‘Community’ has become something of a buzzword. We see it in business slogans, pitch decks and marketing materials. But to go back to basics, a community is a group of people brought together around a shared interest or topic.
Communities for modern businesses have evolved from online message boards, forums, Reddit and Facebook groups or even LinkedIn pages, to now be a part of the very fabric of a business. Online communities like developer forum Indie Hackers have shown the power of a community. Tech, product and data professionals have been able to actively engage, connect and build relationships together to create numerous successful ventures.
Marketplaces are a community themselves. They unite a group of people around a shared purpose or product. That could be a niche vertical like meat, supporting independent retailers, or as an aggregator of a broken system. B2B marketplaces thrive when they bring their community together to transact naturally through their platform.
As we’ve discussed before, building supply and demand, and connecting both sides for transactions is incredibly challenging in the early stages of a marketplace. The dilemma is often called ‘The Cold Start Problem’ or ‘Chicken and Egg’. Whilst there are many ‘hacks’ to jumpstart this, the simple truth is that aggregating supply when there is no demand, or attracting demand when there is no supply, is a very tough prospect.
Over the past few years though, there have been lots of examples where savvy platforms have understood and used methods that are less transactional in nature to grow their buyer and seller numbers. This has been especially true in consumer marketplaces, such as Etsy and Airbnb. They achieved this by engaging with customers more casually, nurturing a thriving community, before moving towards introducing a marketplace model and monetisation.
In spaces such as Facebook Groups, Reddit or Instagram, it’s common to see posts selling goods, or even job opportunities. These spaces act as forums where community members naturally start to seek and offer services to others. As Deepka Rana, Vice President at Venture Capital firm Northzone, pointed out at our recent B2B marketplace event, much of the B2C marketplace growth over the last decade can be traced back to the unbundling of Craigslist. Tech companies began targeting specific verticals to disrupt, built marketplaces to improve the experience and allowed these communities to begin transacting together.
Early community-building marketplaces benefitted from tapping into existing communities. They got to know early members, facilitated conversations, highlighted the stories of users and managed or curated the community. These marketplaces have built community into their product and culture. What’s more, they’ve been able to understand what their users really need by actively participating in the community with them.
This is the genesis of a community-first model – creating or discovering engaged and valuable communities, and cultivating them. Once you understand their needs and problems you can introduce a marketplace model which solves these and communicates with customers in their own language.
There is no ‘one size fits all’ approach for building or starting a marketplace and there are of course nuances for B2B, highly regulated or service focussed marketplaces. However, having community and engagement at the heart of your marketplace has some significant and far-reaching benefits:
- There is little to no cost to start and build compared to building a marketplace product and Minimal Viable Product
- You’ll be able to aggregate supply and demand based on your industry or market directly from your community
- You can interact directly with your sellers and buyers, and understand their needs, problems, challenges and how you can best help
- You’ll leverage network effects through platforms like Facebook, LinkedIn and community events
- Online communities allow you to reduce your brick and mortar presence but increase your commercial reach
- You’ll learn how matching of supply and demand occurs naturally by observing how the community interacts and be able to replicate that with your marketplace model
- You can lower user acquisition costs and make the customers your champions
There are two primary ways to grow – by increasing market share or by increasing wallet share. What these boil down to is adding more customers and getting those customers to spend more.
Acquiring a new customer requires a lot more work than engaging an old one. B2B marketplaces that engage with their community understand their customers’ problems and become more central to their business practice. Seafood marketplace Rooser understands this and achieves a very high repeat purchase ratio, increasing customer lifetime value by becoming core to their users. If marketplace buyers feel the marketplace is part of their business, they keep coming back: engaged users are loyal. When they feel they belong to a community, they are less likely to jump ship, even when a competitor tries to entice them.
The lack of trust between customers and suppliers is a big challenge for many B2B marketplaces. If users feel you share the same values and community identity, it will increase their trust. If users trust each other, they will engage in transactions more often and on a larger scale. Building marketplace trust through community building and engagement can be a catalyst for GMV growth and make your customers your champions! Another way to help build trust within your marketplace is to ensure the security of payment through embedded finance. This means helping customers with their cash flow by offering up to 90 days of payment terms and giving suppliers assurance that they will be paid instantly after the goods have been delivered.
Supporting your marketplace community with access to capital and cash flow support has never been more important than the current economic conditions. Being the platform that supports their community through these hard times will help increase sales, build loyalty and boost engagement!
Find out how MarketFinance can help your marketplace by providing better payment terms to your customers.