Docstoc

Solving the Marketplace Problem - The Chicken and the Egg

Joey Flores is CEO & Co-founder of Earbits (http://www.earbits.com/ joey@earbits.com). In this video he speaks about solving the market place problem.

  1. Start Small, with a niche audience
  2. Grow both sides of the marketplace
  3. Grow the business at an appropriate pace
  4. Resell big-ticket items
  5. Don't sell an item you might not get

These days a lot of startups that pop up are about removing friction and peer-to-peer transactions where one person has an item and another person wants it and creating a marketplace that sort of solves that problem. A lot of times when you’re building one of those companies, people will ask you well how do you provide value to the person who has the item before you have people who want it and how do you get people who want it before you have any items to offer them. So it’s a chicken and egg problem and most investors will ask you how you plan to solve that problem.

In our experience, the most effective way to solve that problem is to start very small with a niche audience of people that you can more easily meet and then really do whatever it takes to solve that problem for them. So, “Hey, you want to sell cameras.” Great. Let’s, like, facilitate just that area so we can go get buyers there instead of trying to be eBay right away. Once you’ve established like a small group of people who have an item and told them you’re building this and that you’re going to meet their needs and then you go out and literally on your own find to people to buy those items for them, you need to start growing that, you know, both sides of the equation and the effective way to do that is a little evenly on both sides.

So spend more time now marketing to more people who have items and then go back and spend more time marketing to people who need items and keep bouncing back and forth and growing them at an even clips so that that way, you know, they’re always receiving value and you don’t have a ton of people selling and not enough people buying.

Once you sort of established yourself in that spot, you just start to move up the food chain, either go to more high-end cameras or move into your next area, stereos or whatever it is and continue to sort of figure out how to, you know, expand either, you know, the amount of people you have in that niche or the quality of people or bulk buyers or whatever it is. Whatever you went and did in the long run there’s usually a food chain of some sort. You just kind of slowly moved up that process.

And one of the ways to sort of get these new bigger food chain clients is to sort of know for sure that you can get them to sell an item and then go find the buyers that they need and pretty much sell them that you already have the item, you know, listed on your site even if the person won’t take the time to list it because you know for a fact that if you get a buyer, you’ll be able to get that item. So it’s a little risky basically, say, “Are you sure you would sell this item if I can find you a buyer?” Great. And then you go find a buyer. You tell them you already have the item and it’s good to go and then you connect these people. The only way that that becomes a problem is if you sell something you honestly cannot get so make sure not to put yourself too far out there.

But in general, solve the marketplace when it starts small, build up slowly, balance both sides of the marketplace as you go up, deal with bigger and bigger players, and ultimately at the end be constantly selling into, you know, the channel as aggressively as you can even if you don’t necessarily have that inventory but only if you’re damn sure you can get the inventory.