, platforms like Poshmark have gamified the re-sharing, liking, and buying process, making it more engaging and personalized for users. Other marketplaces, such as StockX for shoes or handmade goods marketplaces, have focused on specific categories and created unique experiences that appeal to their target audience. These innovative user experiences help differentiate marketplaces and attract and retain users.

Q: How can marketplaces replicate the success of physical commerce?

Physical commerce, such as grocery stores, can provide valuable insights for the future of e-commerce. Marketplaces can learn from the practices of physical retailers, such as using slotting fees to determine shelf space or leveraging co-marketing deals with manufacturers. By understanding and replicating successful elements of physical commerce, marketplaces can create a more holistic and effective shopping experience.

Q: Why is density important for local marketplaces?

Density is crucial for local marketplaces because it leads to more efficient transactions and a better user experience. When a marketplace has high density in a particular city, it becomes easier for buyers and sellers to connect and transact with each other. It also allows the marketplace to provide more localized offerings and services. By focusing on building density in specific cities before expanding, local marketplaces can establish a stronger presence and increase their chances of success.

Takeaways

In summary, successful marketplaces need to prioritize effective communication strategies, carefully consider their take rates, and build strong user trust through payments and shipping solutions. They should tailor the user experience to the specific needs of their target audience and leverage unique features to stand out from competitors. Density is crucial for local marketplaces, while purely online marketplaces can focus on wider geographic reach. Learning from the practices of physical commerce can also be valuable in creating innovative and successful marketplaces.

Summary & Key Takeaways

• Deb Liu emphasizes the importance of showing up and actively participating in meetings to make a strong impact and avoid biases against quiet individuals.

• Take rates in marketplaces should be considered in three different sections: listing fees, transactional rates, and long-term relationship rates.

• Building successful local marketplaces requires geographic density, while online marketplaces offer more flexibility in terms of location.