Why It’s So Hard to Create Marketplaces for Local Commerce

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GrowthAmong tech types, there’s near-universal approbation of Uber. The transportation app has investors fawning over its success at building a marketplace capable of disrupting an industry while keeping margins high and costs of scale low. Recognizing the opportunity, startups and incumbents alike have rushed to replicate Uber’s model in other verticals, developing new products to help business and consumers buy and sell local services like car repair, house cleaning, and haircuts.

But here’s the thing about marketplaces: they’re hard. And most fail. They have an implicit need to attract both demand and supply, and the reality that each side tends to wait for the other makes successes like Uber (and Etsy and EBay before it) a rarity. Most wither, while some, like Zappos, move away from middle, and become a simpler reseller of goods to consumers.

That problem is even more acute in a fragmented local market where the guts of most businesses — the inventory, payment capabilities, and booking systems — are either siloed in legacy software or kept offline using pen and paper. For local marketplace plays, these operations systems are critical in making the onboarding process easy and seamless for an already tentative small business market. Otherwise, technology companies are forced to not only sell a business’s product, but help them bring it to market as well.

We’ve already seen ReachLocal, for instance, steer away from its original “Uber for home-services” concept, ClubLocal, in favor of a white-labeled version of the technology, ReachCommerce, which allows the company to sell software to the supply-side (businesses) without worrying about generating consumer demand. Meanwhile, Yelp has taking what we might call the industry-as-a-marketplace approach, feeding demand into a number of supply-side partners like ReachCommerce and Booker. The move buttresses the growing ecosystem of supply-side players while hurting the ability of marketplaces to capture unfilled demand from Yelp users looking for a more transactional experience.

However, MyTime, the 9-month old project launched by RedBeacon founder Ethan Anderson, is staying the course. Since launching in February, the service, which allows users to book and buy fixed-price services like haircuts and dental cleanings, has seen good pickup in San Francisco and Los Angeles. And earlier this month, the company released its first mobile app to a warm reception, garnering positive reviews in the tech press.

The company, at its core, is a marketplace. The software integrates with businesses calendars, accessing the time slots that serve as the inventory for service businesses, and allows consumers to browse, reserve and pay for these services entirely within its app or website. MyTime passes the funds onto merchants within seven days, taking a small cut of each transaction.

When I spoke with Anderson last week, he outlined a few key strategic decisions and clever hacks, which have helped the company get some early traction for its marketplace:

  • Flexible Technology: Maybe the most important lesson which Anderson shared was the need to build flexible technology, capable of adapting to the unique needs of every business. For MyTime, the company needed to account for various business models within the salon industry, in which some stylists work autonomously, renting seats, while others are full-time employees of a company. To account, the company built out profiles for each potential combination, and then its sales staff manages the onboarding process for each business directly.
  • Concierge Upsell: With the launch of its iOS app, MyTime went national — to an extent. The company uploaded 2 million business profiles to its system, allowing users to browse basic information like name and address across the country but without the calendar integrations needed to book appointments. However, when a user requests an appointment from one of (many) business, which do not work with MyTime directly, a sales rep will book the appointment on behalf of the user, and in doing so, try to onboard that merchant onto the platform. Anderson says 70% of the businesses end up signing up.
  • The Business Graph: From a user experience perspective, says Anderson, it’s not necessarily important to have a density of business within a given location. What’s important is having every business a user goes to on the platform. The service allows users to add business to a favorites list — either manually or by uploading their contacts or check-ins from Foursquare — and then the sales team will call those business directly to onboard them to the platform. Think of it as personalizing the business acquisition strategy to the user’s own business graph.
  • The User Graph: Now invert that tactic. The company is also pitches newly onboarded businesses to share their customer lists with the company, offering zero commission on purchases made by any of these existing patrons.

Steven Jacobs is Street Fight’s deputy editor.