August 28, 2023 • 40 mins
Get ready to unravel the intricate workings of online marketplaces, their evolution, and the key role trust plays in their success with our guest, Shirish Nadkani, a seasoned tech entrepreneur and marketplace aficionado. Prepare to dive deep into the dynamics of how marketplaces like Amazon, eBay, and Airbnb have transformed traditional business models and gathered the trust of their customers. Together, we'll dissect the mechanisms behind network effects, explore how technological innovations disrupt traditional markets, and discuss the trend of marketplaces managing transactions end-to-end.
We'll also take you on a journey through the success stories of various marketplaces, like Instacart, Airbnb, and DoorDash. Hear from Shirish about the challenges and opportunities of multi-tenanting for suppliers, and the dominance of Amazon as a marketplace monopoly. Plus, we'll dissect the use of key metrics in marketplace models, the concept of power users, and the influence of mobile technology and location tracking in reshaping traditional marketplaces. So join us for a thought-provoking discussion that promises to uncover the future of the digital marketplace.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Hi, welcome to the Big Commerce Podcast.
Hello, welcome to a brand newepisode of the Big Commerce
Podcast.
My name is Luigi and in today'sepisode, I'm joined by Shirish
Nadkani.
Shirish is a successful serialentrepreneur who's worked for
the likes of Microsoft duringthe Hotmail acquisition and the
launch of MSN.
He's worked for ResearchEmotion and also co-founded the
(00:25):
world's largest languagelearning site, livemoker, which
was then sold to Rosetta Stone.
In today's episode, weunderstand how marketplaces like
Amazon, ebay and Airbnb haveevolved over the years, how
trust plays a huge role inonline shopping and marketplaces
, and how marketplaces buildtrust with their customers, how
marketplaces have transformedtraditional business models and
(00:48):
what the future holds formarketplaces.
Today's episode is extremelyinteresting and I certainly
learned a lot.
I hope you enjoy it too,shirish.
Welcome to the podcast.
Speaker 2 (01:01):
Thank you very much, great to be with you.
Speaker 1 (01:03):
I've been looking forward to this podcast for many
reasons, but just the knowledgethat you have around
marketplaces and how it's kindof just reading your book I've
learned so many things.
It's incredible how you'vemanaged to condense it into a
book.
I'm a bit looking forward tointerviewing you, but more so
after the book.
(01:25):
I've got plenty of questionsfor you that I think our
listeners will enjoy as well.
For those that haven't don'tknow you haven't heard of you,
why don't you tell us a bitabout yourself and your
experience?
Speaker 2 (01:39):
You bet?
Yeah, I'm a native of Seattle.
I've been in the tech industryfor the last 35 years.
I started my career atMicrosoft in 1987.
This was one year after theMicrosoft IPO.
I worked for Microsoft forabout 12 years.
In that I did the acquisitionof Hotmail, which was one of the
(02:03):
biggest acquisitions thatMicrosoft did at that time, and
then launched MSNcom, whichbecame a top web portal.
Then, after that, I started myentrepreneurial journey.
I've done multiple startups,had multiple exits.
I now spend time writing booksI've written two books so far
(02:25):
and also advising and investingin startups.
Speaker 1 (02:30):
I think you're being quite humble there, sherish,
because I've done my research.
Yes, you worked 12 years atMicrosoft and in the acquisition
and then RIM Blackberry.
You also co-founded a companycalled Live Mocha, which became
the world's largest languagelearning site, which was then
sold to a little company calledRosetta Stone.
Sorry, I think you slightlyundersold yourself there Then.
(02:52):
Obviously, you're working nowas a TIE.
This is one of the reasons whyyou have this authority, because
when you talk about marketplaces, because of your time at
Live Mocha, where you built amarketplace and then you had
millions of members, 15 millionmembers.
Speaker 2 (03:12):
We had about 15 million members in 200 different
countries and that we had about300,000 language tutors around
the world.
We built this marketplace oflanguage learners and tutors,
where you got instruction fromLive Mocha, but also you could
sign up with one of the languagetutors to actually practice the
(03:35):
target language that you wereplanning to learn.
Speaker 1 (03:38):
I think that's a really important point because
within my industry of e-commerceand retail, when we think
marketplaces we predominantlythink of physical goods.
So your Amazon, your Ebay, yourEtsy, and obviously the new
wave of marketplaces that arebeing spun out by retailers such
(03:58):
as Walmart and so on You'retouching it within the book
marketplaces everywhere, fromAirbnb through to Alibaba and
obviously Live Mocha as well.
Your latest book because it'snot the first one that you've
written dives deep intomarketplaces, not just
(04:24):
dissecting the kind ofmarketplaces and the success
they've had, but actually howthey've been able to build those
marketplaces and really build aposition of, I guess, partly
monopoly, but, as the title says, the winner takes it all how
marketplaces are creatingmonopolies.
So why don't you talk to us abit about the inspiration?
Why did you write this book andwhy now?
Speaker 2 (04:46):
Yes.
So, as I mentioned just now, Ihad the opportunity to create
and run a marketplace, a largemarketplace at Live Mocha, with
15 million members and 300,000language tutors, so I understood
the dynamics of launching andscaling a marketplace and the
(05:10):
power it has, the networkeffects that are generated that
allow you to become a monopolyin that space.
So I've been fascinated bymarketplaces for a long time,
primarily because of the factthat as you establish a critical
mass of suppliers and consumers, then network effects kick in
(05:30):
and it becomes a virtuous cyclewhere, as you have more
consumers, more suppliers jointhe network.
As you have more suppliers,more consumers want to buy from
you because you have a widerange of suppliers, and it
becomes a virtuous cycle thatleads to a winner takes all.
A winner takes most kind ofsituation.
Speaker 1 (05:52):
We're going to touch on some of these things later on
, but the things around thenetwork effects and so on, how
have marketplaces predominantlymaybe the more known ones are
the ones within our sector, likeAmazon, like eBay and so on
evolved over the years?
Speaker 2 (06:14):
Yeah.
So Amazon, as you know, was aprimarily an e-commerce site
initially, and then they decidedthat, made a very important
strategic decision to open uptheir platform to other
suppliers and then to offerservices like fulfillment by
(06:35):
Amazon, and they were the firstplatform to do that and they
were very successful inattracting suppliers to that
platform.
Now they have about 2.3 millionsuppliers and they are the
dominant marketplace withmillions of suppliers.
(06:57):
Walmart, in contrast, alsotried to copy Amazon.
They were very late to themarket, as you know, and they
only have 50,000 suppliers,lastly, lower than Amazon, and
that's the reason that Amazonhas become a monopoly and
(07:19):
Walmart is a distant second.
So that's an example of Amazon.
Of course, ebay also has hadgreat success, though today,
auctions really makes up only10% of their sales.
Most of it is fixed price andthat's where they have lost to
(07:41):
Amazon and most suppliers onAmazon.
Most consumers prefer to go toAmazon first as opposed to eBay.
Speaker 1 (07:50):
Yeah, we're seeing that and obviously they made
that shift, I think, to kind ofpartly shake off also an image
that they had around, kind ofyou know, the type of customer
that would shop on eBay.
But that certainly changed.
You touch in your book aboutthe importance of trust from a
marketplace and the example youused was an Airbnb renter who
(08:14):
had their or host, who basicallyhad their house, their
apartment, ransacked byindividual and that was a
pivotal point, I think, withinAirbnb and how they approached
things, because there was thisassumed trust and then in an
instance that trust now becamequestionable.
And you touch on the eight waysthat marketplaces can really
(08:38):
ensure that there is thatcertainly perception, but there
is that trust between itself andthe customers.
What do you touch on?
A few of the most importantones?
Speaker 2 (08:50):
Yeah, establishing trust is super important for any
marketplace and that bringsgreater liquidity and greater
transactions in the marketplace.
So there are a variety of waysin which you can establish trust
.
The first and most common wayis through reviews and ratings.
You know, amazon does a verygood job, as you know, with that
(09:16):
.
A lot of people go to Amazon toresearch products and they look
at the ratings and reviews.
Now, certainly they have been.
Ratings and reviews have beenabused by suppliers with false
ratings, false reviews and soforth, so you have to invest in
algorithms to detect fakereviews and remove them from the
(09:38):
system to create more trust.
So that's one mechanism.
Another mechanism is throughinsurance.
So you refer to the Airbnbexample where the host home was
ransacked and so Amazon offers a$1 million insurance policy to
(10:07):
make sure that, if you are homeit's damaged in any way, that
you get insurance to cover theexpenses associated with
addressing that damage.
Yeah, you can't Airbnb sorry,Amazon Airbnb yes, yes, yes.
And then you have ESCO services.
(10:28):
This was something that waspioneered by Alibaba in China.
There was a lot of distrustwhether you paid for an item,
whether you would get the itemfrom the merchant, and so they
establish an ESCO service wherethe funds will be released to
the merchant only when theconsumer confirmed that they had
(10:53):
received the item and they weresatisfied with that item.
So those are some of the waysthat you can establish trust in
a marketplace.
Speaker 1 (11:03):
And I think that's the reason why I kind of brought
that up is, I think for a lotof merchants predominantly, or
even ones that don't sell onmarketplaces, or even businesses
in general, I think trust is areally important piece of
business.
Very few companies can kind ofpush trust to the side because
(11:24):
maybe they have such a dominantmarket position, but for anyone
that's doing anyone's inbusiness, they need to make sure
that there is that trustbetween themselves and their
customer.
And yeah, differentmarketplaces have different ways
and one of the things youtouched on, referring Alibaba,
was obviously different marketshave different I guess I won't
(11:48):
call them standards, but certainmarkets were happy to, you know
, would accept counterfeit goodsthat you might historically
have found on Alibaba, whereasobviously others weren't.
And I guess that's where maybecertain markets weren't really
suitable for Alibaba because itdidn't have the same success it
did in its home country.
You also touched on things likecommunication and just making
(12:10):
sure that the customer feelslike they're in control, to
things like refunds they'recritical to make sure that the
customer continues to come back,because you spoke about
different metrics such aslifetime value and so on, and
they will only happen when thecustomer is confident enough to
(12:31):
be able to go back a second timeand a third time and a fourth
time.
Speaker 2 (12:36):
Right, yeah, I mean.
There's also an example I giveabout OfferUp, which is in the
used goods market, and withCraigslist.
For example, in the US there'sa lot of distrust in using
Craigslist because there havebeen many examples of people
getting mugged and so forth.
When they meet, the consumersand suppliers meet to exchange
(12:59):
the item, and so with OfferUpthey have an identity
verification system which allowsyou to make sure that you're
really dealing with the rightperson and if something goes
wrong you can report that personto the police and so forth.
Speaker 1 (13:14):
Exactly, yeah, you also.
It's a very interesting pieceyou wrote about how can Airbnb
use Craigslist as their kind ofleading source to find.
I mean the Airbnb story thatI'd heard of many years ago.
There was an interview with oneof the co-founders, so it's a
(13:35):
very interesting story how theystarted up and the serial etc.
But actually just shows youthat finding this business is
now huge.
But actually at the beginningthey still had to be resourceful
.
And even Instacart as well,where the founder was the one
doing deliveries and so on.
And it just kind of goes toshow that not everything starts
from this kind of high level,heavily financed business, that
(14:00):
actually sometimes thoseco-founders were the ones that
rolled their sleeves up andactually did the heavy lifting
at the beginning to get thewheels moving.
And I think that's reallyencouraging to businesses
because you kind of see the endproduct, if you like, or
certainly the successful side ofthat part, but you don't see
all the heavy work and all thebeginning that the co-founder
(14:23):
put in to make that businessgrow.
You spoke briefly about kind ofcustomers.
What role do they play inmaking a marketplace a success
or not?
Speaker 2 (14:44):
Well, in terms of consumers and the impact on
marketplace, one of the thingsthat you can do is really track
what kinds of items they'relooking for, and that provides a
lot of useful research datathat you can use to populate
(15:07):
your marketplace with the rightset of suppliers.
But today people no longer goto Google to search for a
product.
They go to Amazon, and that'scertainly true for my own
behavior.
If I have a product that I wantto buy, then I first go to
Amazon and do my research andread all the reviews and so
(15:28):
forth.
So there's a lot of rich datathat you can gather from
consumers in how they use theplatform, and you can then use
that to better populate thesuppliers and also improve your
search algorithm so that you'rehighlighting the most useful and
(15:48):
most trusted items to theconsumers.
Speaker 1 (15:52):
Let's stay on that because, like you said, the
algorithms marketplace is havingto invest in technology for so
many different reasons, not justfrom the kind of front end, the
merchandising side, but, likewe've said, the security and
verification and so on.
Have you seen other examples ofany kind of technological
(16:15):
innovations that have reallymade an impact in the way that
marketplaces have evolved ormaybe been successful over the
last few years?
Speaker 2 (16:23):
Yeah, absolutely.
I mean, let's take the impactof mobile on marketplaces.
So Greglis, as you know, wasthe 800-pound gorilla in the
used goods marketplace in the USand it was hard to imagine that
somebody could come in anddisplace a monopoly in that
(16:47):
space.
But OfferUp didn't manage to dothat.
They took advantage of mobileto allow you to simply take a
picture of your used itemhousehold item and, very few
steps, published that on theirmarketplace and then engaged in
(17:08):
instant messaging with consumersto negotiate the appropriate
price and address any questionsthat the buyers would have.
And that was significantlybetter experience than what you
had with Craigslist, where youhad to use a PC to upload a
picture.
(17:29):
People would respond via emailand the suppliers would take
several days to respond back andso forth.
So that's one example.
Another example, of course, isUber.
The fact that mobile reallyenabled Uber to happen in the
first place.
But mobile you wouldn't havedrivers getting alerts on riders
(17:55):
in the neighborhood who arelooking for a ride and then you
know, watching on the phone,where the ride is and how far it
is and when it will arrive, andso forth was only possible
through location tracking andmobile.
Speaker 1 (18:12):
And with location tracking as well.
One of the really interestingcase studies that is in your
book is about convoy.
So just to kind of give a recapof the marketplaces that you
talk about, so we've gotInstacart, Airbnb, DoorDash and
OfferUp that you just mentioned,Alibaba, Convoy, Upwork and
Cazaver, and obviously you spokeabout Craigslist, Uber, Amazon,
(18:37):
eBay and OpenTable as well,which, again, we don't
traditionally think as amarketplace.
I mean define it and it's amarketplace, but we don't
necessarily kind of think ofthat as a marketplace.
So again, Convoy, because theyreally entered a market with a
lot of distrust.
(19:00):
You said that the Hauliers, thecompanies that had the trucks,
they didn't really trust thestatus quo as it was at the
moment, the companies that wereworking in that sector, because
the payments were late,sometimes the jobs didn't go
through, there was no trackingfor their customers as well to
be able to check things.
So when you speak about kind ofGPS on phones, again a system
(19:22):
like Convoy, that's what theydid to be able to track that
lorry use the phone's GPS andagain it's pretty native
technology.
The truck driver didn't have toupgrade to a particular type of
technology or buy an additionalfunctionality.
It was out of the smartphone,that this benefit kind of came
(19:45):
up.
And that's why, again, thisbook is so interesting for me,
because it just dissectsdifferent types of marketplaces
and how disruptors have justcome in and, like you say, just
knock the 800 pound or half aton for those metric gorilla
from the top spot, because maybethat company got complacent,
assumed they had a reallycomfortable position in the
(20:06):
market but actually didn'treally invest in better serving
their merchants at the end ofthe day their customers.
You spoke about network effects.
Why don't we just do a deeperdive around that?
(20:29):
Let's talk about networkeffects of marketplaces.
Speaker 2 (20:37):
Yeah, generally platforms enable network effects
once you get to a critical mass.
Of course getting off theground is very difficult because
suppliers don't want to comeuntil they're consumers.
Consumers don't want to comebecause there are no suppliers.
So I talk about how tojumpstart a marketplace in my
(21:01):
book.
But once you have critical mass, then more and more suppliers
join the platform because thereare lots of consumers.
And then more consumers jointhe platform to search for
products because there is a widearray of suppliers and it
becomes a virtuous cycle ofnetwork effects at that point to
(21:29):
allow more and more consumersuppliers to join the
marketplace.
Then ultimately it becomesmonopoly in that or winner takes
all or winner takes most kindof situation in that marketplace
.
Speaker 1 (21:42):
How do the different network effects?
You've got multi-tenantinglocal network effects.
Network effects.
Speaker 2 (21:57):
Is there a?
Speaker 1 (21:57):
transition that the marketplace goes through with
these network effects, or dothey all come at the same time?
How would a marketplacenavigate those things or be able
to achieve those variousnetwork effects?
Speaker 2 (22:09):
Yeah, so you talked about multi-tenanting.
That's a very important conceptand that will determine if a
marketplace can become amonopoly or not.
Yeah, so basically,multi-tenanting means being on
multiple marketplaces at thesame time.
I'll give you two examples Oneis Amazon, the other one is
(22:35):
Doordash.
In the case of Amazon, it isvery difficult for a supplier to
be multi-tenant between twomarketplaces because there's a
lot of work that if somebody ison Amazon, there's a lot of work
that they have to do to ensurethey have proper inventory, that
they are providing propercustomer support, they are
(22:59):
fulfilling the requests in atimely fashion.
All of that has to be managedand you generally have mom and
pop supplier millions of them onAmazon and it's very difficult
for them to be on a secondmarketplace, which is why
Walmart, even though they are amajor e-commerce player, has not
been able to really attractmore than 50,000 suppliers.
(23:20):
So that's why Amazon is the8,000 pound gorilla versus
Walmart in that space.
However, in the Doordashexample, you don't have millions
of suppliers.
You only have thousands ofrestaurants in a particular
region, and so it becomes easierfor a competitor to come in and
(23:41):
replicate that and it's easyfor a restaurant to multi-tenant
and be on multiple platforms,and that's why in the US, you
have three differentmarketplaces there's UberEats,
there's Doordash and thenthere's GrabHub to some extent,
and so it's a winner take mostsituation as opposed to winner
takes all type of situation.
Speaker 1 (24:04):
And you see that here in the UK as well, where we
have JustEat, we have Deliverooand we have UberEats as well.
So when you talk about thatkind of multi-tenanting it's
certainly kind of on a globallevel Tracking network effects
(24:26):
is you kind of dissect it quitedown, because there's only
really three major metrics thatyou talk about.
Before we do that, you talkabout power users.
So define a power user to beginwith.
Speaker 2 (24:41):
Well, I mean, a power user is somebody who frequently
logs into the marketplace andis somebody who purchases a lot
of products.
So typically with Amazon, forexample, anyone who's a prime
member tends to be a power user.
I certainly found that out withmy own behavior.
(25:03):
Before I signed up for Prime, Iwould not buy many items, but
once I became a Prime member andshipping essentially became
free, I was just going crazybuying lots of items on Amazon.
Yeah, so having power users isvery beneficial for your
business.
Speaker 1 (25:24):
And would you say the number of power users is going
up?
Because if you correlate it tothings like Prime membership,
fine, it can dip and so on, butactually with Prime membership
it opened out.
So you had power users beforePrime membership and now Prime
membership kind of opened upthat gate to so many more
(25:46):
consumers becoming power users.
Speaker 2 (25:49):
Yeah, I mean I think Amazon has like 200 million
Prime members and it's a way youknow.
What they found is that, eventhough they're getting code and
code free shipping, that at theend of the day they make more
revenue profitability with thosePrime members than people who
are not Prime members.
(26:10):
So it's to their benefit to getas many people signed up for
Prime as possible.
Speaker 1 (26:15):
Yeah, I mean I'm no longer a Prime member, but every
time I buy anything from Amazonyou get that pop up try Prime
Free.
Everything's pushing towardsyou, not necessarily, like you
say, signing up to Prime.
It's getting that second andthird and fourth order, which
obviously relates to lifetimevalue, ltv, one of the other
metrics that you talk aboutunder the umbrella of unit
(26:41):
economics.
How important of a metric isthat for a marketplace?
Speaker 2 (26:47):
Well, that's very important.
I mean the two main metricsthat a market needs to track is
lifetime value, which is theprofitability of that customer
over that customer's lifetime,and then the customer
acquisition cost.
And typically you want to havea ratio at least of three to one
between lifetime value andcustomer acquisition cost, if
(27:09):
not five to one ratio.
And, as I'm sure Amazon hasfound with Prime members, the
churn is pretty low, so lifetimevalue can be pretty significant
over time.
Speaker 1 (27:24):
Obviously, within that I mean I was driving the
other day and on the same roadthere were two Amazon bands, one
at Gold Beach End.
Obviously they've had to investin infrastructure, but, like
you say, 200 million members andit's not a massive amount as a
monthly fee but can found thatglobally and it's a huge revenue
stream then for, like you say,the profitability of those
customers.
You also talk about organic andpaid users, so obviously,
(27:50):
customer kind of acquisition,let's talk about that metric.
Why is that one important formarketplaces to monitor?
Speaker 2 (28:00):
Yeah, ultimately you want to have as many organic
users as possible versus paidusers.
Initially I understand that youwill have to invest in
advertising on Google orFacebook or whatever to attract
users to your platform, butthat's not really the best way
(28:23):
to build your user base.
Basically, you want the networkeffects to kick in and
basically consumers to be drawnto your platform organically.
So you're not really paying,there's no customer acquisition
costs really, and it's all pureprofitability from that point on
, once you have attracted thatuser to your platform.
Speaker 1 (28:48):
You also talk about curves, but I think they'll have
to buy the book to read aboutthat.
But it's really kind ofinteresting that actually the
metrics that go into making surethat your marketplace is on the
right trajectory and goingtowards the success is super
important.
(29:10):
How do you think marketplacesare going to evolve over the
next few years?
I mean, obviously, since COVID,e-commerce within our sector
has evolved considerably.
I think marketplaces have donetheir bit as well.
Airbnb obviously got hit quitebadly during the pandemic,
pretty much overnight, whereasother marketplaces like Amazon
saw the opposite and huge growth.
But where do you see any trendsin terms of marketplaces over
(29:33):
the coming years?
Speaker 2 (29:36):
I mean there are a number of different ways that
marketplaces can evolve.
One is to manage thetransaction end to end.
You've seen that with siteslike marketplaces like Angie's
List, for example.
So if you have some job thathas to be performed, in the old
(29:58):
days they would list a number ofhandymen or places that would
come in and do the job and you'dhave to search through them and
decide who you want to pick.
So instead of that, they allowyou to provide more information
about the job so you can uploadpictures of the work that has to
(30:23):
be done, and they havedifferent categories that you
can pick from and so forth, andultimately they will then take
that information, go to all thedifferent suppliers on the
network and come back withresponses, with somebody saying
okay, I'll take me $75 to do thejob or $150 to do the job, and
(30:44):
then you can decide who you wantto pick.
So there's more management ofthat transaction happening with
these second generation, thirdgeneration marketplaces.
The second trend that I can seeis using chat, tpd, for example
, to really improve theexperience.
(31:04):
So in the case of Airbnb, forexample, instead of searching
for a home rental, you coulddescribe hey, I want to go to
Sedona for my trip and can youplan my trip for me with all
kinds of not only just a homerental, but different kinds of
(31:25):
experiences and I've done thatmyself, actually with chat GPT.
I asked it to plan one of mytrips and it did a phenomenal
job of doing that, so I can seehow you can use large language
models to really create a wholenew transaction where all the
(31:46):
information is managed for you.
Speaker 1 (31:50):
I did an episode of SellerCast a few weeks ago
around kind of artificialintelligence and how systems
like chat, gbt can help.
But again you're so rightbecause not only are you making
the experience easier for thecustomer, for the consumer, for
the end user, but actually thenit's also making it more
(32:10):
comprehensive.
You're not just saying, likeyou said, here's the apartment
or the house or whatever it is.
You're actually then kind ofplanning out the rest of that
and that's a value add to theagain one of the network effects
, with the value adds to theconsumer experience.
For anyone wanting to breakinto the marketplace space, what
(32:36):
advice, apart from buy the bookand read it and learn as much
as you can, what advice wouldyou have for anyone wanting to
break into the space?
Speaker 2 (32:47):
Well, the one of the key things that I talk about in
my book is how to jumpstart amarketplace, and it's very
important to think long and hardabout how to do that.
And most of the time, you know,instead of launching on a
nationwide basis, it's veryimportant to do that on a
(33:08):
localized basis.
So again, I'll give you theexample of offer up.
When they launched, theirinitial focus was on the city of
Seattle and they basicallyestablished a critical mass in
the area of Seattle where peoplecould exchange used goods
(33:28):
through that platform.
In contrast, one of thecompetitors launched on a
nationwide basis and was notsuccessful.
Because, you know, if I havesomebody signing up from Seattle
and another person signing upfrom New York, it doesn't
benefit either party becausethey can't exchange local goods.
(33:48):
So you have to start with anarrow niche first and then
establish critical mass and then, once you have, once you know
how that playbook works in aspecific market, then replicate
that playbook in other markets,and you've seen others like
Instacart and Doordash followingthat same playbook.
Speaker 1 (34:12):
There's two things that I'm really glad you said.
The first one is playbook,because I think that's such an
important thing to do, which isput together, that playbook, so
that you can replicate anditerate as you expand.
And the first point you putaround kind of maybe starting
off really locally.
Somebody once told me kind ofthe example that they picked up
(34:34):
from the book as well, which isyou're trying to boil the
saucepan or you're trying toboil the ocean, because if you
try to boil the saucepan you'regoing to get that water boiling
and probably much faster ratethan trying to boil an ocean,
which is going to be near andimpossible.
So, as you said, with offer up,you start to start locally,
give that critical mass, thatsuccess, and then once you've
(34:55):
got your, your concept provenand you know all lined out, then
you really go, go all out inscale.
Where can listeners learn moreabout the book and obviously all
of their copy?
Speaker 2 (35:12):
Yeah, so obviously you can order my book from
Amazon.
I have actually self publishedthe book it was.
It's quite amazing really whatservices Amazon can provide.
You know, all I had to do wasto create the book in Microsoft
(35:33):
Word and create a book cover, upmore into Amazon and they print
on demand.
So I don't even have to holdinventory or pay for inventory.
It's all done for me.
So so definitely you can orderthe book on Amazon.
You can also go to my website,which is shirishnatkarnicom, and
you can learn about other booksI've written, as well as blog
(35:57):
articles.
I've written on various topics.
Speaker 1 (36:00):
We'll link to all of those in the show notes as well,
and if this is one to connectwith you, where's the best way
that they can do that?
Speaker 2 (36:07):
They can certainly connect with me on LinkedIn and
Twitter and I welcome all youknow connections.
I'm happy to meet with aspiringentrepreneurs and help them in
their journey.
Speaker 1 (36:23):
I said, I really found your book interesting and
also your, your career.
You've you've had a lot ofsuccess, a lot of experience,
and one of the things that weask, I guess, at the end of the
podcast is if there's a book orpodcast that they've recently
read that they'd like to sharewith listeners.
But what I'd like to ask you,nirish, is if you're to go back
(36:44):
and do it again, what's the onething that you would do which
you feel has led to your success?
Speaker 2 (36:53):
Yeah, the.
The one attribute that I feelhas been very helpful to me is
really having a learning mindset.
I've been very fortunate tohave been able to experience,
you know, initially withMicrosoft, the PC Devolution,
(37:14):
then the Internet, then mobile,now AI and so forth.
So along the way, what I havetried to do is to learn about
the different trends in themarket and see, you know, look
for opportunities and seizethose opportunities, and my
(37:35):
learning mindset has really beenvery helpful in that regard.
Speaker 1 (37:40):
I would share with you.
I mean, I enjoy learning.
There was a time when I, veryearly on in my career, I didn't
really feel the need to learn.
You know, you kind of there's aDunder Kruger effect but you
kind of feel that you know itall.
But actually it's true thatbecause you don't know what you
don't know and every daylearning something new, and you
kind of sometimes you see someinformation, sometimes how
(38:03):
grateful you are for havinglearned that thing, because
actually that's something thatcompletely changes your approach
or your mindset or just opensup whole new opportunities.
So a learning mindset for sure,you know, and I guess it's
encouraging that I share that.
So, you know, hopefully I getto share some, some success in
(38:25):
future as well.
Well, it's been a pleasuretalking to you.
Your book we're Takes All CaseStudies in how Online
Marketplaces Are CreativeMonopolies Available on Amazon
and on your website as well.
I would urge anyone who isinterested in not necessarily
setting up a marketplace buteven just understanding how they
(38:46):
work and how they, theirbusiness can, can kind of
capitalize on on marketplaces,to get a copy.
You know it's very interesting,going to into incredible depth.
I've for sure learned a lotfrom it and very glad that I got
the opportunity to speak withyou.
Speaker 2 (39:03):
Thanks so much.
It's been a great interview andreally enjoyed talking to you.
Speaker 1 (39:07):
Excellent.
Well, I've enjoyed it as well,and thank you very much for your
time.
Okay, Thank you very much.
Thank you.
Thank you for listening to theBigCommerce Podcast.
If you've enjoyed today'sepisode, please leave a review
on your favorite podcastplatform and if you haven't
already, please subscribe tolearn more about our podcast,
(39:27):
listen to previous episodes orget in contact.
Please visit our website at thebigcommercepodcastcom and make
sure you're following us on oursocial media, on Instagram and
Twitter.
Until next week.
Thank you very much.
Hi, welcome to the Big Commerce Podcast.
Hello, welcome to a brand newepisode of the Big Commerce
Podcast.
My name is Luigi and in today'sepisode, I'm joined by Shirish
Nadkani.
Shirish is a successful serialentrepreneur who's worked for
the likes of Microsoft duringthe Hotmail acquisition and the
launch of MSN.
He's worked for ResearchEmotion and also co-founded the
(00:25):
world's largest languagelearning site, livemoker, which
was then sold to Rosetta Stone.
In today's episode, weunderstand how marketplaces like
Amazon, ebay and Airbnb haveevolved over the years, how
trust plays a huge role inonline shopping and marketplaces
, and how marketplaces buildtrust with their customers, how
marketplaces have transformedtraditional business models and
(00:48):
what the future holds formarketplaces.
Today's episode is extremelyinteresting and I certainly
learned a lot.
I hope you enjoy it too,shirish.
Welcome to the podcast.
Speaker 2 (01:01):
Thank you very much, great to be with you.
Speaker 1 (01:03):
I've been looking forward to this podcast for many
reasons, but just the knowledgethat you have around
marketplaces and how it's kindof just reading your book I've
learned so many things.
It's incredible how you'vemanaged to condense it into a
book.
I'm a bit looking forward tointerviewing you, but more so
after the book.
(01:25):
I've got plenty of questionsfor you that I think our
listeners will enjoy as well.
For those that haven't don'tknow you haven't heard of you,
why don't you tell us a bitabout yourself and your
experience?
Speaker 2 (01:39):
You bet?
Yeah, I'm a native of Seattle.
I've been in the tech industryfor the last 35 years.
I started my career atMicrosoft in 1987.
This was one year after theMicrosoft IPO.
I worked for Microsoft forabout 12 years.
In that I did the acquisitionof Hotmail, which was one of the
(02:03):
biggest acquisitions thatMicrosoft did at that time, and
then launched MSNcom, whichbecame a top web portal.
Then, after that, I started myentrepreneurial journey.
I've done multiple startups,had multiple exits.
I now spend time writing booksI've written two books so far
(02:25):
and also advising and investingin startups.
Speaker 1 (02:30):
I think you're being quite humble there, sherish,
because I've done my research.
Yes, you worked 12 years atMicrosoft and in the acquisition
and then RIM Blackberry.
You also co-founded a companycalled Live Mocha, which became
the world's largest languagelearning site, which was then
sold to a little company calledRosetta Stone.
Sorry, I think you slightlyundersold yourself there Then.
(02:52):
Obviously, you're working nowas a TIE.
This is one of the reasons whyyou have this authority, because
when you talk about marketplaces, because of your time at
Live Mocha, where you built amarketplace and then you had
millions of members, 15 millionmembers.
Speaker 2 (03:12):
We had about 15 million members in 200 different
countries and that we had about300,000 language tutors around
the world.
We built this marketplace oflanguage learners and tutors,
where you got instruction fromLive Mocha, but also you could
sign up with one of the languagetutors to actually practice the
(03:35):
target language that you wereplanning to learn.
Speaker 1 (03:38):
I think that's a really important point because
within my industry of e-commerceand retail, when we think
marketplaces we predominantlythink of physical goods.
So your Amazon, your Ebay, yourEtsy, and obviously the new
wave of marketplaces that arebeing spun out by retailers such
(03:58):
as Walmart and so on You'retouching it within the book
marketplaces everywhere, fromAirbnb through to Alibaba and
obviously Live Mocha as well.
Your latest book because it'snot the first one that you've
written dives deep intomarketplaces, not just
(04:24):
dissecting the kind ofmarketplaces and the success
they've had, but actually howthey've been able to build those
marketplaces and really build aposition of, I guess, partly
monopoly, but, as the title says, the winner takes it all how
marketplaces are creatingmonopolies.
So why don't you talk to us abit about the inspiration?
Why did you write this book andwhy now?
Speaker 2 (04:46):
Yes.
So, as I mentioned just now, Ihad the opportunity to create
and run a marketplace, a largemarketplace at Live Mocha, with
15 million members and 300,000language tutors, so I understood
the dynamics of launching andscaling a marketplace and the
(05:10):
power it has, the networkeffects that are generated that
allow you to become a monopolyin that space.
So I've been fascinated bymarketplaces for a long time,
primarily because of the factthat as you establish a critical
mass of suppliers and consumers, then network effects kick in
(05:30):
and it becomes a virtuous cyclewhere, as you have more
consumers, more suppliers jointhe network.
As you have more suppliers,more consumers want to buy from
you because you have a widerange of suppliers, and it
becomes a virtuous cycle thatleads to a winner takes all.
A winner takes most kind ofsituation.
Speaker 1 (05:52):
We're going to touch on some of these things later on
, but the things around thenetwork effects and so on, how
have marketplaces predominantlymaybe the more known ones are
the ones within our sector, likeAmazon, like eBay and so on
evolved over the years?
Speaker 2 (06:14):
Yeah.
So Amazon, as you know, was aprimarily an e-commerce site
initially, and then they decidedthat, made a very important
strategic decision to open uptheir platform to other
suppliers and then to offerservices like fulfillment by
(06:35):
Amazon, and they were the firstplatform to do that and they
were very successful inattracting suppliers to that
platform.
Now they have about 2.3 millionsuppliers and they are the
dominant marketplace withmillions of suppliers.
(06:57):
Walmart, in contrast, alsotried to copy Amazon.
They were very late to themarket, as you know, and they
only have 50,000 suppliers,lastly, lower than Amazon, and
that's the reason that Amazonhas become a monopoly and
(07:19):
Walmart is a distant second.
So that's an example of Amazon.
Of course, ebay also has hadgreat success, though today,
auctions really makes up only10% of their sales.
Most of it is fixed price andthat's where they have lost to
(07:41):
Amazon and most suppliers onAmazon.
Most consumers prefer to go toAmazon first as opposed to eBay.
Speaker 1 (07:50):
Yeah, we're seeing that and obviously they made
that shift, I think, to kind ofpartly shake off also an image
that they had around, kind ofyou know, the type of customer
that would shop on eBay.
But that certainly changed.
You touch in your book aboutthe importance of trust from a
marketplace and the example youused was an Airbnb renter who
(08:14):
had their or host, who basicallyhad their house, their
apartment, ransacked byindividual and that was a
pivotal point, I think, withinAirbnb and how they approached
things, because there was thisassumed trust and then in an
instance that trust now becamequestionable.
And you touch on the eight waysthat marketplaces can really
(08:38):
ensure that there is thatcertainly perception, but there
is that trust between itself andthe customers.
What do you touch on?
A few of the most importantones?
Speaker 2 (08:50):
Yeah, establishing trust is super important for any
marketplace and that bringsgreater liquidity and greater
transactions in the marketplace.
So there are a variety of waysin which you can establish trust
.
The first and most common wayis through reviews and ratings.
You know, amazon does a verygood job, as you know, with that
(09:16):
.
A lot of people go to Amazon toresearch products and they look
at the ratings and reviews.
Now, certainly they have been.
Ratings and reviews have beenabused by suppliers with false
ratings, false reviews and soforth, so you have to invest in
algorithms to detect fakereviews and remove them from the
(09:38):
system to create more trust.
So that's one mechanism.
Another mechanism is throughinsurance.
So you refer to the Airbnbexample where the host home was
ransacked and so Amazon offers a$1 million insurance policy to
(10:07):
make sure that, if you are homeit's damaged in any way, that
you get insurance to cover theexpenses associated with
addressing that damage.
Yeah, you can't Airbnb sorry,Amazon Airbnb yes, yes, yes.
And then you have ESCO services.
(10:28):
This was something that waspioneered by Alibaba in China.
There was a lot of distrustwhether you paid for an item,
whether you would get the itemfrom the merchant, and so they
establish an ESCO service wherethe funds will be released to
the merchant only when theconsumer confirmed that they had
(10:53):
received the item and they weresatisfied with that item.
So those are some of the waysthat you can establish trust in
a marketplace.
Speaker 1 (11:03):
And I think that's the reason why I kind of brought
that up is, I think for a lotof merchants predominantly, or
even ones that don't sell onmarketplaces, or even businesses
in general, I think trust is areally important piece of
business.
Very few companies can kind ofpush trust to the side because
(11:24):
maybe they have such a dominantmarket position, but for anyone
that's doing anyone's inbusiness, they need to make sure
that there is that trustbetween themselves and their
customer.
And yeah, differentmarketplaces have different ways
and one of the things youtouched on, referring Alibaba,
was obviously different marketshave different I guess I won't
(11:48):
call them standards, but certainmarkets were happy to, you know
, would accept counterfeit goodsthat you might historically
have found on Alibaba, whereasobviously others weren't.
And I guess that's where maybecertain markets weren't really
suitable for Alibaba because itdidn't have the same success it
did in its home country.
You also touched on things likecommunication and just making
(12:10):
sure that the customer feelslike they're in control, to
things like refunds they'recritical to make sure that the
customer continues to come back,because you spoke about
different metrics such aslifetime value and so on, and
they will only happen when thecustomer is confident enough to
(12:31):
be able to go back a second timeand a third time and a fourth
time.
Speaker 2 (12:36):
Right, yeah, I mean.
There's also an example I giveabout OfferUp, which is in the
used goods market, and withCraigslist.
For example, in the US there'sa lot of distrust in using
Craigslist because there havebeen many examples of people
getting mugged and so forth.
When they meet, the consumersand suppliers meet to exchange
(12:59):
the item, and so with OfferUpthey have an identity
verification system which allowsyou to make sure that you're
really dealing with the rightperson and if something goes
wrong you can report that personto the police and so forth.
Speaker 1 (13:14):
Exactly, yeah, you also.
It's a very interesting pieceyou wrote about how can Airbnb
use Craigslist as their kind ofleading source to find.
I mean the Airbnb story thatI'd heard of many years ago.
There was an interview with oneof the co-founders, so it's a
(13:35):
very interesting story how theystarted up and the serial etc.
But actually just shows youthat finding this business is
now huge.
But actually at the beginningthey still had to be resourceful
.
And even Instacart as well,where the founder was the one
doing deliveries and so on.
And it just kind of goes toshow that not everything starts
from this kind of high level,heavily financed business, that
(14:00):
actually sometimes thoseco-founders were the ones that
rolled their sleeves up andactually did the heavy lifting
at the beginning to get thewheels moving.
And I think that's reallyencouraging to businesses
because you kind of see the endproduct, if you like, or
certainly the successful side ofthat part, but you don't see
all the heavy work and all thebeginning that the co-founder
(14:23):
put in to make that businessgrow.
You spoke briefly about kind ofcustomers.
What role do they play inmaking a marketplace a success
or not?
Speaker 2 (14:44):
Well, in terms of consumers and the impact on
marketplace, one of the thingsthat you can do is really track
what kinds of items they'relooking for, and that provides a
lot of useful research datathat you can use to populate
(15:07):
your marketplace with the rightset of suppliers.
But today people no longer goto Google to search for a
product.
They go to Amazon, and that'scertainly true for my own
behavior.
If I have a product that I wantto buy, then I first go to
Amazon and do my research andread all the reviews and so
(15:28):
forth.
So there's a lot of rich datathat you can gather from
consumers in how they use theplatform, and you can then use
that to better populate thesuppliers and also improve your
search algorithm so that you'rehighlighting the most useful and
(15:48):
most trusted items to theconsumers.
Speaker 1 (15:52):
Let's stay on that because, like you said, the
algorithms marketplace is havingto invest in technology for so
many different reasons, not justfrom the kind of front end, the
merchandising side, but, likewe've said, the security and
verification and so on.
Have you seen other examples ofany kind of technological
(16:15):
innovations that have reallymade an impact in the way that
marketplaces have evolved ormaybe been successful over the
last few years?
Speaker 2 (16:23):
Yeah, absolutely.
I mean, let's take the impactof mobile on marketplaces.
So Greglis, as you know, wasthe 800-pound gorilla in the
used goods marketplace in the USand it was hard to imagine that
somebody could come in anddisplace a monopoly in that
(16:47):
space.
But OfferUp didn't manage to dothat.
They took advantage of mobileto allow you to simply take a
picture of your used itemhousehold item and, very few
steps, published that on theirmarketplace and then engaged in
(17:08):
instant messaging with consumersto negotiate the appropriate
price and address any questionsthat the buyers would have.
And that was significantlybetter experience than what you
had with Craigslist, where youhad to use a PC to upload a
picture.
(17:29):
People would respond via emailand the suppliers would take
several days to respond back andso forth.
So that's one example.
Another example, of course, isUber.
The fact that mobile reallyenabled Uber to happen in the
first place.
But mobile you wouldn't havedrivers getting alerts on riders
(17:55):
in the neighborhood who arelooking for a ride and then you
know, watching on the phone,where the ride is and how far it
is and when it will arrive, andso forth was only possible
through location tracking andmobile.
Speaker 1 (18:12):
And with location tracking as well.
One of the really interestingcase studies that is in your
book is about convoy.
So just to kind of give a recapof the marketplaces that you
talk about, so we've gotInstacart, Airbnb, DoorDash and
OfferUp that you just mentioned,Alibaba, Convoy, Upwork and
Cazaver, and obviously you spokeabout Craigslist, Uber, Amazon,
(18:37):
eBay and OpenTable as well,which, again, we don't
traditionally think as amarketplace.
I mean define it and it's amarketplace, but we don't
necessarily kind of think ofthat as a marketplace.
So again, Convoy, because theyreally entered a market with a
lot of distrust.
(19:00):
You said that the Hauliers, thecompanies that had the trucks,
they didn't really trust thestatus quo as it was at the
moment, the companies that wereworking in that sector, because
the payments were late,sometimes the jobs didn't go
through, there was no trackingfor their customers as well to
be able to check things.
So when you speak about kind ofGPS on phones, again a system
(19:22):
like Convoy, that's what theydid to be able to track that
lorry use the phone's GPS andagain it's pretty native
technology.
The truck driver didn't have toupgrade to a particular type of
technology or buy an additionalfunctionality.
It was out of the smartphone,that this benefit kind of came
(19:45):
up.
And that's why, again, thisbook is so interesting for me,
because it just dissectsdifferent types of marketplaces
and how disruptors have justcome in and, like you say, just
knock the 800 pound or half aton for those metric gorilla
from the top spot, because maybethat company got complacent,
assumed they had a reallycomfortable position in the
(20:06):
market but actually didn'treally invest in better serving
their merchants at the end ofthe day their customers.
You spoke about network effects.
Why don't we just do a deeperdive around that?
(20:29):
Let's talk about networkeffects of marketplaces.
Speaker 2 (20:37):
Yeah, generally platforms enable network effects
once you get to a critical mass.
Of course getting off theground is very difficult because
suppliers don't want to comeuntil they're consumers.
Consumers don't want to comebecause there are no suppliers.
So I talk about how tojumpstart a marketplace in my
(21:01):
book.
But once you have critical mass, then more and more suppliers
join the platform because thereare lots of consumers.
And then more consumers jointhe platform to search for
products because there is a widearray of suppliers and it
becomes a virtuous cycle ofnetwork effects at that point to
(21:29):
allow more and more consumersuppliers to join the
marketplace.
Then ultimately it becomesmonopoly in that or winner takes
all or winner takes most kindof situation in that marketplace
.
Speaker 1 (21:42):
How do the different network effects?
You've got multi-tenantinglocal network effects.
Network effects.
Speaker 2 (21:57):
Is there a?
Speaker 1 (21:57):
transition that the marketplace goes through with
these network effects, or dothey all come at the same time?
How would a marketplacenavigate those things or be able
to achieve those variousnetwork effects?
Speaker 2 (22:09):
Yeah, so you talked about multi-tenanting.
That's a very important conceptand that will determine if a
marketplace can become amonopoly or not.
Yeah, so basically,multi-tenanting means being on
multiple marketplaces at thesame time.
I'll give you two examples Oneis Amazon, the other one is
(22:35):
Doordash.
In the case of Amazon, it isvery difficult for a supplier to
be multi-tenant between twomarketplaces because there's a
lot of work that if somebody ison Amazon, there's a lot of work
that they have to do to ensurethey have proper inventory, that
they are providing propercustomer support, they are
(22:59):
fulfilling the requests in atimely fashion.
All of that has to be managedand you generally have mom and
pop supplier millions of them onAmazon and it's very difficult
for them to be on a secondmarketplace, which is why
Walmart, even though they are amajor e-commerce player, has not
been able to really attractmore than 50,000 suppliers.
(23:20):
So that's why Amazon is the8,000 pound gorilla versus
Walmart in that space.
However, in the Doordashexample, you don't have millions
of suppliers.
You only have thousands ofrestaurants in a particular
region, and so it becomes easierfor a competitor to come in and
(23:41):
replicate that and it's easyfor a restaurant to multi-tenant
and be on multiple platforms,and that's why in the US, you
have three differentmarketplaces there's UberEats,
there's Doordash and thenthere's GrabHub to some extent,
and so it's a winner take mostsituation as opposed to winner
takes all type of situation.
Speaker 1 (24:04):
And you see that here in the UK as well, where we
have JustEat, we have Deliverooand we have UberEats as well.
So when you talk about thatkind of multi-tenanting it's
certainly kind of on a globallevel Tracking network effects
(24:26):
is you kind of dissect it quitedown, because there's only
really three major metrics thatyou talk about.
Before we do that, you talkabout power users.
So define a power user to beginwith.
Speaker 2 (24:41):
Well, I mean, a power user is somebody who frequently
logs into the marketplace andis somebody who purchases a lot
of products.
So typically with Amazon, forexample, anyone who's a prime
member tends to be a power user.
I certainly found that out withmy own behavior.
(25:03):
Before I signed up for Prime, Iwould not buy many items, but
once I became a Prime member andshipping essentially became
free, I was just going crazybuying lots of items on Amazon.
Yeah, so having power users isvery beneficial for your
business.
Speaker 1 (25:24):
And would you say the number of power users is going
up?
Because if you correlate it tothings like Prime membership,
fine, it can dip and so on, butactually with Prime membership
it opened out.
So you had power users beforePrime membership and now Prime
membership kind of opened upthat gate to so many more
(25:46):
consumers becoming power users.
Speaker 2 (25:49):
Yeah, I mean I think Amazon has like 200 million
Prime members and it's a way youknow.
What they found is that, eventhough they're getting code and
code free shipping, that at theend of the day they make more
revenue profitability with thosePrime members than people who
are not Prime members.
(26:10):
So it's to their benefit to getas many people signed up for
Prime as possible.
Speaker 1 (26:15):
Yeah, I mean I'm no longer a Prime member, but every
time I buy anything from Amazonyou get that pop up try Prime
Free.
Everything's pushing towardsyou, not necessarily, like you
say, signing up to Prime.
It's getting that second andthird and fourth order, which
obviously relates to lifetimevalue, ltv, one of the other
metrics that you talk aboutunder the umbrella of unit
(26:41):
economics.
How important of a metric isthat for a marketplace?
Speaker 2 (26:47):
Well, that's very important.
I mean the two main metricsthat a market needs to track is
lifetime value, which is theprofitability of that customer
over that customer's lifetime,and then the customer
acquisition cost.
And typically you want to havea ratio at least of three to one
between lifetime value andcustomer acquisition cost, if
(27:09):
not five to one ratio.
And, as I'm sure Amazon hasfound with Prime members, the
churn is pretty low, so lifetimevalue can be pretty significant
over time.
Speaker 1 (27:24):
Obviously, within that I mean I was driving the
other day and on the same roadthere were two Amazon bands, one
at Gold Beach End.
Obviously they've had to investin infrastructure, but, like
you say, 200 million members andit's not a massive amount as a
monthly fee but can found thatglobally and it's a huge revenue
stream then for, like you say,the profitability of those
customers.
You also talk about organic andpaid users, so obviously,
(27:50):
customer kind of acquisition,let's talk about that metric.
Why is that one important formarketplaces to monitor?
Speaker 2 (28:00):
Yeah, ultimately you want to have as many organic
users as possible versus paidusers.
Initially I understand that youwill have to invest in
advertising on Google orFacebook or whatever to attract
users to your platform, butthat's not really the best way
(28:23):
to build your user base.
Basically, you want the networkeffects to kick in and
basically consumers to be drawnto your platform organically.
So you're not really paying,there's no customer acquisition
costs really, and it's all pureprofitability from that point on
, once you have attracted thatuser to your platform.
Speaker 1 (28:48):
You also talk about curves, but I think they'll have
to buy the book to read aboutthat.
But it's really kind ofinteresting that actually the
metrics that go into making surethat your marketplace is on the
right trajectory and goingtowards the success is super
important.
(29:10):
How do you think marketplacesare going to evolve over the
next few years?
I mean, obviously, since COVID,e-commerce within our sector
has evolved considerably.
I think marketplaces have donetheir bit as well.
Airbnb obviously got hit quitebadly during the pandemic,
pretty much overnight, whereasother marketplaces like Amazon
saw the opposite and huge growth.
But where do you see any trendsin terms of marketplaces over
(29:33):
the coming years?
Speaker 2 (29:36):
I mean there are a number of different ways that
marketplaces can evolve.
One is to manage thetransaction end to end.
You've seen that with siteslike marketplaces like Angie's
List, for example.
So if you have some job thathas to be performed, in the old
(29:58):
days they would list a number ofhandymen or places that would
come in and do the job and you'dhave to search through them and
decide who you want to pick.
So instead of that, they allowyou to provide more information
about the job so you can uploadpictures of the work that has to
(30:23):
be done, and they havedifferent categories that you
can pick from and so forth, andultimately they will then take
that information, go to all thedifferent suppliers on the
network and come back withresponses, with somebody saying
okay, I'll take me $75 to do thejob or $150 to do the job, and
(30:44):
then you can decide who you wantto pick.
So there's more management ofthat transaction happening with
these second generation, thirdgeneration marketplaces.
The second trend that I can seeis using chat, tpd, for example
, to really improve theexperience.
(31:04):
So in the case of Airbnb, forexample, instead of searching
for a home rental, you coulddescribe hey, I want to go to
Sedona for my trip and can youplan my trip for me with all
kinds of not only just a homerental, but different kinds of
(31:25):
experiences and I've done thatmyself, actually with chat GPT.
I asked it to plan one of mytrips and it did a phenomenal
job of doing that, so I can seehow you can use large language
models to really create a wholenew transaction where all the
(31:46):
information is managed for you.
Speaker 1 (31:50):
I did an episode of SellerCast a few weeks ago
around kind of artificialintelligence and how systems
like chat, gbt can help.
But again you're so rightbecause not only are you making
the experience easier for thecustomer, for the consumer, for
the end user, but actually thenit's also making it more
(32:10):
comprehensive.
You're not just saying, likeyou said, here's the apartment
or the house or whatever it is.
You're actually then kind ofplanning out the rest of that
and that's a value add to theagain one of the network effects
, with the value adds to theconsumer experience.
For anyone wanting to breakinto the marketplace space, what
(32:36):
advice, apart from buy the bookand read it and learn as much
as you can, what advice wouldyou have for anyone wanting to
break into the space?
Speaker 2 (32:47):
Well, the one of the key things that I talk about in
my book is how to jumpstart amarketplace, and it's very
important to think long and hardabout how to do that.
And most of the time, you know,instead of launching on a
nationwide basis, it's veryimportant to do that on a
(33:08):
localized basis.
So again, I'll give you theexample of offer up.
When they launched, theirinitial focus was on the city of
Seattle and they basicallyestablished a critical mass in
the area of Seattle where peoplecould exchange used goods
(33:28):
through that platform.
In contrast, one of thecompetitors launched on a
nationwide basis and was notsuccessful.
Because, you know, if I havesomebody signing up from Seattle
and another person signing upfrom New York, it doesn't
benefit either party becausethey can't exchange local goods.
(33:48):
So you have to start with anarrow niche first and then
establish critical mass and then, once you have, once you know
how that playbook works in aspecific market, then replicate
that playbook in other markets,and you've seen others like
Instacart and Doordash followingthat same playbook.
Speaker 1 (34:12):
There's two things that I'm really glad you said.
The first one is playbook,because I think that's such an
important thing to do, which isput together, that playbook, so
that you can replicate anditerate as you expand.
And the first point you putaround kind of maybe starting
off really locally.
Somebody once told me kind ofthe example that they picked up
(34:34):
from the book as well, which isyou're trying to boil the
saucepan or you're trying toboil the ocean, because if you
try to boil the saucepan you'regoing to get that water boiling
and probably much faster ratethan trying to boil an ocean,
which is going to be near andimpossible.
So, as you said, with offer up,you start to start locally,
give that critical mass, thatsuccess, and then once you've
(34:55):
got your, your concept provenand you know all lined out, then
you really go, go all out inscale.
Where can listeners learn moreabout the book and obviously all
of their copy?
Speaker 2 (35:12):
Yeah, so obviously you can order my book from
Amazon.
I have actually self publishedthe book it was.
It's quite amazing really whatservices Amazon can provide.
You know, all I had to do wasto create the book in Microsoft
(35:33):
Word and create a book cover, upmore into Amazon and they print
on demand.
So I don't even have to holdinventory or pay for inventory.
It's all done for me.
So so definitely you can orderthe book on Amazon.
You can also go to my website,which is shirishnatkarnicom, and
you can learn about other booksI've written, as well as blog
(35:57):
articles.
I've written on various topics.
Speaker 1 (36:00):
We'll link to all of those in the show notes as well,
and if this is one to connectwith you, where's the best way
that they can do that?
Speaker 2 (36:07):
They can certainly connect with me on LinkedIn and
Twitter and I welcome all youknow connections.
I'm happy to meet with aspiringentrepreneurs and help them in
their journey.
Speaker 1 (36:23):
I said, I really found your book interesting and
also your, your career.
You've you've had a lot ofsuccess, a lot of experience,
and one of the things that weask, I guess, at the end of the
podcast is if there's a book orpodcast that they've recently
read that they'd like to sharewith listeners.
But what I'd like to ask you,nirish, is if you're to go back
(36:44):
and do it again, what's the onething that you would do which
you feel has led to your success?
Speaker 2 (36:53):
Yeah, the.
The one attribute that I feelhas been very helpful to me is
really having a learning mindset.
I've been very fortunate tohave been able to experience,
you know, initially withMicrosoft, the PC Devolution,
(37:14):
then the Internet, then mobile,now AI and so forth.
So along the way, what I havetried to do is to learn about
the different trends in themarket and see, you know, look
for opportunities and seizethose opportunities, and my
(37:35):
learning mindset has really beenvery helpful in that regard.
Speaker 1 (37:40):
I would share with you.
I mean, I enjoy learning.
There was a time when I, veryearly on in my career, I didn't
really feel the need to learn.
You know, you kind of there's aDunder Kruger effect but you
kind of feel that you know itall.
But actually it's true thatbecause you don't know what you
don't know and every daylearning something new, and you
kind of sometimes you see someinformation, sometimes how
(38:03):
grateful you are for havinglearned that thing, because
actually that's something thatcompletely changes your approach
or your mindset or just opensup whole new opportunities.
So a learning mindset for sure,you know, and I guess it's
encouraging that I share that.
So, you know, hopefully I getto share some, some success in
(38:25):
future as well.
Well, it's been a pleasuretalking to you.
Your book we're Takes All CaseStudies in how Online
Marketplaces Are CreativeMonopolies Available on Amazon
and on your website as well.
I would urge anyone who isinterested in not necessarily
setting up a marketplace buteven just understanding how they
(38:46):
work and how they, theirbusiness can, can kind of
capitalize on on marketplaces,to get a copy.
You know it's very interesting,going to into incredible depth.
I've for sure learned a lotfrom it and very glad that I got
the opportunity to speak withyou.
Speaker 2 (39:03):
Thanks so much.
It's been a great interview andreally enjoyed talking to you.
Speaker 1 (39:07):
Excellent.
Well, I've enjoyed it as well,and thank you very much for your
time.
Okay, Thank you very much.
Thank you.
Thank you for listening to theBigCommerce Podcast.
If you've enjoyed today'sepisode, please leave a review
on your favorite podcastplatform and if you haven't
already, please subscribe tolearn more about our podcast,
(39:27):
listen to previous episodes orget in contact.
Please visit our website at thebigcommercepodcastcom and make
sure you're following us on oursocial media, on Instagram and
Twitter.
Until next week.
Thank you very much.
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