What's Next for Marketplace Startups | Summary and Q&A

TL;DR

Marketplaces for regulated services have the potential to address the unfulfilled demand in various industries, such as mental health and beauty, by improving access, lowering costs, and utilizing automation.

Key Insights

• 👋 The best marketplace companies tap into latent demand, providing value by addressing constraints in regulated service industries.
• 🐕‍🦺 Marketplaces for regulated services can unlock supply by improving discovery, managing providers, expanding the supply pool, or utilizing automation.
• 💅 Mental health and wellness, beauty, and other regulated professions offer promising opportunities for marketplace disruption.

Transcript

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Questions & Answers

Q: Why are there only a few marketplaces for buying services, compared to the abundance of marketplaces for buying goods?

Services are complex, heterogeneous, and harder to standardize into SKUs, making it difficult to capture relevant information in a marketplace. Additionally, services often happen through in-person interactions, unlike goods, which can be split across different stages of the value chain.

Q: What are the challenges in creating marketplaces for regulated services?

One challenge is unlocking the supply side, as regulated services have artificial constraints on supply due to licensing and certification requirements. Startups can address this by improving discovery, managing the providers themselves, expanding the supply pool, or utilizing automation.

Q: How can marketplaces for regulated services make consumers' lives better?

These marketplaces can enhance access to services, reduce waiting times, decrease prices, and offer consistent quality by optimizing the supply side. They can also leverage technology, such as AI, to automate certain aspects of service delivery, potentially increasing efficiency and convenience.

Q: What are some promising categories for marketplaces in regulated services?

Categories such as mental health and wellness, beauty, and other regulated professions like law, accounting, and medicine offer significant potential for marketplaces to disrupt and improve access.

Summary

In this video, Frank Chen and Lee discuss marketplaces and why there haven't been many successful ones for buying services. They go through the history of marketplaces and identify different eras, such as the listings era, unbundled Craigslist era, Uber 4x era, and managed marketplace era. They also highlight the challenges and strategies for unlocking supply in regulated service industries. Finally, they discuss some of the categories they are personally excited about, such as mental health and wellness and beauty.

Questions & Answers

Q: Why haven't there been many successful marketplaces for buying services?

Marketplaces for buying services have been slow to come online for several reasons. First, services are complex and have many different attributes, making it difficult to capture relevant information in a marketplace. Second, there is no clear metric of success or quality for services, as different consumers have different preferences and expectations. Third, many services are performed by small business owners who lack the resources to go online. Lastly, services involve synchronous creation and consumption, making it difficult to extract parts of the value chain to bring online.

Q: What are the different eras of marketplaces?

There have been four major eras of marketplaces. The listings era, which started in the 90s, involved digitized versions of the Yellow Pages where consumers had to do the legwork to find and coordinate with service providers. The unbundled Craigslist era saw the emergence of verticalized marketplaces that focused on specific service categories. The Uber 4x era introduced on-demand marketplaces that leveraged mobile technology for quick and simple service transactions. The current era is the managed marketplace era, where companies provide additional value and handle more complex services through a heavier operational lift.

Q: How did companies address the challenges of trust and tediousness in the unbundled Craigslist era?

In the unbundled Craigslist era, companies addressed trust and tediousness by offering richer features, better filtering technology, and improved search capabilities. They also implemented credentials or verification processes for service providers to help consumers identify high-quality options. By specializing in specific service categories, these marketplaces made it easier for consumers to find and connect with service providers who meet their needs.

Q: What are the strategies for unlocking supply in regulated service industries?

There are several strategies for unlocking supply in regulated service industries. One strategy is to make discovery easier by providing a platform for consumers to find licensed service providers. Another strategy is the managed model, where companies hire and manage the providers themselves to ensure a consistent level of service quality. Companies can also augment or expand the licensed supply pool by finding alternative ways to provide similar services or connecting consumers with unlicensed professionals who meet certain standards. Lastly, automation can be used to overcome supply constraints, such as using self-driving trucks or AI-powered platforms for certain services.

Q: What are some examples of regulated service industries?

Some examples of regulated service industries include law, accounting, medicine, healthcare, floristry, and interior design. These professions often require licensing or certification from regulatory bodies to ensure consumer safety and quality of service. However, there are opportunities to disrupt these industries by providing better access, lower prices, and improved customer experiences through regulated service marketplaces.

Q: What are the potential benefits for consumers in regulated service marketplaces?

Regulated service marketplaces can offer several benefits to consumers, including increased access, lower prices, shorter waiting lists, and improved service quality. By unlocking supply and leveraging technology, these marketplaces can provide a more efficient and convenient way for consumers to access regulated services. They can also offer additional features, such as standardized quality criteria, easier appointment scheduling, and personalized recommendations based on consumer needs.

Q: What are some categories that regulated service marketplaces could focus on?

Two categories that show promise in regulated service marketplaces are mental health and wellness, and beauty. In the mental health space, there is a lack of accessible therapy for many people due to high costs and limited availability. Regulated service marketplaces could provide alternative options, such as unlicensed but trained professionals, to address this issue. In the beauty industry, marketplaces could offer the experience of having a personal makeup artist, making such services more accessible and affordable for everyday consumers.

Q:What challenges do startups face in creating regulated service marketplaces?

Startups in regulated service marketplaces face challenges such as regulatory compliance, building trust with consumers, and ensuring service quality and safety. They need to navigate licensing requirements, standards, and regulations set by regulatory bodies. Establishing trust in the quality and safety of service providers is also crucial to overcoming consumer skepticism. Companies must also implement mechanisms to ensure high service standards and mitigate risks associated with offering regulated services.

Q: How can startups address concerns about unlicensed professionals in regulated service marketplaces?

Startups can address concerns about unlicensed professionals by implementing screening and vetting processes to ensure that these professionals meet certain standards and qualifications. They can provide additional training and support to unlicensed professionals to enhance their skills and knowledge. Startups should also clearly communicate the limitations and scope of services provided by unlicensed professionals to manage customer expectations and ensure transparency.

Q: What advice would you give to entrepreneurs starting companies in regulated service marketplaces?

There are many opportunities in regulated service marketplaces that are yet to be explored. Entrepreneurs should identify service categories with high consumer demand that are currently unfulfilled or underserved. They should focus on developing innovative solutions that enhance access, affordability, convenience, and quality of services. Navigating regulatory landscapes, building trust with consumers, and providing excellent customer experiences are key factors for success in this space.

Takeaways

Regulated service marketplaces have huge potential due to the unfulfilled demand and limited supply in many service categories. Marketplaces that tackle regulated services can improve access, affordability, and service quality for consumers. Strategies for unlocking supply in regulated service industries include making discovery easier, using a managed model, expanding the licensed supply pool, and leveraging automation. Startups should focus on categories with high demand, navigate regulatory challenges, build trust, and deliver exceptional customer experiences to succeed in this space. Mental health and wellness and beauty are two categories that show promise for regulated service marketplaces.

Summary & Key Takeaways

• Services represent a significant portion of the economy, but only a small percentage is transacted online, indicating an untapped opportunity for marketplaces.

• The history of marketplaces shows various eras of development, from basic listings platforms to specialized, on-demand, and managed marketplaces.

• Regulated services, such as mental health and beauty, have the potential for disruption through marketplaces that enhance access, lower costs, and leverage automation.